Warranty Alone Doesn't Convert Commercial Purchases into Consumer Transactions, Rules NCDRC

June 20, 2024

( NCDRC )The National Consumer Disputes Redressal Commission, chaired by Subhash Chandra and with Sadhna Shanker as a member, has granted an appeal from Telco Construction, overturning the state commission’s ruling. The state commission had previously determined that the complainant was not eligible as a consumer solely because they received a warranty on a commercial purchase.

BRIEF FACTS OF THE CASE

A private limited company engaged in excavation purchased a Hydraulic Excavator from Telco Construction Equipment Company for Rs. 44 lakhs, which included 4% VAT. Shortly after the purchase, operational issues arose with the excavator, which were initially addressed under the one-year or 2000-hour warranty. Despite replacing the engine, other parts of the excavator continued to malfunction. The complainant alleged manufacturing defects and sought a replacement excavator or compensation for losses through a legal notice. Subsequently, they filed a consumer complaint in the State Commission of Rajasthan, seeking a refund of Rs. 44 lakhs, along with Rs. 22,30,000 in compensation and Rs. 1 lakh for litigation expenses. The state commission partially allowed the complaint, directing the company to pay Rs. 15 lakhs towards repair charges, Rs. 10 lakhs towards mental distress, and Rs. 20,000 towards litigation costs. Dissatisfied with this ruling, the company filed a First Appeal before the National Commission.

CONTENTIONS OF THE OPPOSITE PARTY

The Company contested the State Commission’s order on multiple grounds. They argued that the State Commission erred in not considering that the excavator was bought for commercial purposes, thus the complainant wasn’t a ‘consumer’ solely because the Company provided a warranty. They pointed out that the State Commission wrongly concluded the complainant was a ‘consumer’ under Section 2(1)(d) of the Act, despite the 2003 amendment excluding commercial purposes from the definition of ‘consumer.’ Additionally, they claimed the State Commission failed to acknowledge the lack of substantial evidence regarding manufacturing defects or service deficiencies, aside from parts replacement worth Rs. 15 lakhs. The Company also argued that the State Commission mistakenly relied on the complainant’s unsubstantiated statements and disregarded remarks on various job cards by service engineers. Moreover, they asserted that the State Commission failed to recognize that the excavator wasn’t operated according to the manual and procedures, violating warranty terms. Finally, the Company contended that there was no deficiency in service on their part, as evidenced by the job cards showing they provided services as required.

OBSERVATION S BY THE COMMISSION

The Commission noted that the State Commission’s order was flawed as the complainant didn’t meet the definition of a ‘consumer’ under Section 2(1)(d) of the Consumer Protection Act, 1986, as amended in 2003, which excluded goods and services used for ‘commercial purposes.’ Since the complaint was filed after this amendment, it wasn’t maintainable under the Act, and the State Commission erred in entertaining it. The Commission also rejected the argument that frequent repairs during the warranty period implied an inherent manufacturing defect warranting replacement or refund.

The complainant’s counsel referenced M/s Pressweld Engineers vs. Jayaram Reddy & Anr. to argue the complainant was covered under the Act as a consumer despite the commercial purpose. However, the Commission focused on the exclusion clause in Section 2(1)(d) post-2003 amendment, which applied here since the excavator was bought by a private limited company for commercial use.

Furthermore, the Commission noted the complainant failed to provide an expert opinion per Section 13(1)(c) of the Act to support the claim of deficiency. Consequently, the Commission couldn’t sustain the claims of manufacturing defect and service deficiency against the company. Thus, the Commission found merit in the company’s appeal and overturned the State Commission’s order.

Posted and reproduced in Public Interest by

Adv. Sulaiman Bhimani Legal Consultant

Expert in RERA & Consumer Matters, Co-operative Scty Matters,

Deem Conveyance, Family Matters, and Property Disputes.

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