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A medical trust rendering service to its nurses comes within the meaning of a ‘consumer’


The bench encompassing Justice Mohan M. Shantanagoudar and Justice Ajay Rastogi collectively pronounced the judgment pertaining to a medical trust and its service providing aspect. It also settled the dynamic question of ‘who is a consumer?’ as far as this case is concerned.

A brief background will suffice the purpose.  The case is that the Appellant trust took possession of 29 flats developed by the opposite party for provision of hostel facilities to nurses employed by Lilavati Hospital, which is run by the Appellant trust. The contractual formalities were satisfied. However, within 2-3 years of completion of the project, because of alleged poor building quality, the structure became dilapidated. The appellant vacated the flats in 2002 and since 2004, the flats are lying unused. In the meanwhile, an interim Board of Trustees was constituted which called for a structural report from M/s Raje Consultants and found that the cost of repairs would be more than the cost of reconstruction. The appellant also claims that Respondent No. 1 obtained the occupation certificate for the flats by playing fraud upon the local municipal corporation. Hence the appellant filed Consumer Complaint No. 117/2016 before the

National Commission claiming Rs 7,65,95,400/- in compensation on account of annual loss of rent from 2002 to 2015, cost of reconstruction of building ‘Madhuvan’ and future loss of rent of Rs 35,00,000/- per year, along with Rs 5,00,000/- in damages. The National Consumer Disputes Redressal Commission (‘National Commission’) dismissed the Appellant’s petition mainly on two grounds:

  1. The complaint was time-barred since under Section 24A of the Consumer Protection Act, 1986 (‘1986 Act’) the period of limitation for filing a complaint is two years.

  2. The complainant, the Appellant trust was not a ‘consumer’ within the meaning of Section 2(1)(d) of the 1986 Act as the aforesaid section excludes a person who obtains goods and services for a ‘commercial purpose’.

This appeal in the Hon’ble Supreme Court arises out of judgment of the National Consumer

Disputes Redressal Commission. Mr. Guru Krishna Kumar, the learned Senior Counsel for the Appellant’s argued that the Court has to look at the dominant purpose for which the purchase is made in order to decide whether it was for a ‘commercial purpose.’ In this case, the dominant purpose for purchasing the flats was to provide housing to the nurses and was not linked to the commercial operations of the hospital. For this argument he relied upon this Court’s decisions in Laxmi Engineering Works v. P.S.G. Industrial Institute, and Paramount Digital Colour Lab v. Agfa India Private Limited. Per contra, Ms. Kiran Suri, the learned Senior Counsel for the respondent’s argued that hostel facilities in the flats constructed by Respondent No. 1 were for the purpose of providing comfortable accommodation to the nurses, which in turn would increase their efficiency.

Hence the flats were indirectly connected to the commercial purpose of increasing profits for the hospital. Such a purchase would not fall in the category of ‘earning livelihood by self-employment’. To buttress her argument she relied upon this Court’s decisions in Laxmi Engineering (supra), Cheema Engineering Services v. Rajan Singh, and Kalpavruksha Charitable Trust v. Toshniwal Brothers (Bombay) Pvt. Ltd.  The Hon’ble Supreme Court rejected the arguments of the respondent’s counsel and relied upon its decisions in Spring Meadows Hospital v. Harjol Ahluwalia through K.S. Ahluwalia, Synco Textiles Pvt. Ltd. v. Greaves Cotton and Company Limited and the aforementioned cases. Though a straight-jacket formula cannot be adopted in every case, the  broad principles enumerated can be culled out for determining whether an activity or transaction is ‘for a commercial purpose’ which in turn answers the question ‘who is a consumer?’. In the light of it, the following judgment was produced:

“We find that there is no direct nexus between the purchase of flats by the Appellant trust and its profit generating activities. The flats were not occupied for undertaking any medical/diagnostic facilities within the hospital but for accommodating the nurses employed by the hospital. Moreover, the flats were being provided to the nurses without any rent. The Appellant was not generating any surplus. It may be the case that provision of comfortable hostel facilities to the nurses, generates a feeling of gratitude and loyalty towards their employer and improves their overall efficiency, which indirectly results in the hospital gaining more repute and therefore generating more income. However, this is a matter of conjecture and there is no direct causal chain. Further, applying the dominant purpose test, it cannot be said that the provision of such hostel facilities is integral to the Appellant trust’s commercial activities. Hence we find that the Appellant trust is a ‘consumer’ under Section 2(1)(d) of the 1986 Act for the present transaction under consideration. In light of the above discussion, we consider it appropriate to remand the matter to the National Commission for consideration in accordance with law. The appeal is allowed and restored before the National Commission, and the impugned judgment is set aside, in the aforesaid terms. The parties are relegated to record their evidence before the National Commission, and the National Commission is requested to hear the matter on merits and decide the same expeditiously, at an early date.”

The valuable services rendered by nurses were also highlighted to justify provision of hospitality and comfort to them.

Jumanah Kader

– Photo: Sruthi R Manikam



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