SC:Employer is consumer when purchase is to provide perks to employee

The Hon’ble Supreme Court, on 14th November 2019, in the matter of Lilavati Kirtilal Mehta Medical Trust v. M/S Unique Shanti Developers & Ors. observed that private corporate bodies engaging services of third parties for providing perquisites / perks to their employees would usually fall under the definition of consumer.

The Hon’ble Supreme Court observed that:

Private corporate bodies may engage the services of third parties for the purpose of providing perquisites to their employees. If any negligence occurs resulting in injury to the employee or their property, the service provider cannot disclaim liability on the ground that the activity was carried out for a ‘commercial purpose’. (This inference has been drawn on the basis of Para 6)

(Para 7) The following broad principles can be culled out for determining whether an activity or transaction is ‘for a commercial purpose’:

(i) The question of whether a transaction is for a commercial purpose would depend upon the facts and circumstances of each case. However, ordinarily, ‘commercial purpose’ is understood to include manufacturing/industrial activity or business-to-business transactions between commercial entities.

(ii) The purchase of the good or service should have a close and direct nexus with a profit-generating activity.

(iii) The identity of the person making the purchase or the value of the transaction is not conclusive to the question of whether it is for a commercial purpose. It has to be seen whether the dominant intention or dominant purpose for the transaction was to facilitate some kind of profit generation for the purchaser and/or their beneficiary.

(iv) If it is found that the dominant purpose behind purchasing the good or service was for the personal use and consumption of the purchaser and/or their beneficiary, or is otherwise not linked to any commercial activity, the question of whether such a purchase was for the purpose of ‘generating livelihood by means of self- employment’ need not be looked into.

Copy of judgement: Judgement_14-Nov-2019

-Adv. Tushar Kaushik

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