O R D E R
The appellant set up an industry at Unnao in Uttar 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 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 terms are as under:
"3. Please not that Margine Insurance
is to be arranged by us. For this
purpose suppliers will send a cable
advice to us immediately after the
shipment Suitable provision in this
regard has been 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 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 arranging
payment of our service charges and
insurance etc. and also for getting the
documents endorsed in your favour.
5. Please note that in the 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 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
company/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 complaints should be reported
within 30 days from the date of receipt
of goods.
In the meanwhile, we request you to
kindly go through the Purchase Order and
confirm per return that the same is in
order." 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 expressed difficulty in supplying the entire quantity due to exigencies mentioned 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 requirement 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. VOEST ASPINE
were not in a position to organise
shipment against the subsequent LOI as
there was delay in setting up of the
galvanizing line. Due to these
circumstances, the supplier wanted to
invoke the FORCE MAJEURE clause on the
plea that conditions prevailing at their
end warranted invocation of FORCE
MAJEURE and hence inability to fulfill
contractual obligations qua the
respondent.
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. VOEST ALPINE. M/s. Monton Metals
agreed to ship 20% of the quantity at
the same price.
The Complainants and other end
users in the country were informed by
the respondent that in view of the FORCE
MAJEURE Conditions operating in the
producing countries/the respondent at
bast could have recovered 2% guarantee
money from the supplier towards non-
performance of contractual obligations
by the supplier. It was in these
circumstances that the respondent
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 acceptance(s).
The complainants did not reply to
the correspondences of the 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.
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 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." 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 Commission"] under Section 21 of the Consumer Protection Act, 1986, [for 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 these circumstances,
the controversy raised in this case
cannot be regarded as a Consumer Dispute
which can appropriately be brought
before this Forum. 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.
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 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 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 appellants 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 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 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 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 between the buyer and the seller as consumer goods but not when the goods are intended to be consumed for manufacturing purpose to produce a distinctly identifiable different commercial commodity. Therefore, s.2(1)(d)(i) is not attracted to the facts in this case.
Having 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 (ii) thus:
"(d) ‘Consumer’ means any person who,-
(i) busy 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 deferred 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; 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 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." 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 deferred 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 which has been paid or promised? Whether the transaction in question excludes the person who obtains such goods for resale or for any commercial 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 unde the Act. But when the legislature having defined the term ‘consumer’ in broader terms, sought 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 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. 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 in 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 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 unaward supply to the appellant and others. 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 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 appellants 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 exclusionary clause under Section 2(1)(d)(ii). Therefore, they would not come under Section 2(1)(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 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 agency would be fastened with the liability. Thereby, the definition of the word ‘consumer’ under Section 2(1)(d)(ii) so not attracted.
Consequentially, clause (ii) of Section 2(1) (d) does not apply. Considered 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 would be not lie under Section 21 of the Act.
The appeal is accordingly dismissed but, in the circumstances, without costs.