AN INVESTOR IS NOT A CONSUMER

[Mr. M. GOVINDARAJAN]

Consumer

Section 2(1)(d) of the Consumer Protection Act, 1986 defines the term ‘consumer’ as any person 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;
• 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 and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person.

Who is not a consumer?

The following will not be considered as a ‘consumer’ for the purposes of the Consumer Protection Act, 1986-

• a person who obtains such goods for resale or for any commercial purpose;
•  a person who avails of such services for any commercial purpose.

But there is an exception to this.  The explanation to section 2(1)(d) of the Consumer Protection Act, 1986 provides that ‘commercial purpose’ does not include use by a person of goods bought and used by him and services availed by him exclusively for the purposes of earning his livelihood by means of self-employment.

Investor – a consumer?

The issue to be discussed in this article is as to whether an investor will be considered as a consumer and whether he will be entitled to file a complaint before the Consumer Forum for deficiency of service or defective in goods.  The National Consumer Disputes Redressal Commissioner (‘NCDRC’ for short) in SURENDRA KAPUR VERSUS M/S PUJA CONSTRUCTION LTD. & 3 ORS. - 2022 (12) TMI 363 - NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI, that the investor is not the consumer.

In the above said case the opposite party No. 1 is a company registered under the Companies Act, 1956.   The Opposite Party No.2 is the Director of the first opposite company.  The opposite parties 3 and 4 are wife and daughter of the opposite party No.2. 

The complainant was approached by the Opposite Party 2 with respect to a proposed investment opportunity by Opposite Party No.2.  The complainant decided to invest an amount of Rs.17,00,000/- on the basis of a Memorandum of Understanding for Joint Venture Project.  The complainant sent further draft of Rs.25,00,000/-, along with letter dated 05.11.1996, wherein it was stated that a further payment of Rs.20,00,000/- would be made upon execution of the Agreement as envisaged in the Memorandum of Understanding.

The opposite party 2 unilaterally changed the amount from Rs.20,00,000/- to Rs.25,00,000/- and terms of the Agreement.   Vide his letter dated 31.08.1998 the complainant expressed his disinterred in the project and requested to refund the amount with interest.  Vide his letter dated 22.07.1999 the complainant requested the opposite party to refund the amount Rs.42,00,000/- with 24% interest.  On 21.11.2006 the opposite parties entered into a settlement agreement with the complainant.  The complainant was promised a residential duplex flat for his personal use in the Rajmahal Royal Residency Project located at Goner Road, Jaipur.  The settlement agreement was confirmed by the opposite party No.1.   The opposite party No.2 assured the complainant that he send photographs which will show the progress made in the project.  The complainant visited Jaipur and found that no work has been done in the site.  Therefore, vide his letter dated 22.12.2012, sought the refund of full value of the said flats with interest amounting to Rs.3.20 crores.   The complainant also claimed punitive damages to the tune of Rs.1.80 crores for compelling him to occupy costly alternative accommodation. 

Despite the requests made by the complainant the opposite party did not refund any amount.  The complainant issued a legal notice on 28.03.2013 to the opposite parties claiming an amount to the tune of Rs. 5,00,30,000/-.  The opposite party sent reply to the legal notice 13.04.2013 to get the sale deed executed.  In the reply the opposite party informed that it appointed an arbitrator, in terms of the agreement, to resolve the dispute prevailing between both the parties.  But the complainant did not accept the same.  He, vide his letter dated 15.07.2013 informed that he never consented for arbitration to resolve the dispute. 

The complainant filed a consumer complaint before the NCDRC alleging the deficiency of service on the part of opposite parties.  The complainant made the following prayer before the Commission-

• To pass an order holding that the Opposite Parties are liable for breach of contract and deficiency of service;
• To pass an order directing the Opposite Parties to forthwith pay to the Complainant a total sum of Rs.5,00,30,000/- together with simple Interest@ 18 percent p.a. from March 28, 2013 till the date of payment;
• To pass an order calling upon the Opposite Parties to certify and transmit all necessary records relating to the case before the  Commission or cause them to be produced at the time of hearing so that conscionable justice may be done to the Complainant;
• To pass an order awarding the costs of the present proceedings in favor of the Complainant and against the Opposite Parties;
• To pass such other or further order or orders, direction or directions as may be considered fit and expedient in the facts and circumstances of the case.

