The Aryavarth Express
Agency (New Delhi): The Supreme Court of India has provided much-needed clarity on the burden of proof in consumer disputes where the service provider claims that the service was obtained for a commercial purpose. The ruling came in a series of appeals filed by Shriram Chits (India) Private Limited, a registered chit fund company, against the orders of the National Consumer Disputes Redressal Commission (NCDRC) and lower consumer forums.
The case originated from a complaint filed by Raghachand Associates, a subscriber to the chit fund, alleging that the company had illegally stopped the chit business in 1996 and refused to refund the subscription amount. The complainant initially sought redressal under the Chit Funds Act, 1982, but was directed by the High Court to approach the consumer forum.
The District Forum found the chit fund company guilty of deficiency in service and ordered a refund of the claimed amount with interest. The State Consumer Disputes Redressal Commission and the NCDRC upheld the order. The company then approached the Supreme Court, raising a preliminary objection that the complaint was not maintainable as the complainant did not qualify as a ‘consumer’ under the Consumer Protection Act, 1986, since the service was obtained for a commercial purpose.
The Supreme Court, in its judgment, observed that the definition of ‘consumer’ under Section 2(7) of the Act has three parts: (1) jurisdictional prerequisites for a person to qualify as a consumer; (2) an exclusion clause that excludes a person from the definition if the goods or services were obtained for resale or commercial purpose; and (3) an exception to the exclusion clause, which states that ‘commercial purpose’ does not include the use of goods or services exclusively for earning livelihood through self-employment.
The court emphasized that the onus of proving the first part, i.e., that the person had bought goods or availed services for consideration, rests on the complainant. However, the onus of proving that the person falls within the exclusion clause (second part) must necessarily rest on the service provider, as it is the service provider who pleads that the service was obtained for a commercial purpose.
The court further clarified that if the service provider successfully discharges its onus of proving that the service was availed for a commercial purpose, only then does the onus shift back to the complainant to bring the case within the exception to the exclusion clause (third part) by showing that the service was obtained exclusively for earning livelihood through self-employment.
In the present case, the chit fund company had merely pleaded in its written version that the service was obtained for a commercial purpose, without leading any evidence to prove its claim. The court held that a plea without proof and proof without plea is no evidence in the eyes of the law.
The Supreme Court dismissed the appeals, upholding the findings of the consumer forums on the merits of the case, which had concurred that there was proved deficiency of service by the chit fund company.
The judgment is significant as it provides clarity on the burden of proof in consumer disputes where the service provider raises the defense of ‘commercial purpose.’ It emphasizes that the onus lies on the service provider to prove that the service was obtained for a commercial purpose, and only if this onus is discharged does the burden shift to the complainant to prove that the service was obtained exclusively for earning livelihood through self-employment.
The ruling is in line with the consumer-friendly nature of the Consumer Protection Act, which aims to address the grievances of consumers. By placing the burden of proving the ‘commercial purpose’ on the service provider, the court has ensured that consumers are not unfairly denied the benefits of the Act due to technical pleas raised by service providers.
The judgment also serves as a reminder to service providers that merely pleading that the service was obtained for a commercial purpose is not sufficient; they must lead evidence to prove their claim. The standard of proof required is a preponderance of probabilities, as established by the Supreme Court in an earlier decision.
The Supreme Court’s decision is expected to have far-reaching implications for consumer disputes across the country. It will provide guidance to consumer forums in deciding cases where the ‘commercial purpose’ defense is raised and ensure that the rights of consumers are protected in accordance with the spirit and intent of the Consumer Protection Act.
The judgment also highlights the importance of properly framing the issues and casting the burden of proof on the relevant party in consumer disputes. The court has provided valuable guidance on how the issues must be framed and the manner in which evidence must be appreciated to arrive at a proper decision.
The Supreme Court’s judgment in Shriram Chits (India) Private Limited v. Raghachand Associates is a landmark ruling that strengthens the rights of consumers and provides much-needed clarity on the burden of proof in cases where the ‘commercial purpose’ defense is raised. It reaffirms the consumer-friendly nature of the Consumer Protection Act and ensures that consumers are not denied justice due to technical pleas raised by service providers.