Metal Works & Ors Vs. The Mineral & Metal Trading Corpn. of India Ltd.
 INSC 772 (1
K.Ramaswamy, K.Kirpal B.N. (J)
1996 AIR 1083 JT 1995 (9) 250 1995 SCALE (7)342
O R D
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.
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.
terms are as under:
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.
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 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.
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.
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.
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
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.
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:
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.
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 the same
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
complainants did not reply to the correspondences of the respondent.
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.
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.
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
Commission in the impugned order dated November 12, 1992 dismissed the complaint in the
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 been filed.
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.
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.
s.2(1)(d)(i) is not attracted to the facts in this case.
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:
`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 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 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
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.
appeal is accordingly dismissed but, in the circumstances, without costs.