When the Consumer Protection Act was initially enacted in 1986, goods purchased for commercial purpose (excluding those purchase for earning one’s livelihood) were excluded from the purview of the Act. Yet, surprisingly services availed or hired for commercial purposes were amenable to the jurisdiction of the consumer courts. To remove this anomaly, the CP Act was amended in the year 2003, so that services for commercial purposes (except those availed of for earning one’s livelihood) stood excluded from the purview of the CP Act. This amendment was made with the objective of excluded commercial disputes, as the CP Act was basically for the common man.
Now, the National Consumer Disputes Redressal Commission has interpreted the meaning of “commercial purpose” in such a manner that business houses can also file complaints under the CP Act. This authoritative judgement was recently passed on December 3, 2004 by a bench of the National Commission comprising of Justice MB Shah and Rajyalakshmi Rao in a bunch of appeals requiring the interpretation of the term “commercial purpose.”
The issue before the National Commission was whether insurance policies taken by commercial units could be held to be hiring of services for commercial purpose and thereby excluded from the purview of the Consumer Protection Act, 1986 (as amended in 2003). The issue came up in a bunch of appeals against the orders passed by the Gujarat State Commission which had held that commercial units which had availed of insurance services were not maintainable as services for commercial purpose were excluded from the purview of the CP Act.
After considering the definitions of the words “consumer,” “service,” and “commercial purpose,” the National Commission observed that an insured who takes an insurance policy cannot trade or carry on any commercial activity with regard to the insurance policy taken by him.
Hence, hiring of services of insurance companies by taking insurance policies by persons / parties carrying on commercial activities cannot be held to be a commercial purpose. This is because the policy is taken for reimbursement or for indemnity for the loss which may be suffered due to various perils. There is no question of trading or carrying on commerce in insurance policies by the insured, even though the insurance coverage is taken for commercial activity carried out by the insured.
While arriving at this conclusion, the National Commission referred to Halsbury’s Laws of England, Volume 25, 4th Edition, and observed that insurance