Treating Business To Business Disputes As Consumer Disputes Will Defeats Purpose Of Consumer Protection Act: SC

Treating Business To Business Disputes As Consumer Disputes Will Defeats Purpose Of Consumer Protection Act: SC

• The Hon’ble Supreme Court (SC or Court),in the case of Shrikant G Mantri v Punjab National Bank, has observed that the legislative intent of the Consumer Protection Act, 1986 (Act) is to keep commercial transactions outside the purview of the Act and simultaneously, to give benefit of the Act to a person entering into commercial transactions exclusively for the purposes of earning his livelihood by means of self-employment.
• Opening a bank account and availing overdraft facility to expand business profits tant amounts to a business-to-business relationship and is a transaction purely for commercial purpose. Such services cannot be said to have been availed “exclusively for the purposes of earning his livelihood” “by means of self-employment”.
• The Appellant, a stock broker by profession, opened a bank account with Nedungadi Bank (erstwhile bank) and sought an overdraft facility in lieu of pledged shares for ₹1 crore; which was subsequently increased to ₹5 crores. Later, upon the request of the Appellant, the facility was temporarily enhanced to ₹6 crores. Thereafter, owing to a steep fall in the stock market, the erstwhile bank called upon pledge of additional shares to regularise the overdraft account.
• The Appellant pledged 37,50,000 shares of face value 10 each of an unlisted company as additional security. However, the company merged with a public listed company and the aforesaid shares became equal to 3,75,000 shares of the public company.
• The overdraft account became irregular and when the Appellant was not able to regularise it, the erstwhile bank called upon the appellant-complainant to pay a sum of ₹6.61 crores along with interest.
• The Appellant alleged that the erstwhile bank failed to sell the pledged shares on a date notified by the Appellant and sold them on a date when the market value was the lowest thereby causing colossal loss to the Appellant. Later on, the Respondent Bank, successor in interest of the erstwhile bank, filed a petition before the Debt Recovery Tribunal for recovery of the balance due from the Appellant. However, a one-time settlement was reached between the parties and the Respondent bank issued a no dues certificate and withdrew proceedings against the Appellant.
• The Appellant was also working as a stockbroker of the Respondent Bank and had arbitration proceedings pending with the Respondent Bank. The appellant filed a complaint before the National Consumer Disputes Redressal Commission (NCDRC), alleging deficiency in services on the part of the respondent-Bank and claimed a relief for return of the 3,75,000 shares of the listed company along with dividend.
• Raising objection with regard to maintainability of the complaint, the Respondent claimed that the Appellant was not a consumer under as per the definition under section 2(1)(d) of the Act. The NCDRC ruled in favor of the Respondent.
• The contention of the Applicant was that since he was a stockbroker and since the services of the overdraft facility were taken for his profession, the services rendered by the Bank were exclusively for the purposes of earning his livelihood.
• The Bank contended that if commercial disputes are included in the definition of 'consumer', it will give rise to floodgates of complaints.
• Analysing the provision of the Act, the SC observed that when a person avails a service for a commercial purpose, in order to be adjudged a consumer, he will have to establish that the services were availed exclusively for the purposes of earning his livelihood by means of self-employment. However, if the goods are bought for commercial purpose, he will beout of the definition of 'consumer'.
• The Court observed that in the instant case, the transaction was of a commercial nature and as such it was purely a "business to business" relationship between the parties. Acceptance of such disputes as consumer disputes will defeat the purpose of enactment of the Consumer Protection. In effect, the appeal was dismissed.