RAJEEV METAL WORKS AND ORS.versusTHE MINERAL METAL TRADING CORPN. OF INDIA LTD.

A               RAJEEV METAL WORKS AND ORS.
                             v.
       THE MINERAL METAL TRADING CORPN. OF INDIA LTD.

                              DECEMBER 1, 1995
B
                  [K. RAMASWAMY AND B.N. KIRPAL, JJ.]

          Co11sumer Protection Act, 1986-Sectiom 21, 23, 2( 1)(d)(i) & (ii)-
    Scope-'Co11sumer'-Deftnitio1i-Whe11 object of supply a11d purchase of
    goods being commercial purpose-Applicability of exclusio11ary clause u/s
C   2(1)(d)(ii)-Deftnition of word 'consumer' u/s 2( l)(d)(ii) not attracted.

           The appellant set up an industry and put up an application to the
    District Industry Centre for the supply of about 300 M.T. of G.P. Steel
    Sheets. The General Manager of the District Industry Centre recom-
D mended to the respondent, a statutory authority constituted to canalise the
    procurement of the canalised items for imports and for onward delivery
    to the consumer industries, of the appellants' reqniremenL After pooling
    the requirements of various industries, the respondent placed a con-
    solidated indent with a foreign seller for the supply of the total required
    quantity of the canalised items. The foreign seller expressed difficulty in
E supplying the entire quantity due to some exigencies. The respondent wrote
    a letter to the appellants to receive 20% of the indented requirement but
    the appellants did not comply with it. Since the respondent had not
    supplied the required quantity demanded by the appellants, the appellants
    filed the complaints before the National Consumer Disputes Redressal
F Commission u/s 21 of the Consumer Protection Act, 1986. The Commission
    dismissed the complaint while holding that the transaction involved in this
    case was only one of sale of goods for commercial purpose and not an
    agreement for rendering any service for consideration and therefore the
    controversy raised in this case coul.d not be regarded as a Consumer
    Dispute which could appropriately be brought this Forum. This appeal u/s
G 23 had been filed against the order of the National Commission. The
    appellants contended that the respondent had nndertaken to render ser-
    vice to the appellants for procuring the required quantity of the G.P.
    Sheets; that the appellants had paid what was demanded from them and
    had complied with all the conditions mentioned in the letter and having
H · had the goods supplied by the foreign sellers, instead of delivering the
                                         118
               RAJEEV METAL WORKS v. M.M.T.C.I. LTD.                   119

goods to the appellants diverted them for extraneons consideration to A
others, thereby, the appellant had suffered damages and sought recovery
thereof from the respondent for its failnre to render services nnder the
contract; that various letters exchanged between the appellants and the
respondent would clearly show that the transaction was one of service
contract to be rendered by the respondent to the appellants and doe to B
deficiency in the service, the appellants suffered the damages and conse-
quentially, the appellants as consumer u/s 2(1)(d)(ii) of the Act were
entitled to redressal from the Commission and the Commission was not
right in rejecting the claim of the appellants on the ground that it was a
commercial transaction; that the word 'commercial' used in the definition
requires broader construction in a normal trading sense since it being in C
the nature of the exception and when it is used in the context of resale, the
words 'transaction of sale' must be construed to niean direct sale between
the boyer and the seller as consumer goods but not when the goods are
intended to be consumed for manufacturing purpose to produce a distinct-
ly identifiable different commercial commodity and therefore, section D
2(1)(d)(i) was not attracted to the facts in this case.

       The respondent contended that there was no direct relationship of
buyer and seller between the appellants and the foreign suppliers; that the
appellants had opened letters of credit with the respondent and had agreed
to take delivery of the goods to be supplied by the respondent after getting E
them from the foreign suppliers and subject to the terms and conditions
mentioned therein and in furtherance thereof, the respondent had opened
letters of credit directly with the foreign suppliers within the exclusionary
clause of section 2(1)(d)(i) of the Act which defines 'consumer'. The ques-
tion raised for consideration was whether the appellant firm was a con-
sumer.                                                                       F

      Dismissing the appeal, this Court

      HELD : l.l. The definition of 'consumer' requires to be interpreted
broadly so as to give effect to the legislative intention envisaged under the G
Consumer Protection Act. But when the legislature having defined the
terms 'consumer' in broader terms, sought to exclude certain transactions
from the purview of the Act the meaning that would be assigned to the
exclusionary civil, viz., "but does not include a person who obtains sucll
goods for resale or for any commercial purpose" appears to be that when
the goods are exchanged between a buyer and the seller for commercial . H
    120                   SUPREME COURT REPORTS [1995] SUPP.6 S.C.R.

