Supreme Court clarifies consumer status under the Consumer Protection Act in REP license claims: The Secretary, Ministry of Commerce & Ors. vs. M/s Vinod and Company (2019)

Date of the Judgment: July 11, 2019

Citation: (2019) INSC 728

Judges: Dr. Dhananjaya Y Chandrachud, J., M.R. Shah, J.

Can a government body providing export incentives be considered a service provider under the Consumer Protection Act? The Supreme Court of India recently addressed this question in a case involving a claim under an REP license. The core issue was whether an exporter, who was denied a premium under the Export-Import (Exim) policy, could be considered a ‘consumer’ and whether the government’s actions constituted a ‘service’ as defined by the Consumer Protection Act, 1986. The judgment was delivered by a two-judge bench comprising Dr. Dhananjaya Y Chandrachud, J. and M.R. Shah, J., with the opinion authored by Dr. Dhananjaya Y Chandrachud, J.

Case Background

M/s Vinod and Company, the respondent, engaged in export activities between 1988 and 1993. Under the prevailing Export-Import (Exim) policy, they applied for an REP license for exports worth Rs 6,16,116. They were entitled to a 20% premium on the export value, amounting to Rs 1,23,223. However, the scheme for issuing REP licenses was discontinued, and the premium was not paid to the respondent. The Additional Chief Controller of Imports and Exports issued an order on September 3, 1991, putting the grant of premiums in abeyance from February 1988 to August 1992, which was later extended to March 31, 1993. Despite appeals to the Ministry of Commerce, the respondent’s claim was rejected because the scheme had been closed.

This led the respondent to file a complaint before the District Consumer Disputes Redressal Forum (District Forum) in Delhi, seeking the unpaid premium and compensation. The District Forum ruled in favor of the respondent, ordering the payment of Rs 1,23,223 along with compensation for mental agony and legal expenses. The appellants were set down ex-parte before the District Forum. The State Consumer Disputes Redressal Commission (SCDRC) rejected the appeal on October 9, 2006, and the National Consumer Disputes Redressal Commission (NCDRC) confirmed this decision on April 4, 2012.

Timeline:

Legal Framework

The case revolves around the interpretation of key definitions within the Consumer Protection Act, 1986. These include:

• Consumer: Defined under Section 2(1)(d) of the Consumer Protection Act, 1986 as a person who buys goods or hires services for consideration, excluding those for commercial purposes. The definition includes any beneficiary of such services.
• “ (d)”consumer” means any person who—
  (i) 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; or
  (ii) hires or avails of any services 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 and partly promised, or under any system of deferred
  payment, when such services are availed of with the approval of
  the first mentioned person but does not include a person who
  avails of such services for any commercial purposes;
  Explanation.— For the purposes of this clause,
  “commercial purpose” does not include use by a person of
  goods bought and used by him and services availed by him
  exclusively for the purposes of earning his livelihood by
  means of self-employment;”
• Consumer Dispute: Defined under Section 2(1)(e) of the Consumer Protection Act, 1986 as a dispute where the person against whom a complaint is made denies the allegations.
• “(e)”consumer dispute” means a dispute where the person
  against whom a complaint has been made, denies or disputes
  the allegations contained in the complaint.”
• Defect: Defined under Section 2(1)(f) of the Consumer Protection Act, 1986 as any fault or shortcoming in the quality, quantity, or standard of goods.
• “(f) “defect” means any fault, imperfection or shortcoming in the
  quality, quantity, potency, purity or standard which is required to
  be maintained by or under any law for the time being in force
  under any contract, express or implied or as is claimed by the
  trader in any manner whatsoever in relation to any goods;”
• Deficiency: Defined under Section 2(1)(g) of the Consumer Protection Act, 1986 as any shortcoming in the quality, nature, or manner of performance of a service.
• “(g)”deficiency” means any fault, imperfection, shortcoming or
  inadequacy in the quality, nature and manner of performance
  which is required to be maintained by or under any law for the
  time being in force or has been undertaken to be performed by a
  person in pursuance of a contract or otherwise in relation to any
  service;”
• Service: Defined under Section 2(1)(o) of the Consumer Protection Act, 1986 as a service of any description made available to potential users, including but not limited to banking, insurance, transport, etc. It excludes services rendered free of charge or under a contract of personal service.
• “(o)”service” means service of any description which is made
  available to potential users and includes, but not limited to, the
  provision of facilities in connection with banking, financing
  insurance, transport, processing, supply of electrical or other
  energy, board or lodging or both, housing construction,
  entertainment, amusement or the purveying of news or other
  information, but does not include the rendering of any service
  free of charge or under a contract of personal service;”

The Exim policy for April 1988 to March 1991 aimed to stimulate industrial growth, promote import substitution, and boost exports. It included incentives like the REP license, which allowed exporters to import goods based on their export performance. The policy’s objectives were to improve the quality of incentives and simplify procedures, keeping in view the constraints of both domestic and external resources.

