Lourdes Society
Snehanjali Girls Hostel and Anr Vs MS H and R Johnson India Ltd and Ors on
2nd
August 2016 in the Supreme Court
Society doing
charitable activities for a small amount in return. Can't be considered as
"Commercial entity". Held - society is a "Consumer" within
the Consumer Protection Act, 1986.
Lourdes Society a
charitable institution running a girl’s hostel for the benefit of Adiwasi
Children, purchased floor tiles of H.R. Johnson through their agent
The said tiles,
gradually developed black and white spots. The appellant society complained in
this regard to the company as well as to their agent. Society then appointed an
architect to assess the loss which was assessed at Rs.4,27,712.37. Then
appellant society served a legal notice upon the manufacturer H.R.Johnson Co.
and called upon them to pay the losses but no response was received then the
society filed the Consumer Complaint before the District Forum.
District Forum
appointed a Local Commissioner to ascertain manufacturing defects as was being
claimed by the society. The District Forum held that the manufacturer committed
an unfair trade practice by supplying such defective tiles and held them liable
to pay a sum of Rs.2,00,000/- along with interest @9% p.a. to the appellant
society.
Aggrieved with this
order respondent manufacturer filed appeal before Stat Commission. The State
Commission dismissed the Appeal by confirming the order passed by the District
Forum.
Respondent manufacturer
filed Revision Petition before the National Commission, questioning the
validity and correctness of the order passed by the District Forum and the
State Commission.
The National Commission
reversed the findings of the District Forum and the State Commission by holding
that the appellant-Society had failed to establish that it is a consumer within
the meaning of Section 2(d) of the Consumer Protection Act, 1986. This order of
the National Commission came under challenge before the Apex Court.
The Apex Court
concluded that the National Commission had exceeded its jurisdictional power
under Section 21 (b) of the Consumer Protection Act, by setting aside the
finding of the State Commission affirming the finding of the District Forum
which was based on the valid and cogent reasons. The National Commission had to
exercise its power under Section 21 only when either the State Commission or
the District Forum had failed to exercise their jurisdiction or exercised the
jurisdiction when the same was not vested in them or exceeded their
jurisdiction by acting illegally or with material irregularity.
Apex Court further held
that the National Commission had erred in ignoring the Memorandum of
Association and byelaws of appellant-Society which shows that it is a
charitable institution supporting Tribal girls to pursue their education by
providing hostel facilities and thus National Commission had wrongly held that
the appellant-Society is a commercial establishment.
With the above said
findings, Apex Court allowed the appeal and affirmed the order of the District
Forum and State Commission and ordered Respondent – manufacturer to pay the
amount awarded by the District Commission along with interest @9% p.a. and
costs of Rs.50,000/- to the appellant-Society.
___________________________________________________
NON-REPORTABLE
IN THE SUPREME COURT OF
INDIA
CIVIL APPELLATE
JURISDICTION
CIVIL APPEAL NO. 7223
OF 2016
(ARISING OUT OF SLP(C)
NO. 36918 OF 2013)
LOURDES SOCIETY SNEHANJALI GIRLS HOSTEL AND
ANR. ……APPELLANTS
Vs.
M/S H & R JOHNSON
(INDIA) LTD. & ORS. ……RESPONDENTS
J U D G M E N T
V.GOPALA GOWDA, J.
Leave granted.
2. This civil appeal by
special leave is directed against the impugned judgment and order dated 23.09.2013
passed by the National Consumer Disputes Redressal Commission, New Delhi in
Revision Petition No. 4047 of 2006 whereby it has allowed the revision petition
filed by respondent nos. 1-4 and set aside the order dated 12.10.2006 passed by
the Gujarat State Consumer Disputes Redressal Commission, Ahemdabad in Appeal
No. 741 of 2006.
3. The brief facts of
the case in nutshell are as under:-
The appellant
no.1-Lourdes Society Snehanjali Girls Hostel is a society registered under the Societies
Registration Act vide society registration no.Guj/525/Surat and also a trust
registered, vide its Trust registration no. F/430/Surat. The appellant-Society
is a charitable institution running a girls hostel at Surat for the benefit of
Adiwasi children. On 02.02.2000, the appellant-Society purchased vitrified
glazed floor tiles from respondent no.5 (since deleted from the array of
parties vide Court’s order dated 01.04.2015) who was a local agent of respondent
no.1-Company for a sum of Rs.4,69,579/-.