A purpose or for resale, the object of the Act appears to be to exclude such
  commercial transactions from the purview of the Act. Instead, legislature
  intended to confine the redressal to the service contracted or undertaken
  between the seller and the 'consumer' defined under the Act. The appel-
  lants admittedly entered their letters of credit with the respondent. The
  respondent was a statutory authority to act as canalised agency on behalf
B
  of the industries to procure required goods on their behalf from the foreign
  seller and acted in that behalf in terms of the letter of credit and conditions
  enumerated thereunder. The respondent did not undertake any direct
  responsibility for supply or liability for non-supply of the goods. On the
  other hand, the appellants had solicited to have the goods supplied to it
c through the respondent and opened letter of credit in favour of the
  respondent. After collecting requirements from various industries in the
  country admittedly a consolidated demand for supply of the required
  quantity of the G.P. Sheets was indented with foreign sellers so as to
  procure the required goods for onward supply to the appellant and others.
D The goods supplied were required for commercial purpose, i.e., for
  manufacture and resale as finished goods during the course of their
  commercial business. Under the circumstances, the appellants intended to
  purchase these goods for commercial purpose, namely to manufacture the
  tin sheets for resale. The word 'resale' used in the exclusionary clause of
  Section 2(1)( d)(i) was nsed in connection with the purchase of goods
E defined in the Sale of Goods Act for commercial purpose. The ultimate
  object of the supply of the goods, namely G.P. Sheets to the appellants was
  manufacture of finished goods for resale. The goods for resale. The goods
  were intended to be used for commercial purpose. Thus considered, the
  appellants were not consumers by virtue of the exclusionary clause under
F Section   2(1)(d)(ii). Therefore, they would not come under Section
  2(l)(d)(ii) of the Act. Since the object of the supply and purchase of the
  goods was commercial purpose, it would certainly come within the ex-
  clusionary clause of section 2(1)(d)(ii). Therefore the definition of the
  word 'consumer' under section 2(l)(d)(ii) was not attracted.
                                                              [126-B-H, 127-A-B)
G
             CIVIL APPELLATE JURISDICTION : Civil Appeal No. 770 of
     1993.


             From the Order dated 12.11.92 of the National Consumer Disputes
H Redressal Commission New Delhi in O.P. No. 28 of 1992.
              RAJEEV METAL WORKS v. M.M.T.C.I. LTD.                     121

     G.L. Sanghi, Vipin Sanghi, Harishankar, Ms. Shrnti Pandey and Ms.         A
Indn Malhotra for the Appellants.

      M.L. Verma, N. Ganpathy and N. Ganpathy for the Respondent.

      The following Order of the Court was delivered :
                                                                               B
      The appellant set up an industry at U nnao in U ttar Pradesh. He put
up an application to the District Industry Centre, Unnao on 13.6.1986 for
the supply of about 300 M.T. of G.P. Steel Sheets. The Government of
India had constituted .the respondent as statutory authority to canalise the
procurement of the canalised items for imports and for onward delivery to      C
the consumer industries. The General Manager of the District Industry
Centre recommended to the respondent of the appellants' requirement of
300 M.T. In furtherance thereof, on 24.8.1987, the respondent had written
a letter to the appellants that they could arrange supply of 50 M.T. and
directed the appellants to open letters of credit with them and to comply
with the requirements mentioned in the letter referred to therein. Relevant    D
terms are as under :

        "3. Please note that Margine Insurance is to be arranged by us.
        For this purpose suppliers will send a cable advice to us immedi-
        ately after the shipment. Suitable provision in this regard has been   E
        made in our Purchaser Order.