Arguments

Appellants’ Arguments (The Secretary, Ministry of Commerce & Ors.):

• The Exim policy is a part of the government’s fiscal policy and regulatory control over foreign trade.
• The policy’s objective is to encourage exports and regulate imports through incentives.
• The benefits granted to exporters do not constitute a ‘service’ under the Consumer Protection Act, 1986.
• The government’s actions are in the nature of regulatory and fiscal measures, not service provision.

Respondent’s Arguments (M/s Vinod and Company):

• As an exporter, the respondent was entitled to a premium against the REP licenses.
• This premium is a benefit provided by the government and is part of the services rendered to exporters.
• The denial of the premium constitutes a deficiency in service, making the government amenable to the jurisdiction of consumer forums.

Submissions Table:

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Whether a person who has made a claim under an REP license issued in terms of the import and export policy is a consumer within the meaning of Section 2(1)(d) of the Consumer Protection Act, 1986.
2. Whether in providing benefits under the terms of the Exim policy, the government renders a ‘service’ so as to make it amenable to the jurisdiction of the consumer fora established under the Act.

Treatment of the Issue by the Court:

Authorities

The Supreme Court considered the following authorities:

Cases:

• Vikram Sales Corporation & Anr vs Commissioner of Commercial Taxes [(1996) 4 SCC 433], Supreme Court of India: This case discussed the nature of REP licenses and whether their transfer constitutes a sale of goods under state sales tax laws. The Court highlighted that the objective of the licenses was to provide exporters with essential inputs for manufacturing exported products and that these licenses were freely transferable.
• Bihar School Examination Board vs Suresh Prasad Sinha [(2009) 8 SCC 483], Supreme Court of India: This case addressed whether a state examination board is a service provider under the Consumer Protection Act, 1986. The Court held that conducting examinations is a statutory function and not a service offered to candidates, and that students participating in exams are not consumers.

Legal Provisions:

• Section 2(1)(b)(i) of the Consumer Protection Act, 1986: Defines “complainant” to include a consumer.
• Section 2(1)(d) of the Consumer Protection Act, 1986: Defines “consumer”.
• Section 2(1)(e) of the Consumer Protection Act, 1986: Defines “consumer dispute”.
• Section 2(1)(f) of the Consumer Protection Act, 1986: Defines “defect”.
• Section 2(1)(g) of the Consumer Protection Act, 1986: Defines “deficiency”.
• Section 2(1)(o) of the Consumer Protection Act, 1986: Defines “service”.

Authority Table:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Court relied on Vikram Sales Corporation & Anr vs Commissioner of Commercial Taxes [(1996) 4 SCC 433]* to understand the objectives of the import policy and the nature of REP licenses. The Court used the explanation of the objective of the licenses to provide exporters with essential inputs for manufacturing exported products.
• The Court followed Bihar School Examination Board vs Suresh Prasad Sinha [(2009) 8 SCC 483]* and applied the same principle by analogy, holding that the government is not a service provider in the context of the Exim policy and an exporter is not a consumer.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the understanding that the Exim policy and the incentives provided under it are part of the government’s fiscal and regulatory functions, not a service provided to consumers. The Court emphasized that the government’s role in these matters is to regulate and control foreign trade, and the incentives are merely a tool to achieve these objectives. The Court also relied on the precedent set in the Bihar School Examination Board case to support its view that the government’s actions in this context do not constitute a service under the Consumer Protection Act.

Fact:Law Ratio:

The court’s reasoning was heavily based on legal interpretation and precedent, with less emphasis on the specific facts of the case.

Logical Reasoning:

Key Takeaways

• The Supreme Court clarified that the government’s actions under the Exim policy, such as providing incentives, do not constitute a “service” under the Consumer Protection Act, 1986.
• Exporters claiming benefits under the Exim policy are not considered “consumers” under the Act.
• The government’s role in regulating foreign trade and implementing fiscal policies does not fall under the purview of service provision as defined in the Consumer Protection Act.
• This judgment limits the jurisdiction of consumer forums in cases involving government policies and incentives related to trade and commerce.

Directions

The Supreme Court set aside the judgment of the NCDRC dated April 4, 2012. There was no order as to costs.

Development of Law

The ratio decidendi of this case is that the government, when formulating and implementing policies related to trade and commerce, does not act as a service provider under the Consumer Protection Act, 1986. This clarifies the scope of the Act, ensuring that it does not extend to government functions that are regulatory or fiscal in nature. This decision reinforces the principle established in the Bihar School Examination Board case, applying it to the context of export incentives and the Exim policy.

Conclusion

In conclusion, the Supreme Court held that the government’s actions in providing incentives under the Exim policy do not constitute a service under the Consumer Protection Act, 1986. Therefore, exporters claiming benefits under such policies are not considered consumers under the Act. This decision limits the jurisdiction of consumer forums in cases involving government policies related to trade and commerce, emphasizing that the government’s role in these matters is regulatory and fiscal, not service-oriented.