On April 2023 the Supreme Court of India held regarding the point of identifying the purpose of insurance cover to indemnify the risk of loss and damages caused to an informed Commercial entity. However, there is no such element of profit generation whereby the Commercial entity could qualify as a ‘consumer’ under Section 2(1)(d) of the Consumer Protection Act. It was also made clear by the Court that if there is no straightjacket formula, then it will always remain open for being examined based on the facts of each case with respect to the transactions in reference to which the claim has been raised under any close nexus with the profit-generating activity.
In this case, the Supreme Court of India ruled under two major aspects to be looked upon while deciding on whether the dispute filed by a commercial entity qualifies as a consumer dispute or commercial dispute;
Goods Purchased for resale on Commercial Purposes
Services availed for Commercial Purposes.
All about the proceedings held in the Supreme Court of India
The Court heard a special leave petition against the 2003 order of the National Consumer Disputes Redressal Commission. It was held by the court in a ruling that if in case any insurance policy has been taken for indemnification of an actual loss, that is not intended to generate profits, in that case, any complaint filed would be seen as a breach that would be qualified for being subjected under the 1986 Consumer Act.
Also, the respondents, in this case, were mostly the entities who were engaged in the sale of vehicles. The respondents had filed a complaint before the State Consumer Disputes Redressal Commission under the 1986 Act, which was later found unmaintainable on the grounds of not falling under the absolute definition of a consumer. In this case, it was a company that was running a business from the premises to earn profits, that fell under the classification for commercial purposes, which was not maintainable under the act. As per an appeal that was preferred by the respondents before the NCDRC had recorded any expression being used for commercial purposes which would mean that the goods or services hired were used in case of any activity that is directly intended to generate profit.
Thus, it was found that in case the person taking any insurance policy to cover the envisaged risks for indemnification of the actual losses suffered was not considered to have done so with the intention of generating profits. In that case, the buyers of the policy were not being covered under the definition of a Consumer under Section 2(1)(d) of the act. Thus, as per the leave petitions that were being signed and proposed by the Supreme Court of India’s Bench, which did not agree with the submissions that were made on behalf of the appellant regarding the fact, that insurance claims were virtually being covered under the 1986 Act. In this case, all matters would come under the purview of the act and the services that will be rendered under the Consumer Protection Act of 2019.
Also, it was viewed by the Supreme Court of India that, both these acts had a different scope and ambit, and had different remedial mechanisms. Therefore, they were different in terms of their spheres without having any internal relationships. Thus, while dismissing the plea, the court resorted to the complaint filed by the SCDRC. Thus, considering the expansion of the definition of the term ‘Consumer’ where the judgment was likely to get changed way after when the matters were brought up for adjudication under the 2019 Act. Also, it has been found that there can be an increase in the number of Consumer Complaints that would be filed by the Corporates under the Consumer Protection Act, and be given amplification of rights made available to them through the judgment.
However, while dismissing the Special Leave Petition, the Supreme Court of India established a two-rule thumb for adjudication in similar matters for the near future. The main basis of these factors stood at the insurance services of having a close nexus with the profit-generating entity on areas of having a dominant intention or purpose for purchasing an insurance policy to facilitate the generation of profits. Thus, based on these factors, the Supreme Court of India restored the complaint that was filed by the SCDRC.
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