        4. On receipt of documents from the suppliers, our port offices
        will get in touch with your banker. Please note that the consignment
        (s) is/are to be cleared by you through customs on receipt of
        documents from our port office/your bankers to whom documents          F
        will be presented against Letter of Credit opened on us. In respect
        of LC established by you against our authority directly in favour
        of foreign supplier, you are advised to contract our.Regional Office
        immediately upon receipt of documents by your banker for arrang-
        ing payment of our service charges and insurance etc. and also for     G
        getting the documents endorsed in your favour.

        5. Please note that in ihe event of any complaint in regard to
        shortage damage and quality, you should report the matter to us
        immediately with all supporting documents to enable us to take up
        the matter with the foreign suppliers. Your claim will be settled      H
    122                   SUPREME COURT REPORTS [1995] SUPP. 6 S.C.R.

A           on us by foreign suppliers and to the extent settlements are
            received by us. In case of complaints or short receipts and damage,
            necessary claim should be lodged by you with the insurance com-
            pany/steamer company while taking delivery of goods at the port.
            Any visual defect noticed on materials other than damage in
            handling should be reported immediately upon receipt. All other
B           complaints should he reported within 30 days from the date of
            receipt of goods.

            In the meanwhile, we request you to kindly go through the Pur-
            chase Order and confirm per return that the same is in order."
c
           After pooling the requirements of various industries, the respondent
    had placed a consolidated indent with a foreign seller for the supply of the
    total required quantity of the canalised items, in this case G.P. Sheets. The
    foreign seller appears to have expres;ed difficulty in supplying the entire
D   quantity due to exigencies mentio_ned in their .reply. In the meanwhile, the
    appellants admittedly had opened letters of credit with the respondent for
    50 M.T. of G.P. Sheets. The respondent in turn had opened letters of credit
    with the foreign suppliers for bulk supply and the foreign suppliers were
    unable to supply required quantity. Consequently, the respondent had
    written a letter to the appellants to receive 20% of the indented require-
E   men! but the appellants seem to have not complied with it. The respondent
    in the counter-affidavit filed in the Tribunal stated thus :

            "The supplier i.e. M/s. YOEST ALPINE were not in a position to
            organise shipment against the subsequent LOI as there was delay
F           in setting up of the galvanishing line. Due to these circumstances,
            the supplier wanted to invoke the FORCE MAJEURE clause on
            the plea that conditions prevailing at their end warranted invoca-
            tion of FOR CE MAJEURE and hence inability to fulfill contrac
            tual obligations qua the respondent.

G               The respondent keeping in mind the interest of complainant
            and other end users in the country persisted in their efforts to
            secure shipment and after great efforts succeeded in obtaining
            supply from M/s. MONTON METALS on behalf of M/s. YOEST
            ALPINE. M/s. Monton Metals agreed tc .hip 20% of the quantity
H           at the same price.
              RAJEEV METAL WORKS v. M.M.T.C.I. Lill.                   123

            The Complainants and other end users in the country were A
        informed by the respondent that in view of the FORCE
        MAJEURE Conditions operating in the producing countries/the
        respondent at best could have recovered 2% guarantee money
        from the supplier towards non-performance of contractual obliga-
        tions by the supplier. It was in these circumstances that the respon- B
        dent advised all end users to make necessary financial
        arrangements and take delivery of 20% of the order placed on
        their respective behalfs. They were further advised to confirm their
        acceptances (s).

            The complainants did not reply to the correspondences of the C
        respondent. The goods earmarked for them were allowed to be
        unloaded at the port as the respondent's Bombay Office advised
        that their L/C was operative. However, the document pertaining
        to their consignment were returned by the banker who stated that\
        the L/C in respect of the complainants was not valid.
                                                                             D
            The complainant vide their telegram dated 5.12.1988 agreed to
        accept the goods in question without prejudice to their right to
        seek legal remedy by going to Court. The respondent informed
        them to take delivery of the goods in question by 26.12.88. The
        complainants failed ·to respond and did not take delivery. The E
        goods in question became liable for demurrage charges, it was in
        these circumstances an alternative buyer was asked to take delivery
        of the goods in question after paying demurrage and other charges.
        It was only in these circumstances that the goods in question were
        delivered to another end user. Annexed herewith and marks as
        Annexure is copy of the Telegram dated 5.12.1988."                  F