The said tiles, after
its fixation in the premises of the hostel, gradually developed black and white
spots.
The appellant no.1
wrote several letters to respondent no.4 i.e., Sales Executive of respondent no.1-company,
informing about the inferior and defective quality of the tiles. Thereafter,
the respondent no.5-local agent visited the spot but failed to solve the issue.
4. An architect J.M.
Vimawala was appointed by the appellant-Society to assess the damage caused due
to defective tiles. The architect assessed the loss to the tune of
Rs.4,27,712.37 which included price of the tiles, labour charges, octroi and
transportation charges. Thereafter, the appellant-Society served a legal notice
dated 12.08.2002 to the respondents making a demand of the said amount but no
response was shown by the respondents.
5. The said inaction on
the part of the respondents made the appellant-Society to file a Consumer Complaint
No. 743 of 2002 against the respondents before the District Consumer Disputes
Redressal Forum at Surat (for short “the District Forum”) for claim of the said
amount.
6. The District Forum
appointed a Court Commissioner to examine and find out the manufacturing
defects in the tiles as claimed by the appellant-Society. After examination,
the Court Commissioner submitted a report dated 21.09.2004 stating therein that
the tiles were having manufacturing defect.
7. The District Forum
vide its order dated 31.12.2005 held that the tiles supplied by the respondents
had manufacturing defect. The respondents committed an unfair trade practice by
supplying such defective tiles. By holding the respondents jointly and severally
liable, the District Forum directed the respondents to pay to the appellants a
sum of Rs.2,00,000/- along with interest @9% p.a. from the date of complaint
i.e., 31.10.2002 till its recovery.
The respondent no.1 was
directed to pay the above amount to the appellant within a period of 30 days from
the date of order of the District Forum.
8. Being Aggrieved, the
respondents filed First Appeal No. 741 of 2006 before Gujarat State Consumer Dispute
Redressal Commission, Ahmedabad (for short “the State Commission”) challenging
the said order of District Forum urging various grounds.
9. The State Commission
dismissed the said First Appeal of the respondents by its order dated 12.10.2006
and confirmed the order passed by the District Forum.
10. Having become
unsuccessful before the State Commission, the respondents filed Revision
Petition No. 4047 of 2006 before the National Consumer Disputes Redressal
Commission, New Delhi (hereinafter referred to as “the National Commission”)
questioning the validity and correctness of the order passed by the District
Forum and the State Commission.
11. On 12.03.2012, the
appellant-Society also made an application being I.A. No.1847 of 2013 in
Revision Petition No. 4047 of 2006 to the National Commission for invoking the
powers under Sections 14(d) and 14(hb) of the Consumer Protection Act, 1986 and
for awarding sufficient amount of compensation in addition to amount already
awarded by the District Forum.
12. The National
Commission vide its order dated 23.09.2013 reversed the findings of the
District Forum and the State Commission holding that the appellant-Society has
failed to establish that it is a consumer within the meaning of Section 2(d) of
the Consumer Protection Act, 1986.
13. In support of their
case, the learned counsel appearing on behalf of both the parties made the following
submissions.
Mr. Ashok Panigrahi,
the learned counsel on behalf of the appellant-Society contended that the
National Commission has erred in coming to the conclusion that the
appellant-Society is a commercial establishment and thus, not covered by the
definition of the term ‘consumer’ under
Section 2(d) of the Consumer Protection Act, 1986. It was further submitted by
him that it is unjustified on the part of the National Commission to hold that
the Memorandum of Association and byelaws of the appellant-society which show
that it is a charitable institution and not any commercial establishment were
not filed before the District Forum but filed at the stage of Revision before
the National Commission. It was further submitted by the learned counsel that
the District Forum and the State Commission have gone through the registration certificate
and Memorandum of Association of the appellant-Society.
14. He further
submitted that the National Commission has erred in holding that the case M/s
Kusumam Hotels Pvt. Ltd. v. M/s Neycer India Ltd.1 is applicable to the facts
and circumstances of the present case.
15. It was further
contended by him that both the District Forum as well as the State Commission
have held that the appellant-Society cannot be regarded as a commercial
establishment. It is completely unjustified on the part of the National
Commission to
______________________
1 III (1993) CPJ 333
(NC)
hold that the
appellant-Society being a commercial establishment is not a consumer within the
meaning of the term ‘consumer’ under Section 2(d) of the Consumer Protection
Act, 1986 in complete ignorance of the Memorandum of Association and the
byelaws of the appellant-Society.
