National Insurance Co. Ltd. Versus Harsolia Motors And Others

The National Consumer Disputes Redressal Commission’s (hereinafter referred to as the “NCDRC”) decision from 03 December 2003 is challenged in the current Civil Appeal Nos. 5352 and 5353 of 2007. In a nutshell, the facts are that the Respondent No. 1 (M/s. Harsolia Motors), which is in the business of sale of vehicles, purchased fire insurance policies with the appellant for a cover value of Rs. 75,38,000 and Respondent No. 2 (Rakesh Narula and Co.) for a cover sum of Rs. 90 Lakhs. The goods of the Respondents No. 1 and 2 were harmed on February 28, 2002, during the ongoing Godhra Riots. The Respondents brought a claim for damages caused to the goods before the State Consumer Disputes Redressal Commission (SCDRC) of Gujarat (hereinafter referred to as “Gujarat State Commission”). However, the Gujarat State Commission held that the complaint of the Respondents cannot be upheld under the provisions of the Consumer Protection Act of 1986 (hereinafter referred to as “the Act of 1986”) because the Respondents do not meet the definition of “consumer” as stated in Section 2(1)(d) of the Act of 1986 and a company engaged in business for profit falls under the definition of the phrase “for commercial purpose”.


  1. Whether the insurance policy covers obtained by a commercial unit, such as M/s. Harsolia Motors, might be deemed to be hiring of services for “commercial purpose” and therefore excluded from the definitions of the terms “consumer” and “service” as specified in Sections 2(1)(d) and 2(1)(o) of the Act respectively?
  2. Whether M/s. Harsolia Motors’ insurance coverage amounts to the employment of services for a “business purpose” and is thus exempt from the definition of “consumer” under Section 2(1)(d) of the Act.


  1. According to Section 2(1)(d) of the Act of 1986, an individual is a “consumer” if he or she acquires products or receives services for an amount that has been paid or promised, or in part paid and in part promised.
  2. The term “Consumer”also includes any additional individual who makes use of these products and the recipient of that service with the approval of the individual who acquired such goods or received the service for an amount paid or promised or in part paid and in part promised.
  3. A consumer does not take into account any individual who acquires goods or receives services for the subsequent sales or any other commercial objective. According to the explanation of Section 2(1)(d) of the Act of 1986, “commercial purpose” excludes the use of goods acquired or services that are obtained by an individual for the purpose of earning their living by means of self-employment.
  4. In the context of Section 2(1)(o) of the Act of 1986, “service” entails all kinds of service given to potential users, except that it excludes service that is provided free or as part of a contract pursuant to the personal service.


  1. In response to the Respondent’s appeal before the NCDRC, the Commission expressed that a person who obtains an insurance policy to cover risk does so for not any commercial reason but for the contemplated loss. The policy is taken out to compensate for an actual loss suffered by the goods in question rather than to generate profits, and NCDRC concluded that the Respondent satisfies the description of “consumer” under Section 2(1)(d) of the Act of 1986. The NCDRC overruled the State Commission of Gujarat’s ruling and affirmed the maintainability of the Respondent’s complaint.
  2. On behalf of the appellant, the Learned Counsel asserted that in the instance of Laxmi Engineering Works v. P.S.G. Industrial Institute[1], the Court acknowledged that in order to establish a “commercial purpose”, the particulars and circumstances of each instance must be carefully assessed in order to comprehend the “purpose for the products have been brought or services have been availed”. If the objective is to indulge in large-scale commercial activity in the interest of profit, the individual in question is not regarded as a “consumer”. The Learned Counsel continued on to clarify that acquiring a policy of insurance is clearly connected with commercial activity carried out in large-scale enterprises.
  3. On behalf of the Respondent, the Learned Counsel pointed out that the acquisition of a coverage is for the sole purpose of reimbursement for any real loss suffered and not for financial gain, and that if any such damage is not incurred, there is no encashment of insurance policy coverage. The Learned Counsel proceeded on to clarify that the Act only restricts transactions that are commercial in nature, but not commercial enterprises from being considered as consumers, and that a commercial enterprise is entitled to exercise the rights it has as a consumer if its “immediate motive is to acquire financial gain out of any such transaction by the commercial enterprise”, as stated in Madan Kumar Singh (Dead) through LR v. District Magistrate Sultanpur & Ors[2].
  4. The Supreme Court relied upon the judgments of the following cases –
  5. Lucknow Development Authority v. M.K. Gupta[3]
  6. Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti Developers and Others[4]
  7. Paramount Digital Colour Lab and Others v. AGFA India Private Limited and Others[5]
  8. Karnataka Power Transmission Corporation and Another v. Ashok Iron Works Private Limited[6]
  9. Laxmi Engineering Works v. P.S.G. Industrial Institute[7]
  10. According the Supreme Court, the notion of “consumer” precludes any individual who procures goods or makes use of services in order to make his or her living by means of working independently. Other than that, the expression ‘person’ takes into account a business entity, and the word ‘service’ also addresses to services such as banking and insurance. The Court additionally pointed out that it might be feasible for an individual who operates business operations to make purchases of products or obtain services for private purposes that have “no connection with to his or her standard revenue-generating operations or the establishment of self-employment”. If a person carries out the aforementioned, he can make use of his or her legal rights as a consumer.
  11. The Supreme Court came to the conclusion that two aspects needed to be accomplished to be able to figure out whether an individual is a consumer:
  12. whether or not the items were acquired for commercial purposes; and
  13. whether or not the service is utilised for commercial purposes.
  14. The Supreme Court ruled that the commercial business is not shielded from the broad definition of “consumer” in Section 2(1)(d) of the Act of 1968 since the company is a “consumer entity”. The Supreme Court directed the query to the State Commission for streamlined adjudication within the course of a year.


The Supreme Court concluded that the Respondent in the present dispute acquired the insurance policy for the sole reason of safeguarding any probable danger or damages and that there is no drive to reap benefits via the insurance policy cover. The risk of a commercial firm suffering damages in the course of operations cannot be underestimated, and for this reason, those involved in commercial business obtain insurance to pay for losses sustained in such instances. Lastly, the Supreme Court pointed out that the goal of the Act’s emergence is for societal good, and hence the Court shall use a constructive liberal approach to decipher the Act’s provisions. In conclusion, the current case serves as a guidepost for examining the scope of the term “consumer” and the aim of insurance policy coverage. The Supreme Court thoroughly examined and analysed Sections 2(1)(d) and 2(1)(o) of the Act of 1986.

[1] (1995) 3 SCC 583

[2] (2009) 9 SCC 79

[3] (1994) 1 SCC 243

[4] (2020) 2 SCC 265

[5] (2018) 14 SCC 81

[6] (2009) 3 SCC 240

[7] (1995) 3 SCC 583

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