ONUS IS ON THE PART OF SERVICE PROVIDER TO PROVE THAT THE SERVICES ARE UTILIZED FOR COMMERCIAL PURPOSES

[Mr. M. GOVINDARAJAN]

In SHRIRAM CHITS (INDIA) PRIVATE LIMITED EARLIER KNOWN AS SHRIRAM CHITS (K) PVT. LTD VERSUS RAGHACHAND ASSOCIATES - 2024 (5) TMI 608 - SUPREME COURT, the service provider (appellant in the present appeal) is engaged in Chit Fund business.  The complainant (‘respondent’ in the present appeal) made a subscription in the appellant company for a Chit value of Rs. 1 lakh payable @ Rs.2500/- per month for a period of 40 months.  The appellant all of a sudden stopped its business.  Therefore, the complainant requested the appellant to refund of amount deposited with it till the date of closure of business.  The appellant refused to pay the same on the contention that the complainant has to pay some dues to the appellant which would be adjusted against the refund amount.

Therefore, the complainant filed a complaint before the appropriate authority under the Chit Funds Act.    He also filed 10 cases before the Assistant Registrar of Co-operative Societies.  The Assistant Registrar passed an order directing the appellant to refund the amount to the complainant.  The appellant filed an appeal before Additional Registrar against the order of Assistant Registrar.  The Appellate Authority held that the appellant is not covered under the Chit Fund Act.

Against the order of Additional Registrar, the complainant filed 10 writ petitions before the High Court.  The High Court held that the said cases were not maintainable under the Chit Funds Act and directed the complainant to file complaints before District Consumer Disputes Redressal Forum (‘District Forum’ for short). 

As per the directions of the High Court, the complainant filed a petition before the District Forum against the appellant alleging that the illegal termination of chit fund business and non-refund of his subscription amount, resulted in deficiency of service on the part of the appellant.  The complainant prayed for the refund of Rs.18,750/- along with interest @ 18% p.a.  The appellant raised an objection that the complainant was not a consumer since he obtained the services from the appellant for commercial purposes.  The appellant relied on-

• The statement in the complainant that there was an ‘understanding between complainant and opposite party to promote chit business’;
• Internal audit conducted by the appellant company.  As per the Internal Audit, the Complainant held 1023 prized chits, and 1043 non-prized chits. The report also mentioned various correspondences between the complainant and appellant  with regards to the increasing disparity between the total liability of the fund, and the paid-up value of the non-prized chits. As per the audit report, the balance liability amounted to Rs. 1.86 crores. It was stated that owing non-payment of outstanding arrears, the foreman in accordance with Section 28 and Section 29 of the Chit Fund Act is bound to remove the defaulted non-prized subscriber to keep the chit running, hence the defaulted non prized tickets maintained by Complainant were removed, and the paid amounts were adjusted against arrears in the prized chits.

The District Forum, instead of examining the objection of the appellant, decided that the complainant is a ‘person’ under Section 2(1)(m) of the Consumer Protection Act which defines the term ‘person’.  The District Forum held that there was a deficiency of service on the part of the appellant and directed the appellant to refund the said amount along with interest @ 18 p.a. 

Against the order of District Forum, the appellant filed an appeal before the State Commission which upheld the findings of the District Forum.  Again, the appellant filed an appeal before the National Commission.  The National Commission has agreed with the findings of the State Forum and District Forum on the merits of the issue and found no reason to interfere with the ‘well appraised detailed order’ of the District Forum.  The appellant filed the present appeal before the Supreme Court challenging the order of National Commission. 

The appellant submitted the following before the Supreme Court-

• the complainant does not satisfy the definition of consumer since the service was obtained for a commercial purpose.
• the complainant has not pleaded let alone prove that the services availed by it was for securing the livelihood of the complainant by means of self-employment.

The Supreme Court, instead of the remanding the matter to the lower authority, decided to determine the simple question as to whether the service obtained by the complainant was for a commercial purpose.  The Supreme Court analyzed the provisions of Section 2(7) of the Consumer Protection Act as amended which define the term ‘consumer’.  The Supreme Court observed that there are three parts to the definition of the term ‘consumer’ as detailed below-

• The first part sets out the jurisdictional prerequisites for a person to qualify as a consumer – there must be purchase of goods, for consideration.
• The second part is an ‘exclusion clause’ [‘carve out’] which has the effect of excluding the person from the definition of a consumer.  The carve out applies if the person has obtained goods for the purpose of ‘resale’ or for a ‘commercial purpose’.
• The third part is an exception to the exclusion clause which limits the scope of ‘commercial purpose’.

The Supreme Court observed that to file a complaint, one must be a complainant and for one to be a complainant, he must be a consumer.  If a person fails to come within the definition of a consumer, he cannot be a complainant and therefore, such person cannot file a complaint under the Consumer Protection Act.  It would be necessary to set out the manner in which consumer forums must decide technical pleas raised by service providers to the effect that the services obtained/goods bought was for a commercial purpose and, therefore, the complaint filed on behalf of such persons are not maintainable. The crucial step in deciding such pleas would turn on the manner in which the issues are framed. Unless the burden of proof is properly cast on the relevant party, the consumer forum would not be in a position to arrive at proper decision.

The Supreme Court observed that the significance of deconstructing the definition into three parts was for the purpose of explaining on whom lies the onus to prove each of the different parts. There can hardly be any dispute that the onus of proving the first part i.e. that the person had bought goods/availed services for a consideration, rests on the complainant himself. The carve out clause, in the second part, is invoked by the service providers to exclude the complainants from availing benefits under the Consumer Protection Act. The onus of proving that the person falls within the carve out must necessarily rest on the service provider and not the complainant.  This is in sync with the general principle embodied in Section 101 and 102 of the Evidence Act that ‘one who pleads must prove’. Since it is always the service provider who pleads that the service was obtained for a commercial purpose, the onus of proving the same would have to be borne by it. The Consumer Protection Act is a consumer-friendly and beneficial legislation intended to address grievances of consumers.  A negative burden cannot be placed on the complainant to show that the service available was not for a commercial purpose. The standard of proof has to be measured against a ‘preponderance of probabilities’. If and only if, the service provider discharges its onus of showing that the service was availed, in fact for a commercial purpose, does the onus shift back to the complainant to bring its case within the third part.  Unless the service provider discharges its onus, the onus does not shift back to the complainant to show that the service obtained was exclusively for earning its livelihood through the means of self-employment.

In this case the appellant has merely pleaded in its version that the service was obtained for a commercial purpose. No evidence has been led to probabilise its case other than merely restating its claim on affidavit. It is now well too settled that a plea without proof and proof without plea is no evidence in the eyes of law.  The Supreme Court dismissed the appeal on the ground that the three Forums below have concurred in their finding that there was proved deficiency of service.