16. On the contrary,
Mr. Sudhir K. Makkar, the learned counsel on behalf of the respondents sought
to justify the impugned judgment and order of the National Commission
contending that the same is based on sound reasoning without error and
therefore, the same need not be interfered with by this Court.
17. It is further
contended by him that the District Forum and the State Commission have erred in
relying on the report dated 21.09.2004 given by the Court Commissioner as his
qualification was not stated in the report. The report was based on visual
inspection.
Further, both the
District Forum as well as the State Commission have erred in not considering
the test certificate produced by respondent no.1 as the same was based on
modern tile testing technology in its laboratory. In the absence of expert
evidence, it was wrong on the part of the District Forum as well as the State
Commission to hold that tiles had manufacturing defect.
18. After hearing the
learned counsel for both the parties we come to the following conclusion:
The National Commission
has exceeded its jurisdiction in exercising its revisional power under Section
21(b) of the Consumer Protection Act, 1986 by setting aside the concurrent
finding of fact recorded by the State Commission in First Appeal No. 741 of 2006
vide its judgment dated 12.10.2006 wherein the finding of fact recorded by the
District Forum was affirmed.
19. The facts of the
instant case clearly reveal that the National Commission has erred in observing
that the appellant-Society is a commercial establishment by completely ignoring
the Memorandum of Association and byelaws of the appellant-Society. Both the
District Forum as well as the State Commission have rightly held that the
appellant-Society is a charitable institution and not a commercial entity. The
relevant portion of the order passed by the District Forum reads thus:
“6. ……It is not in
dispute that complainants are running girls hostel in the name of Complainant
no.1. Commercial purpose is also explained under the provisions of the Act. So far
as activities of the complainants are concerned, they are running girls hostel
and receive fees from the students. The complainants are not carrying out
commercial activities. Purchase of goods namely tiles are for the purpose of
their hostel and it cannot be said that tiles is subject matter of their business.
Whenever any person purchases goods for carrying out business for commercial or
for livelihood then only question regarding purchase of goods or availing any
activities from trader or professional arises. The complainants are not
carrying on business of purchase from opponents. Otherwise also hostel premises
can be constructed and there is no direct relation between commercial activity.
Therefore, the defence
of opponents that complainants are carrying on business activities and thereby
complainants are not consumer is not acceptable. Hence, we hold that complainants
are consumer of opponents and defence of opponents is rejected.”
(emphasis supplied)
20. The National
Commission has erred by applying the decision in M/s Kusumam Hotels Pvt. Ltd.
case (supra) in holding that the appellant-Society is not a consumer in terms
of the definition under Section 2(d) of the Consumer Protection Act, 1986 as
the purchase of tiles and laying in the same in the rooms of the girl’s hostel
run by the appellant-Society is clearly not for any commercial purpose. The
decision in M/s Kusumam Hotels Pvt. Ltd. case (supra) has no application to the
present fact situation for the reason that in the said case complainant was a
hotel and the tiles purchased by the hotel were for commercial purpose as the
hotel business involves the act of profit making, whereas in the instant case
the girl’s hostel in question is run by the appellant-Society as one among its
various charitable activities for the benefit of adivasi students. The appellant-Society
is supporting adivasi/tribal girls to pursue their education by providing
hostel facilities. The expenses for the food and electricity are being paid by
the inmates of the hostel. The appellant-Society is maintaining the hostel free
of cost and no charges in the form of rent, repairs and maintenance are
collected from the inmates. Thus, the appellant-Society cannot be considered as
any commercial establishment striving for profit.
21. Further, the
National Commission while passing the impugned order has ignored certain facts
which throws light on callous attitude on the part of the respondents viz.,
when the defect in the tiles were brought to the notice of the respondents by
sending various letters, there was no action on their part.
Later a local agent on
behalf of the respondent no.1-Company visited the premises of the girl’s hostel
and verified that the said tiles were defective and damaged. However, no proper
attention was paid by the respondents towards the issue. Further, to assess the
damage caused to the appellant-Society by the use of the said defective tiles,
a registered architect and interior designer, J.M. Vimawala was hired by the appellant-Society,
who in his report declared the tiles to be defective and assessed the damage to
the appellant-Society to the tune of Rs.4,27,712.37.
