“REPORTABLE”

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 10650     OF 2010 (ARISING OUT OF SLP (C) NO. 9526 OF 2010)

Birla Technologies Ltd. … Appellant

Versus

Neutral Glass and Allied Industries Ltd.       … Respondent

J U D G M E N T

V.S. SIRPURKAR, J.

1. Leave granted.

2. This  appeal  is  filed  against  the  judgment  passed  by  National  

Consumer  Disputes  Redressal  Commission  (hereinafter  called  ‘the  

National  Commission”  for  short),  allowing  the  First  Appeal  filed  by  the  

respondent herein holding that the complaint filed by the respondent herein  

was tenable relating to its grievance about the deficiency of service, under  

Section  2(1)(d)(ii)  of  The  Consumer  Protection  Act,  1986  (hereinafter  

called “the Act” for short) as amended.   

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3. The appellant had sent a detailed proposal for developing certain  

computer software for the respondent at a cost of Rs.36 lacs on 11.2.1998.  

This proposal was accepted by the respondent who sent the letter of intent  

indicating its intention to entrust the appellant with the development of the  

said software.  On 1.4.1998, the respondent sent a purchase order to the  

appellant regarding the terms and conditions at which the appellant was to  

develop the software for the respondent.  That software was to take care of  

(1) Financial Accounting, (2) Production, (3) Marketing, (4) Purchase, (5)  

Stores/Inventory,  (6)  Fixed  Assets,  and  (7)  Pay  Roll  and  Personnel  

System.  The appellant wrote to the respondent on 3.2.1999 informing that  

the Stores and Purchase Modules had been installed in the respondent’s  

office on 1.2.1999.  The appellant wrote on 4.2.1999 to the respondent that  

since the respondent’s requirements for the Marketing Module had gone  

up considerably in comparison with what had been initially agreed between  

the  parties,  the  appellant  would  require  additional  250  man  hours  to  

complete.  On 26.2.1999, the appellant informed the respondent that three  

Modules  had  been  successfully  installed,  they  being,  (1)  Stores,  (2)  

Purchase,  and  (3)  Production.   Again  on  17.3.1999,  the  appellant  

confirmed  that  even  the  Financial  Accounting  Module  was  also  

successfully installed.  Further, the appellant wrote to the respondent that  

in view of the additional requirements of the respondent, it would require  

350  man  hours  more.   On  30.3.1999,  the  appellant  informed  the  

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respondent  that  the  changes  suggested  by  the  respondent  had  been  

successfully carried out.  The appellant informed the respondent again that  

due  to  the  addition  of  48  new functions  to  the  Marketing  Module,  the  

estimation  for  the  Module  had  gone  up  by  45  man  days,  costing  an  

additional Rs.60,000.  On 7.4.1999 and 13.4.1999, the appellant informed  

that  the  Stores  and  Purchase  Module  and  Financial  Accounting  and  

Marketing Modules were  also installed respectively  on those dates and  

sought for their feedback.  Thereafter, there was a lot of correspondence  

between  the  parties  as  regards  the  work  of  the  said  software  and  in  

respect  of  the  different  Modules.   It  seems,  at  times,  the  

respondent/complainant expressed its satisfaction over the working of the  

Modules.  All this happened in the last months of 1999 and in January,  

2000.  It seems that till February, 2000, the payment of the appellant was  

not  released  requiring  the  appellant  to  write  to  the  respondent  for  the  

same.  The respondent thereafter started complaining about the working of  

some Modules.  In the month of September, 2000, the respondent placed  

a  fresh  purchase  order  with  the  appellant  for  enhancement  of  the  

Production Module, on which the appellant requested the respondent to  

clear the outstanding dues which were not cleared till then.  The appellant  

again wrote to the respondent for payment in the month of April, 2001.   

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4. The disputes started taking ugly shape and the respondent started  

complaining about  the working of  various Modules.   On 15.4.2002,  the  

respondent  wrote  a letter  to the appellant  identifying the problems with  

various  Modules  of  the  software,  which  letter  was  replied  to  by  the  

appellant.   There  was  then lot  of  correspondence between  September,  

2002 and March, 2003 as regards the Modules supplied.  The respondent,  

however,  sent  a  legal  notice  to  the  appellant  through  its  Advocate  on  

4.4.2003,  wherein  it  alleged  deficiency  in  services  rendered  by  the  

appellant with respect to all seven Modules developed by the appellant.  

There was another legal notice sent by hand and ultimately a complaint  

against  the  appellant  came  to  be  filed  on  26.6.2003  before  the  State  

Consumer Disputes Redressal Commission (hereinafter called “the State  

Commission” for short).  The appellant, by way of its reply to the complaint,  

raised a preliminary objection that the respondent/complainant was not a  

‘consumer’ within the meaning of the Act and also sought the decision on  

this preliminary objection as an issue.  A rejoinder was sent to this reply.

