Read Judgment: Shrikant G. Mantri vs. Punjab National Bank 

Pankaj Bajpai

New Delhi, February 23, 2022: While finding that the complainant had opened an account with the bank, took overdraft facility to expand his business profits, and subsequently from time to time the overdraft facility was enhanced so as to further expand his business and increase his profits, the Supreme Court affirmed the findings of the National Consumer Commission that relations between the complainant and the bank is purely “business to business” relationship and the transactions between them would come within the ambit of ‘commercial purpose’, and not ‘exclusively for purposes of earning livelihood’, and hence complainant is not a “consumer” u/s 2(1)(d) of the Consumer Protection Act, 1986.

A Division Bench of Justice B.R Gavai and Justice L. Nageswara Rao observed that when a person avails a service for a commercial purpose, to come within the meaning of ‘consumer’ as defined in the Consumer Protection Act, he will have to establish that the services were availed exclusively for the purposes of earning his livelihood by means of self-employment. 

Going by the background of the case, Shrikant (Appellant – complainant) had opened an account with erstwhile Nedungadi Bank Limited in the year 1998 and had applied for an overdraft facility which was sanctioned initially for an amount of Rs.1 crore, for which the appellant-complainant had pledged certain shares worth more than Rs.1 crore, as security. Subsequently, in the year 1999, the appellant applied for enhancement of the overdraft facility which was granted by temporarily enhanced the overdraft facility from Rs.5 crore to Rs.6 crore, for a period of one week. Later, due to steep fall in the share market, the erstwhile Bank in 2001, called upon the appellant to pledge additional shares to regularize the overdraft account. As the appellant was unable to regularize the overdraft account, the erstwhile Bank called upon the appellant to pay a sum of Rs.600.61 lakhs along with interest thereon. 

After selling a part of the pledged shares for a sum of Rs.2,69,66,215.79, Punjab National Bank (Respondent – successor-in-interest of the erstwhile Bank), filed a Recovery Petition before the Debts Recovery Tribunal (DRT), Mumbai. The said petition was decreed by the DRT. However, the matter was settled between the parties and a ‘One Time Settlement’ (OTS) was reached between them on payment of Rs. 2 crore. As such, the respondent-Bank issued a ‘No Dues Certificate’. After the OTS, the respondent withdrew the recovery proceedings. 

However, since the respondent failed to return the said shares to the appellant, he sent a notice to respondent seeking release of the said shares. With regard to the transactions with the appellant in the capacity as a stockbroker, the respondent-Bank initiated arbitration proceedings against the appellant before the Arbitration forum of the Bombay Stock Exchange (BSE). Since the respondent failed in the said arbitration proceedings, which have attained finality, the appellant filed a complaint before the National Consumer Commission, alleging deficiency in services on the part of the respondent-Bank. The Commission held that the appellant had availed the services of the respondent-Bank for ‘commercial purpose’ and as such, he was not a consumer as envisaged u/s 2(1)(d) of the Consumer Protection Act, 1986. Hence, present appeal. 

After considering the submissions, the Top Court found that the Consumer Protection Act seeks to provide for better protection of the interests of consumers and for that purpose, to make provision for the establishment of Consumer Councils and other authorities for the settlement of consumer disputes and for matters connected therewith.

One of the objects for enacting the said Act was the right to be heard and to be assured that consumers’ interests will receive due consideration at appropriate forums, added the Court. 

Speaking for the Bench, Justice Gavai noted that as per the definition of the term ‘consumer’, u/s 2(1)(d)(ii) of the said Act, as enacted originally, even if a person who hires any services for any commercial purpose, he could still be included in the definition of the term ‘consumer’. 

It is relevant to note that Section 2(1)(d)(i) of the said Act clearly kept a person who obtains such goods for resale or for any commercial purpose, out of the ambit of definition of the term ‘consumer’, however, insofar as hiring of services is concerned, no such provision was made in the original enactment, added the Bench. 

Justice Gavai found that though the original Act of 1986 excluded a person from the ambit of definition of the term ‘consumer’ whenever such purchases were made for commercial purpose; by the Explanation to the Amendment Act, 1993, which is an exception to an exception, even if a person made purchases for ‘commercial purpose’, he was included in the definition of the term ‘consumer’, if such a person bought and used such goods exclusively for earning his livelihood by means of self-employment.

The legislative intent is clear, that though the purchases for commercial purposes are out of the ambit of the definition of the term ‘consumer’ in the said Act, if a person buys and uses such goods exclusively for earning his livelihood by way of self-employment, he would still be entitled to protection under the said Act, added the Bench. 

The Apex Court clarified that by the 2002 Amendment Act, though the legislature provided that whenever a person avails of services for commercial purposes, he would not be a consumer, and ‘commercial purpose’ does not include use by a person of goods bought and used by him and services availed by him exclusively for the purposes of earning his livelihood by means of self-employment.“A person who availed of services for commercial purpose exclusively for the purposes of earning his livelihood by means of self-employment was kept out of the term ‘commercial purpose’ and brought into the ambit of ‘consumer’, by bringing him on par with similarly circumstanced person, who bought and used goods exclusively for the purposes of earning his livelihood by means of self-employment”, added the Court.

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