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PETITIONER: RAJEEV METAL WORKS & ORS.

       Vs.

RESPONDENT: THE MINERAL & METAL TRADING CORPN. OF INDIA LTD.

DATE OF JUDGMENT01/12/1995

BENCH: RAMASWAMY, K. BENCH: RAMASWAMY, K. KIRPAL B.N. (J)

CITATION:  1996 AIR 1083            JT 1995 (9)   250  1995 SCALE  (7)342

ACT:

HEADNOTE:

JUDGMENT:                          O R D E R      The appellant  set up  an industry  at Unnao  in  Uttar Pradesh. He  put up  an application to the District Industry Centre, Unnao  on 13.6.1986 for the supply of about 300 M.T. of  G.P.   Steel  Sheets.   The  Government   of  India  had constituted  the   respondent  as   statutory  authority  to canalise the  procurement of the canalised items for imports and for  onward delivery  to the  consumer  industries.  The General Manager  of the District Industry Centre recommended to the respondent of the appellants’ requirement of 300 M.T. In furtherance  thereof, on  24.8.1987, the  respondent  had written a  letter to  the appellants that they could arrange supply of  50 M.T.  and  directed  the  appellants  to  open letters  of   credit  with  them  and  to  comply  with  the requirements mentioned  in the  letter referred  to therein. Relevant terms are as under:      "3.   Please  not that Margine Insurance      is  to  be  arranged  by  us.  For  this      purpose  suppliers  will  send  a  cable      advice  to   us  immediately  after  the      shipment  Suitable   provision  in  this      regard has  been made  in our  Purchaser      Order.      4.    On receipt of documents from the      suppliers, our  port offices will get in      touch with your banker. Please note that      the consignment (s) is/are to be cleared      by you  through customs  on  receipt  of      documents  from   our  port  office/your      bankers  to   whom  documents   will  be      presented  against   Letter  of   Credit      opened  on   us.  In   respect   of   LC      established by you against our authority      directly in  favour of foreign supplier,      you are advised to contract our Regional

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    Office  immediately   upon  receipt   of      documents by  your banker  for arranging      payment  of   our  service  charges  and      insurance etc.  and also for getting the      documents endorsed in your favour.      5.    Please  note that  in the event of      any  complaint  in  regard  to  shortage      damage and  quality, you  should  report      the matter  to us  immediately with  all      supporting documents  to  enable  us  to      take up  the  matter  with  the  foreign      suppliers. Your claim will be settled on      us  by  foreign  suppliers  and  to  the      extent settlements  are received  by us.      In case  of complaints or short receipts      and damage,  necessary claim  should  be      lodged  by   you  with   the   insurance      company/steamer  company   while  taking      delivery  of  goods  at  the  port.  Any      visual defect noticed on materials other      than  damage   in  handling   should  be      reported immediately  upon receipt.  All      other  complaints   should  be  reported      within 30  days from the date of receipt      of goods.       In  the meanwhile,  we request  you  to      kindly go through the Purchase Order and      confirm per  return that  the same is in      order." After pooling  the requirements  of various  industries, the respondent had  placed a  consolidated indent with a foreign seller for  the supply of the total required quantity of the canalised items,  in this  case  G.P.  Sheets.  The  foreign seller appears to have expressed difficulty in supplying the entire quantity  due to exigencies mentioned in their reply. In the  meanwhile,  the  appellants  admittedly  had  opened letters of  credit with  the respondent  for 50 M.T. of G.P. Sheets. The  respondent in turn had opened letters of credit with the  foreign suppliers  for bulk supply and the foreign suppliers  were   unable  to   supply   required   quantity. Consequently, the  respondent had  written a  letter to  the appellants to  receive 20%  of the  indented requirement but the appellants  seem to  have  not  complied  with  it.  The respondent in  the counter-affidavit  filed in  the Tribunal stated thus:      "The supplier  i.e.  M/s.  VOEST  ASPINE      were  not  in  a  position  to  organise      shipment against  the subsequent  LOI as      there was  delay in  setting up  of  the      galvanizing   line.    Due   to    these      circumstances, the  supplier  wanted  to      invoke the  FORCE MAJEURE  clause on the      plea that conditions prevailing at their      end  warranted   invocation   of   FORCE      MAJEURE and  hence inability  to fulfill      contractual    obligations    qua    the      respondent.           The respondent  keeping in mind the      interest of  complainant and  other  end      users in  the country persisted in their      efforts to  secure  shipment  and  after      great  efforts  succeeded  in  obtaining      supply from M/s. MONTON METALS on behalf      of M/s. VOEST ALPINE. M/s. Monton Metals      agreed to  ship 20%  of the  quantity at

