Introduction
The Consumer Protection Act, 2019 was enacted to protect the rights and interests of consumers, providing them with remedies in cases of unfair trade practices or service deficiencies. It defines a “consumer” as anyone who buys goods or services for consideration, but not for commercial purposes. However, a contentious issue is whether charitable trusts should be included under this definition of “consumer.”
Charitable trusts engage in various activities, including acquiring goods and services for their operations. While their primary purpose is social welfare, they often purchase goods or services for their functioning. Currently, the interpretation of whether such purchases by charitable trusts qualify them as consumers under the Act is debated. To understand the situation, let’s explore the legal definitions and the underlying arguments.
Consumer Protection Act, 2019 – Definition of Consumer
As per the Consumer Protection Act, 2019, a consumer is defined under Section 2(d) of the Act as:
- Any person who buys any goods for a consideration (price), or
- Any person who hires or avails of any services for a consideration.
The consideration could be fully paid, partly paid, or promised to be paid in the future. However, it is important to note that a consumer does not include a person who buys goods or avails services for commercial purposes (i.e., for resale or for a profit motive).
Section 2(1)(m) of the Consumer Protection Act, 2019 (which replaced the 1986 Act) defines “person” as:
“person” includes—
- an individual;
- a firm whether registered or not;
- a Hindu undivided family;
- a co-operative society;
- an association of persons whether registered under the Societies Registration Act, 1860 or not;
- any corporation, company or a body corporate incorporated under any law for the time being in force;
- any artificial juridical person, not falling within any of the preceding sub-clauses;
The case arose when the District Consumer Disputes Redressal Forum, Jodhpur, accepted the claim of a complainant trust and directed the respondents to pay Rs. 5,90,000 in compensation along with 9 percent interest per annum.
However, the State Consumer Disputes Redressal Commission in Jaipur overturned this decision, ruling that a trust could not be classified as a “consumer” under the Act. This was upheld by the National Consumer Disputes Redressal Commission. Thus, the complainant trust approached the Supreme Court in case titled as Administrator Smt. Tara Bai Desai Charitable Opthalmic Trust Hospital, Jodhpur v. Managing Director Supreme Elevators India Pvt. Ltd & Ors.
Reliance was placed on the Supreme Court’s decision in Pratibha Pratisthan v. Canara Bank (2017), which held that a trust is not a “person” and, therefore, not a “consumer” under the Act.
However, the division bench opined that the issue needs reconsideration. The bench said that the inclusive definition of “person” under Section 2(1)(m) of the Consumer Protection Act which includes firms, Hindu undivided families, cooperative societies, and other associations of persons, whether registered or not could potentially cover a trust as well.
The bench also referred to Ramanlal Bhailal Patel v. State of Gujarat, where it was noted that the term “person” includes entities recognized by law as capable of having rights and duties.
The division bench opined that the exclusion of trusts from the definition of “consumer” may not align with the legislative intent, and referred the matter to be reconsidered by a larger bench.
Nature of Charitable Trusts
A charitable trust is a legal entity established for charitable purposes, usually aimed at activities that benefit the public, such as education, healthcare, or religious purposes. The trust generally does not operate with the intent of making profits.
- Consideration for Services:
- To qualify as a consumer, the trust must purchase goods or hire services for consideration.
- If a charitable trust pays for services, for example, hires a professional for legal services, or purchases equipment, it could argue that it is acting as a consumer because it is paying for these goods or services.
- Commercial vs. Non-Commercial Purpose:
- The Act excludes persons who buy goods or avail services for “commercial purposes,” which implies that charitable trusts could argue that they are not engaged in commercial purposes since their activities are aimed at public welfare, not profit.
- However, if the goods or services are used for activities that generate income for the trust, there could be a challenge in determining whether it is for a “non-commercial” or “charitable” purpose.
- Judicial Interpretation:
- Indian courts have typically interpreted the term consumer narrowly to ensure it protects individuals rather than large entities. Courts have ruled that services availed for free do not constitute consideration, hence not qualifying as a consumer.
- For instance, in cases where the trust avails services without any consideration or nominal consideration (such as subsidized rates), courts might rule that such transactions do not fall under the scope of consumer protection laws.
- Specific Court Rulings:
- In Indian Medical Association v. V.P. Shantha & Ors. (1995), the Supreme Court held that charitable institutions providing services for free (or at a nominal fee) are not “service providers” under the Consumer Protection Act.
- However, a charitable trust paying for services (such as hiring a contractor for building a hospital) could qualify as a consumer if the service provided was deficient.
Conclusion:
While there is no definitive rule that categorically includes or excludes charitable trusts from being consumers under the Consumer Protection Act, 2019, the determining factors include:
- Whether the trust has availed goods or services for consideration.
- Whether the goods or services are used for non-commercial purposes, such as for the trust’s charitable activities.
If a charitable trust meets the criteria of paying consideration for goods or services used for its non-commercial charitable purposes, there is a strong argument that it could be considered a consumer under the Act. However, in cases where the trust is engaged in commercial activities, it would likely not qualify as a consumer. Thus, the matter is under consideration before the larger bench of the Supreme Court.
Kratika Mandil
Associate