       Since the respondent had not supplied the required quantity
demanded by the appellants, the appellants laid the complaints before the
National Consumer Disputes Redressal Commission (for short, "the Com-
mission") under Section 21 of the Consumer Protection Act, 1986, (for        G
short, "the Act"). The Commission in the impugned order dated November
12, 1992 dismissed the complaint in the following words :

        "......we are clearly of the opinion that the transaction involved in
        this case is only one of Sale of Goods for commercial purpose and
        not an agreement for rendering any service for consideration. In H
    124                   SUPREME COURT REPORTS (1995) SUPP. 6 S.C.R.

A            these circumstances, the controversy raised in the this case cannot
             be regarded as a Consumer Dispute which are appropriately be
             brought before this Form. The Original Petition is dismissed on
             this limited ground. No costs."

          Calling it in question this appeal under s.23 of the Act has been filed.
B
           Shri G.L. Sanghi, learned senior counsel for the appellants has
    contended that the respondent had undertaken to render service to the
    appellants for procuring the required quantity of the G.P. Sheets. The
    appellants had paid what was demanded from them and had also complied
C with all the conditions mentioned in the letter. Having had the goods
    supplied by the foreign sellers, instead of delivering the goods to the
    appellants diverted them for extraneous consideration to others. Thereby,
    the appellants had suffered damages quantified to the tune of Rs. 17, 71,038
    and sought recovery thereof from the respondent for its failure to render
D services undertaken under the contract. Various letters exchanged between
    the appellants and the respondent would clearly show that the transaction
    is one of service contract to be rendered by the respondent to the appel-
    lants and due to deficiency in the service, the appellants suffered the above
    damages. Consequentially, the appellants as consumer under Section
  . 2(1)( d)(ii) of the Act are entitled to redressal from the Commission. The
E Commission was not right in rejecting the claim of the appellants on the
    ground that it is a commercial transaction. Shri M.L. Verma, learned senior
    counsel for the respondent on the other hand, contended that there is no
    direct relationship of buyer and seller between the appellants and the
    foreign suppliers. The appellants had opened letters of credit with the
F respondent and had agreed to take delivery of the goods to be supplied by
    the respondent after getting them from the foreign suppliers, subject to the
    terms and conditions mentioned therein. In furtherance thereof, the
    respondent had opened letters of credit directly with the foreign suppliers
    within the exclusionary clause of Section 2(1)(d)(i) of the Act which defines
    'consumer'. Thereby, the definition excludes such transaction from the
G purview of the Act. The learned counsel for the appellants elaborated the
    contention that the word 'commercial' used in the definition requires
    broader construction in a normal trading sense since it being in the nature
    of the exception. When it is used in the context of resale, the words
     transaction of commercial nature must be construed to mean direct sale
H between the buyer and the seller as consumer goods b1?! not when the
              RAJEEV METAL WORKS v. M.M.T.C.J. LTD.                      125

goods are intended to be consumed for manufacturing purpose to produce          A
a distinctly identifiable different commercial commodity. Therefore,
s.2(1)(d)(i) is not attracted to the facts in this case.

       Hav.ing given our anxious and very careful consideration to the
respective contentions, the question emerges whether the appellant-firm is
a consumer. The word 'consumer' has been defined under s.2(1)( d)(i) and        B
(ii) thus :

        "(d) 'Consumer' means any person who,-

        (i) buy any goods for a consideration. which has been paid or
        promised or partly paid and partly promised, or under any system
                                                                                c
        of deferred payment and includes any user of such goods other
        than the person who buys such goods for consideration paid or
        promised or partly paid or partly promised, or under any system
        of deferred payment when such use is made with the approval of
        such person, but does not include a person who obtains such goods D
        for resale or for any commercial purpose; or