Thereafter, the
appellant-Society made a demand of the said amount as damages from the
respondents vide legal notice dated 12.08.2002. But the respondents did not pay
any heed to the said notice as well. Because of such irresponsible and
indifferent attitude on the part of the respondents, the appellant-Society was compelled
to file Consumer Complaint No. 743 of 2002 before the District Forum.
22. The District Forum,
after appreciating the pleadings and evidence on record has rightly awarded Rs.
2 lakhs as damages to the appellant-Society towards defective tiles supplied by
the respondents along with compensation towards mental harassment and cost of
present proceedings with interest @9% p.a. from the date of complaint till its
recovery. In concurring with the findings of the District Forum, the State
Commission, after proper re-appreciation of the facts and evidence on record
has rightly exercised its jurisdiction by dismissing the appeal of the respondents.
The National Commission should not have interfered with the concurrent findings
of fact recorded in the judgment impugned before it particularly having regard
to the nature of the jurisdiction conferred upon it by Section 21 of the Consumer
Protection Act, 1986. Section 21 of the aforesaid Act reads thus:
“21. Jurisdiction of
the National Commission.—
Subject to the other
provisions of this Act, the National Commission shall have jurisdiction—
(a) to entertain—
(i) complaints where
the value of the goods or services and compensation, if any, claimed exceeds
rupees one crore; and
(ii) appeals against
the orders of any State Commission; and
(b) to call for the
records and pass appropriate orders in any consumer dispute which is pending
before or has been decided by any State Commission where it appears to the National
Commission that such State Commission has exercised a jurisdiction not vested
in it by law, or has failed to exercise a jurisdiction so vested, or has acted
in the exercise of its jurisdiction illegally or with material irregularity.”
23. The National
Commission has to exercise the jurisdiction vested in it only if the State
Commission or the District Forum has either failed to exercise their
jurisdiction or exercised when the same was not vested in them or exceeded
their jurisdiction by acting illegally or with material irregularity. In the instant
case, the National Commission has certainly exceeded its jurisdiction by setting
aside the concurrent finding of fact recorded in the order passed by the State
Commission which is based upon valid and cogent reasons. The National
Commission has reversed the order passed by the State Commission by wrongly
applying the decision of M/s Kusumam Hotels Pvt. Ltd. case (supra) to the set
of facts in the present case. In the said case, the complainant was a hotel, it
was considered to be a commercial entity and therefore, it was kept out of the
purview of the definition of ‘consumer’ under Section 2(d) of the Consumer
Protection Act, 1986. However, the National Commission has failed to appreciate
the fact that in the present case, the appellant-Society is not a commercial
establishment rather a registered society helping the adivasi students in their
education by providing hostel facilities. The charges, if any, for accommodation
in the hostel are for maintaining the hostel and not for making profit. Thus,
the appellant-Society is consumer within the meaning of the term ‘consumer’
under Section 2(d) of the Consumer Protection Act, 1986. The National
Commission has erroneously accepted the contention urged on behalf of the
respondents in the revisional proceedings that supply of tiles to the
appellant-Society by respondent no. 1 through its local agent is for commercial
purpose. The said finding is based on the decision in M/s Kusumam Hotels Pvt.
Ltd. case (supra), which case absolutely has no application to the fact
situation.
24. Therefore, the
concurrent finding of fact recorded by the District and the State Commission
has been erroneously interfered with by the National Commission by passing the
impugned order, which is liable to be set aside. For the aforesaid reasons, the
appeal of the appellant-Society must succeed.
25. For the reasons
stated supra this appeal is allowed, the impugned order of the National
Commission is hereby set aside and we restore the order of the District Forum
which is affirmed by the State Commission. The matter has been under litigation
for the last fourteen years, we direct the respondents to pay or deposit the
amount so awarded by the District Forum along with interest @9% p.a. within six
weeks from the date of receipt of the copy of this judgment.
The costs of
Rs.50,000/- of these proceedings are also awarded in favour of the
appellant-Society.
…………………………CJI
[T.S. THAKUR]
……………………………J.
[V. GOPALA GOWDA]
……………………………J.
[R. BANUMATHI]
New Delhi, 2nd August,
2016
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