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    the same price.           The  Complainants   and  other  end      users in  the country  were informed  by      the respondent that in view of the FORCE      MAJEURE  Conditions   operating  in  the      producing  countries/the  respondent  at      bast could  have recovered  2% guarantee      money from  the  supplier  towards  non-      performance of  contractual  obligations      by  the   supplier.  It   was  in  these      circumstances   that    the   respondent      advised all  end users to make necessary      financial arrangements and take delivery      of 20%  of the  order  placed  on  their      respective behalfs.  They  were  further      advised to confirm their acceptance(s).           The complainants  did not  reply to      the correspondences  of the  respondent.      The  goods   earmarked  for   them  were      allowed to  be unloaded  at the  port as      the respondent’s  Bombay Office  advised      that their  L/C was  operative. However,      the   document   pertaining   to   their      consignment were  returned by the banker      who stated  that the  L/C in  respect of      the complainants was not valid.           The complainant vide their telegram      dated 5.12.1988  agreed  to  accept  the      goods in  question without  prejudice to      their right  to  seek  legal  remedy  by      going to  Court. The respondent informed      them to  take delivery  of the  goods in      question by  26.12.88. The  complainants      failed  to  respond  and  did  not  take      delivery. The  goods in  question became      liable for  demurrage charges, it was in      these circumstances an alternative buyer      was asked  to take delivery of the goods      in question  after paying  demurrage and      other charges.  It  was  only  in  these      circumstances that the goods in question      were  delivered  to  another  end  user.      Annexed herewith  and marks  as Annexure      is   copy    of   the   Telegram   dated      5.12.1988." Since the  respondent had not supplied the required quantity demanded  by   the  appellants,   the  appellants  laid  the complaints before  the National  Consumer Disputes Redressal Commission [for short, "the Commission"] under Section 21 of the Consumer  Protection Act,  1986, [for short, "the Act"]. The Commission in the impugned order dated November 12, 1992 dismissed the complaint in the following words:      "... we  are clearly of the opinion that      the transaction  involved in  this  case      is  only   one  of  Sale  of  Goods  for      commercial purpose  and not an agreement      for   rendering    any    service    for      consideration. In  these  circumstances,      the  controversy  raised  in  this  case      cannot be regarded as a Consumer Dispute      which  can   appropriately  be   brought      before this Forum. The Original Petition      is dismissed  on this limited ground. No      costs." Calling it in question this appeal under s.23 of the Act has

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been filed.      Shri  G.L.  Sanghi,  learned  senior  counsel  for  the appellants has  contended that the respondent had undertaken to render  service  to  the  appellants  for  procuring  the required quantity  of the  G.P. Sheets.  The appellants  had paid what  was demanded from them and had also complied with all the  conditions mentioned  in the letter. Having had the goods supplied by the foreign sellers, instead of delivering the goods  to the  appellants diverted  them for  extraneous consideration  to   others.  Thereby,   the  appellants  had suffered damages  quantified to  the tune  of Rs.17,71,038/- and sought  recovery thereof  from the  respondent  for  its failure to  render services  undertaken under  the contract. Various letters  exchanged between  the appellants  and  the respondent would clearly show that the transaction is one of service contract  to be  rendered by  the respondent  to the appellants  and  due  to  deficiency  in  the  service,  the appellants suffered  the above damages. Consequentially, the appellants as  consumer under Section 2(1)(d)(ii) of the Act are  entitled   to  redressal   from  the   Commission.  The Commission was  not right  in rejecting  the  claim  of  the appellants  on   the  ground   that  it   is  a   commercial transaction. Shri M.L. Verma, learned senior counsel for the respondent on  the other  hand, contended  that there  is no direct  relationship   of  buyer   and  seller  between  the appellants and  the foreign  suppliers. The  appellants  had opened letters  of credit with the respondent and had agreed to take  delivery  of  the  goods  to  be  supplied  by  the respondent after  getting them  from the  foreign suppliers, subject to  the terms  and conditions  mentioned therein. In furtherance thereof,  the respondent  had opened  letters of credit  directly  with  the  foreign  suppliers  within  the exclusionary clause  of Section  2(1)(d)(i) of the Act which defines ‘consumer’.  Thereby, the  definition excludes  such transaction from the purview of the Act. The learned counsel for the  appellants elaborated  the contention that the word ‘commercial’  used   in  the   definition  requires  broader construction in a normal trading sense since it being in the nature of  the exception.  When it is used in the context of resale, the  words transaction  of commercial nature must be construed to  mean direct  sale between  the buyer  and  the seller as consumer goods but not when the goods are intended to be  consumed  for  manufacturing  purpose  to  produce  a distinctly  identifiable   different  commercial  commodity. Therefore, s.2(1)(d)(i)  is not  attracted to  the facts  in this case.      Having given our anxious and very careful consideration to the  respective contentions, the question emerges whether the appellant-firm  is a  consumer. The  word ‘consumer’ has been defined under s.2(1)(d)(i) and (ii) thus:      "(d) ‘Consumer’ means any person who,-      (i)   busy 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, but  does not  include a  person      who obtains such goods for resale or for      any commercial purpose; or      (ii)  hires  or avails  of any  services