        (ii) hires or avails of any services for a consideration which has
        been paid or promised or partly paid and partly promised, or under
        any system of deferred payment and includes any beneficiary of          E
        such services other than the person who hires or avails of the
        services for consideration paid or promised, or partly paid or partly
        promised, or under any system of deferred payment when such
        services are availed of with the approval of the first mentioned
        person."
                                                                                F
      Clause (i) provides that one who buys any goods for a consideration
which has been paid or promised or partly paid and partly promised, or
under any system of deferred payment and includes any user of such goods
other than the person who buys such goods for consideration paid or
promised or partly paid or partly promised, or under any system of G
defeired payment when such use is made with the approval of such person,
but does not include a person who obtains such goods for resale or for any
commercial purpose, is a consumer. The admitted case is that this does not
apply. The question, therefore, is whether the service of the respondent
availed of by the appellants is covered under Section 2{1)(d)(ii). Whether
the transaction is in the nature of buying the goods for a consideration H
    126                    SUPREME COURT REPORTS (1995] SUPP. 6 S.C.R.

A  which has been paid or promised? whether the transaction in question
   excludes the person who obtains such goods for resale or for any commer-
   cial purpose from the purview of the Act? It is true as contended for the
   appellants that the definition requires to be interpreted broadly so as to
   give effect to the legislative intention envisaged under the Act. But when
   the legislature having defined the term 'consumer' in broader terms, sought
B
   to exclude certain transactions from the purview of the Act what could be
  'the meaning that would be assigned to the exclusionary clause, viz., "but
   does not include a person who obtains such goods for resale or for any
   commercial purpose". The intention appears to be that when the goods are
   exchanged between a buyer and the seller for commercial purpose or for
c resale, the object of the Act appears to be to exclude such commercial
   transactions from the purview of the Act. Instead, legislature intended to
   confine the redressal to the services contracted or undertaken between the
   seller and the 'consumer' defined under the Act. It is seen that the
    appellants admittedly entered their letters of credit with the respondent.
D The respondent is a statutory authority to act as canalised agency on behalf
    of the industries to procure required goods on their behalf from the foreign
   seller and acts in that behalf ju terms of the letter of credit and conditions
    enumerated thereunder. It is seen that the respondent did not undertake
   any direct responsibility for supply or liability for non-supply of the goods.
    On the other hand, the appellants had solicited to have the goods supplied
E to it through the respondent and opened letter of credit in favour of the
    respondent. After collecting requirements from various industries in the
    country admittedly a consolidated demand for supply of the required
    quantity of the G.P. Sheets was indented with foreign sellers so as to
    procure the required goods for onward supply to the appellant and others.
F   The   goods supplied were required for commercial purpose, i.e., for
    manufacture and resale as finished goods during the course of their
    commercial business. Under the circumstances, the appellants intended to
    purchase these goods for commercial purpose, namely, to manufacture the
    tin sheets for resale. It is true that the word 'resale' used in the exclusionary
G clause of Section 2(1)(d)(i) was used in connection with the purchase of
    goods defined in the Sale of Goods Act for commercial purpose. The
    ultimate object of the supply of the goods, namely, G.P. Sheets to the
    appeilants was manufacture of finished goods for resale. The goods were
    intended to be used for commercial purpose. Thus considered, we are of
    the opinion that the appellants are not consumers by virtue of the ex-
H clusionary clause under Section 2(1)(d)(ii). Therefore, they would not
                 RAJEEV METAL WORKS v. M.M.T.C.!. LTD.                  127

come under Section 2(1)(d)(ii) of the Act. Since the object of the supply A
and purchase of the goods was commercial purpose, it would certainly
come within the exclusionary clause of Section 2(1)(d)(ii). Otherwise, if the
construction sought to be put up by Mr. Sanghi is given effect to, while
foreign sellers are not liable under the Act within the definition of
s.2(1)(d)(i) as they get excluded from the purview of the Act, the canalising B
agency would be fastened with the liability. Thereby, the definition of the
word 'consumer' under Section 2(1)(d)(ii) is not attracted.

      Consequentially, clause (ii) of Section 2(1)( d) does not apply. Con-
sidered from this perspective, we are of the opinion that the appellants are
not consumer under Section 2(1)(d)(ii) of the Act. Thereby the complaint       C
would be not lie under Section 21 of the Act.

         The appeal is accordingly dismissed but, in the circumstances, with
costs.

R.A.                                                      Appeal dismissed.    D