5. By its  order  dated  4.3.2004,  the  State  Commission accepted  the  

appellant’s  preliminary  objection  and  dismissed  the  complaint.   The  

respondent/complainant,  therefore,  filed  First  Appeal  No.  218  of  2004  

before the National Commission.  By its order dated 17.12.2009, which is  

impugned here, the National Commission reversed the order of the State  

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Commission and held that the ‘goods’ purchased by the respondent from  

the  appellant  were  being  used  by  the  respondent  for  a  commercial  

purpose, and, therefore, the respondent was not a ‘consumer’ within the  

meaning  of  Section  2(1)(d)(i)  of  the  Act.   However,  the  National  

Commission  further  held  that  notwithstanding  such  findings,  the  

respondent was entitled to maintain a complaint under the Act with respect  

to the deficiency in service during one year warranty period with respect to  

said goods relying on Section 2(1)(d)(ii) of the Act.

6. We have gone through the impugned judgment, wherein there is a  

clear cut finding that the software in question amounted to sale of goods by  

the appellant to the respondent for commercial purpose and as such the  

respondent would be excluded for being considered as a ‘consumer’ under  

Section  2(1)(d)(i)  of  the  Act.   However,  the  National  Commission  then  

proceeded to hold that there was a warranty period of one year in the year  

2000 and as such since the complaint was filed on 1.8.2000, i.e. prior to  

the  amendment  of  Section  2(1)(d)(ii)  by  the  Amendment  Act,  2002,  a  

person  hiring  or  availing  of  any  services  for  a  consideration  was  not  

excluded  even  though  the  services  were  availed  for  any  commercial  

purpose.  In that view, it proceeded to hold that if there was any deficiency  

in service during the warranty period, the complaint could be maintained  

before the consumer forum for the said purpose.  For this, the National  

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Commission  relied  on  its  judgment  in  Meera  Industries,  Howrah  Vs.  

Modern Constructions, Howrah passed in R.P. No. 1765 of 2007.

7. Shri U.U. Lalit, learned Senior Counsel appearing on behalf of the  

appellant pointed out that there is a basic error committed by the National  

Commission inasmuch as it has proceeded on the basis that the complaint  

was  filed  on  1.8.2000,  which  was  prior  to  the  amendment  of  Section  

2(1)(d)(ii)  by the Amendment Act,  2002.  Shri  Lalit  pointed out  that the  

complaint in fact was filed on 26.6.2003 i.e. after the amendment of the  

said  Section,  which  came on 15.3.2003.   The learned Senior  Counsel,  

therefore, submitted that even if there was any service which was hired  

from the appellant in view of the finding of the National Commission that  

the goods themselves were purchased from the appellant for commercial  

purposes,  there  would  be no question  of  the  service  being included in  

Section  2(1)(d)(ii)  particularly  in  view of  the  amendment.   The  learned  

Senior Counsel pointed out that the service offered by the appellant was  

only for proper working of the Modules which were included in the software  

and as such was for commercial purpose.  He, therefore, pointed out that  

the order of the National Commission holding the complaint maintainable  

to the extent of services offered is clearly incorrect, as it proceeds on the  

wrong  assumption  that  the  complaint  was  filed  on  1.8.2000  i.e.  before  

15.3.2003 when the amendment was made to Section 2(1)(d)(ii).   

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8. Shri Sidharth Bhatnagar, learned Counsel appearing on behalf of the  

respondent could not dispute this proposition and fairly accepted that the  

complaint was in fact filed on 26.6.2003 i.e. much after the amendment to  

Section 2(1)(d)(ii), by which the following words were added:-

“but does not include a person who avails of such services for  

any commercial purpose.”

9. In view of the findings of the National Commission that the goods  

sold by the appellant to the respondent/complainant amounted to ‘goods’  

and that such goods were purchased for commercial purpose of earning  

more profits, there could be no dispute that even the services which were  

offered had to be for the commercial purpose.  Nothing was argued to the  

contrary.  It seems that the whole error has crept in because of the wrong  

factual observation that the complaint was filed on 1.8.2000.  In that view,  

it has to be held that the complaint itself was not maintainable, firstly, on  

the count that under Section 2(1)(d)(i), the goods have been purchased for  

commercial  purposes  and  on  the  second count  that  the  services  were  

hired or availed of for commercial purposes.  The matter does not come  

even under the Explanation which was introduced on the same day i.e. on  

15.3.2003 by way of the amendment by the same Amendment Act, as it is  

nobody’s case that the goods bought and used by the respondent herein  

and  the  services  availed  by  the  respondent  were  exclusively  for  the  

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purpose  of  earning  the  respondent’s  livelihood  by  means  of  self-

employment.  In that view, it will have to be held that the complaint itself  

was not maintainable in toto.   

10. However,  the  National  Commission  has  observed  that  if  the  

respondent/complainant  choose to  file  a  suit  for  relief  claimed in  those  

proceedings, they can do so according to law and in such a case, they can  

claim the benefit of Section 14 of the Limitation Act to exclude the period  

spent in prosecuting proceedings under the Act while computing the period  

of limitation prescribed for such a suit.

11. Shri  Lalit,  learned Senior  Counsel  did not  assail  this observation.  

We, therefore, do not wish to interfere with that observation.  However, we  

observe that the parties may avail  of  the remedies available to them in  

accordance with law.  The appeal is allowed.  The order of the National  

Commission  is  set  aside  and  the  complaint  is  dismissed  with  costs  

assessed at Rs.50,000/-.

    ……………………………..J.      [V.S. Sirpurkar]

   ……………………………..J.     [T.S. Thakur]

December 15, 2010; New Delhi.

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