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    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  or  partly      promised,  or   under  any   system   of      deferred payment, when such services are      availed of  with  the  approval  of  the      first mentioned person." Clause (i)  provides that  one 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,  but does not include a person who obtains such goods for  resale  or  for  any  commercial  purpose,  is  a consumer. The admitted case is that this does not apply. The question,  therefore,   is  whether   the  service   of  the respondent availed  of by  the appellants  is covered  under Section 2(1)(d)(ii)?  Whether  the  transaction  is  in  the nature of  buying the  goods for  a consideration  which has been paid  or promised?  Whether the transaction in question excludes the person who obtains such goods for resale or for any commercial  purpose from  the purview  of the Act? It is true as  contended for  the appellants  that the  definition requires to  be interpreted  broadly so as to give effect to the legislative  intention envisaged  unde the Act. But when the  legislature  having  defined  the  term  ‘consumer’  in broader terms,  sought to  exclude certain transactions from the purview  of the Act what could be the meaning that would be assigned  to the exclusionary clause, viz., "but does not include a  person who  obtains such  goods for resale or for any commercial  purpose". The  intention appears  to be that when the  goods are exchanged between a buyer and the seller for commercial  purpose or for resale, the object of the Act appears to  be to  exclude such commercial transactions from the purview  of the  Act. Instead,  legislature intended  to confine  the   redressal  to   the  services  contracted  or undertaken between  the seller  and the  ‘consumer’  defined under the  Act. It  is seen  that the  appellants admittedly entered their  letters of  credit with  the respondent.  The respondent is  a statutory  authority to  act  as  canalised agency on behalf of the industries to procure required goods on their  behalf from  the foreign  seller and  acts in that behalf in  terms of  the letter  of  credit  and  conditions enumerated thereunder.  It is  seen that  the respondent did not  undertake  any  direct  responsibility  for  supply  or liability for  non-supply of  the goods.  On the other hand, the appellants  had solicited  to have the goods supplied to it through  the respondent  and opened  letter of  credit in favour of the respondent. After collecting requirements from various industries  in the country admittedly a consolidated demand for  supply of  the required  quantity  of  the  G.P. Sheets was  indented with  foreign sellers  so as to procure the required  goods for  unaward supply to the appellant and others. The  goods supplied  were  required  for  commercial purpose, i.e.,  for manufacture and resale as finished goods during the  course of  their commercial  business. Under the circumstances, the  appellants intended  to  purchase  these goods for commercial purpose, namely, to manufacture the tin

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sheets for resale. It is true that the word ‘resale’ used in the exclusionary  clause of  Section 2(1)(d)(i)  was used in connection with the purchase of goods defined in the Sale of Goods Act for commercial purpose. The ultimate object of the supply of  the goods,  namely, G.P. Sheets to the appellants was manufacture of finished goods for resale. The goods were intended to be used for commercial purpose. Thus considered, we are  of the opinion that the appellants are not consumers by  virtue   of  the   exclusionary  clause   under  Section 2(1)(d)(ii). Therefore,  they would  not come  under Section 2(1)(d)(ii) of  the Act.  Since the object of the supply and purchase of  the goods  was  commercial  purpose,  it  would certainly come  within the  exclusionary clause  of  Section 2(1)(d)(ii). Otherwise, if the construction sought to be put up by  Mr. Sanghi  is given effect to, while foreign sellers are not  liable under  the  Act  within  the  definition  of s.2(1)(d)(i) as  they get  excluded from  the purview of the Act, the  canalising  agency  would  be  fastened  with  the liability. Thereby,  the definition  of the  word ‘consumer’ under Section 2(1)(d)(ii) so not attracted.      Consequentially, clause  (ii) of  Section 2(1) (d) does not apply.  Considered from  this perspective, we are of the opinion that  the appellants  are not consumer under Section 2(1)(d)(ii) of  the Act.  Thereby the complaint would be not lie under Section 21 of the Act.       The  appeal  is  accordingly  dismissed  but,  in  the circumstances, without costs.