The opposite parties opposed the complaint.  They submitted the following before the Commission-

• The Complaint is barred by limitation under section 24-A of the Consumer Protection Act, 1986 as it was filed after 2 years from the date of the alleged cause of action.
• There was also no relationship of Consumer and service provider between the Parties.
• The Complainant had initially entered into the Joint Venture agreement with Opposite Party No.1 for profit motive and thereafter agreed to take flat in lieu of the investment made by him with the sole intention to earn profit by disposing off the same.
• The Complainant is seeking12% annual compoundable interest on the amount and is thus acting as a money lender who could not be considered to be a Consumer as defined under Section 2 (d) of Consumer Protection Act 1986.
• It had been specifically mentioned in clause 14 of the registration form that any dispute or difference between the Applicant/Buyer and the Opposite Parties shall be resolved through arbitration in terms of Arbitration and Conciliation Act, 1996.
• There was no deficiency on their part and whatever delay had occurred in completion of the construction of the project was beyond the control and power of the Opposite Parties.
• The delay occurred due to the restraint order passed by the High Court of Rajasthan in Civil Writ Petition No. 5702/2006 and not due to any fault or negligence on the part of the Opposite Parties and as such the Opposite Parties could not be held liable.
• Later the Complainant opted for two residential flats admeasuring 1480 sq. feet each. Accordingly, the Complainant had filled two forms for allotment of two flats of 1480 sq. feet, instead of duplex flat. 
• Immediately after completion of the project, Opposite Parties offered the flats to the Complainant, vide letter dated 13.04.2013. Despite that, the Complainant did not come forward to take possession of the flats and instead filed the present Complaint just to harass the Opposite Parties.

The NCDRC heard the submissions made by the appellant and the opposite parties.  The opposite parties raised an objection that the complainant is not a consumer at all and therefore he cannot file a complaint before the consumer forum.  Further there is an arbitration clause in the agreement to resolve the disputes.  The NCDRC observed that in para 3 of the complaint he submitted that he was a respected citizen and enjoys an enviable and unimpeachable reputation as a businessman.  His credentials are impeccable and he is well respected, well acknowledged, well recognized and well accepted in his field of business. He has a reputed standing in business circles. During his business career, spanning a period of several long years, the Complainant has earned a blemish-less reputation for care, caution, diligence, thoughtfulness, circumspection, prudence and, sound judgment. He has a record of honesty, integrity and fair play both in his business and otherwise.  From his version it is clear that the complainant is a business man. 

The NCDRC further observed that in para 5 of the complaint, the complainant indicated that in and around October, 1996, the Complainant, on being approached by and relying upon tacit assurances given by Opposite Party No.2 and his father with respect to a proposed investment opportunity, decided to invest an amount of Rs.17,00,000/-  on the basis of Memorandum of Understanding which was intended to be used for the purpose as decided between the Parties.

From the complaint the NCDRC observed that the Complainant made investment of his money as a partner in the project and now he is seeking refund of that investment amount.  The entire transactions made between the complainant and the opposite parties are commercial in nature.  Refund of the amount sought by the Complainant is only extension of initial investment made by him, which is purely commercial in nature. By the Complainant’s own admission, vide settlement dated 21.11.2016 the said amount was agreed to be ‘accounted against’ the contractual promise for delivery to the Complainant of a duplex flat. The amount paid along with accrued interest was the consideration for the flat and the debt was discharged by the Opposite Parties through the promise to deliver the duplex flat to the Complainant.  The claim made by the Complainant is only for furtherance of gain for the original investment made.

NCDRC dismissed the complaint with instructions to the complainant to approach the appropriate forum to get the refund of the alleged amount from the opposite parties.