Punjab State Warehousing Corporation & Anr vs M/s Prabhakar Transporters & 2 Ors

This revision petition has been filed under Section 21(b) of The Consumer Protection Act,1986 in challenge to the Order dated 03.04.2013 of the State Commission in appeal no. 106 of 2013 arising out of the Order dated 24.12.2012 of the District Commission in complaint no. 296 of 2011.

We have heard the learned counsel and have perused the record.

Punjab State Warehousing Corporation, the petitioner no. 1 herein, was the complainant no. 1 before the District Commission; District Manager of Punjab State Warehousing Corporation, the petitioner no. 2 herein, was the complainant no. 2 before the District Commission; Prabhakar Transporters, the respondent no. 1 herein, was the opposite party no. 1 before the District Commission; Vijay Kumar, proprietor of Prabhakar Transporters, the respondent no. 2 herein, was the opposite party no. 2 before the District Commission; Harpreet Singh, owner of the subject truck, the respondent no. 3 herein, was the opposite party no. 3 before the District Commission.

Briefly, the Punjab State Warehousing Corporation was availing the services of the Transporters for transportation of foodgrains, gunny bales, etc. in the year 2009-10. In one particular transaction 50 new gunny bales were being transported on 21.10.2009 from Jalandhar to Mau Sahib Mandi, to be used in procurement of foodgrains under the scheme of minimum support price. The truck in question caught fire and the consignment was burnt. The Warehousing Corporation filed a complaint with the District Commission to seek remedy for the loss and injury suffered.

The District Commission vide its Order dated 24.12.2012 dismissed the complaint, holding that: “Without going in to the merits of the complaint, the present complaint is liable to be dismissed on the short ground that the complainant availed the services of opposite party no. 1 for commercial purpose. The complainant No. 1 is a Warehousing Corporation and admittedly it store food grain etc against payment of rent or charges. So the activities of complainant Warehousing Corporation is commercial in nature. In para No. 2 of the complaint, the complainants have themselves pleaded that the complainant through tender invites the different transporters for their assistance in the day to day business. So the complainants availed the services of opposite party No. 1 Transport Company for commercial purposes and as such, the complainant Warehousing Corporation cannot be termed as consumer under Consumer Protection Act, 1986. The remedy of the complainant is to approach the civil court.”

Appeal filed by the State Warehousing Corporation was dismissed by the State Commission vide its impugned Order dated 03.04.2013, holding that “Complainant No. 1 is a Warehousing Corporation of the State of Punjab established under the Warehousing Corporation Act, 1962. Chapter A of that Act deals with the State Warehousing Corporation. It is very much clear from the provisions of this Act that the complainant corporation has been created by the statute for carrying out business / commercial activity. The very preamble of the Act makes it clear that it provides for incorporation and regulation of corporations for the purposes of warehousing of the agricultural products and certain other commodities. It was in the course of that commercial activity that the gunny bags were to be transferred by the complainants to the purchaser centre and for doing the same services of the opposite parties were hired. It is also clear from the impugned order itself that an agreement to that effect was executed between the parties. The transportation of goods was in connection with that commercial purpose. There was direct nexus between the commercial activity being carried out by the complainants and the hiring of services of the opposite parties. It was correctly concluded by the District Forum that the complainants did not fall under the definition of “consumer”. Therefore, the appeal is dismissed in limine.”.

The State Warehousing Corporation then preferred the instant revision petition before this Commission.

The short point involved is whether or not the State Warehousing Corporation is a ‘consumer’ under the Act 1986.

The contention of learned counsel for the State Warehousing Corporation is that the State Warehousing Corporation has been constituted under The Warehousing Corporations Act, 1962. Functions of the State Warehousing Corporation are given in Section 24 thereof.

The said Section is reproduced below:

Functions of the State Warehousing Corporation

Subject to the provisions of this Act, a State Warehousing Corporation may—

(a) acquire and build godowns and warehouses at such places within the State as it may, after consultation with the “Central Warehousing Corporation, determine; (“With the previous approval” was substituted with “in consultation with” vide Warehousing Corporation (Amendment) Act No. 23 of 2001),

(b) run warehouses in the State for the storage of agricultural produce, seeds, manures, fertilizers, agricultural implements and notified commodities;

(c) arrange facilities for the transport of agricultural produce, seeds, manures, fertilizers, agricultural implements and notified commodities to and from warehouses;

(d) act as an agent of the Central Warehousing Corporation or of the Government for the purposes of the purchase, sale, storage and distribution, of agricultural produce, seeds, manures, fertilizers, agricultural implements and notified commodities; (The word “and” occurring at the end of this section was deleted vide Warehousing Corporation Act amendment No. 23 of 2001)

(e) carry out such other functions as may be prescribed.

Learned counsel submits that the activities of the State Warehousing Corporation are not commercial in nature, and in any case the activity in question here i.e. of ‘procurement’ is decidedly not commercial in nature. In this regard he draws specific attention to paras 5, 7 and 8 of the affidavit dated 10.06.2015 of Mr. Arvinder Singh Bains, IAS, Managing Director, Punjab State Warehousing Corporation, which are reproduced below:

That the procurement of foodgrains (which is a distinct activity from the Warehousing activity) i.e. wheat and paddy, is undertaken on behalf of State Govt. as its Agency for the purpose of Central Pool which are ultimately used for distribution under the Targeted Public Distribution Scheme of Govt. of India and this procurement activity is undertaken on “no profit no loss basis”. In other words only the cost of operations of procurement is reimbursed by the Govt. of India through Food Corporation of India. The gunny bales which were burnt down were procured for filing foodgrains purchased and this is a non-commercial activity as explained heretofore.

That the gunnies are procured through Director General of Supplies & Disposals, Ministry of Commerce & Industries, Govt. of India and it is a part of the procurement activity taken up on behalf of the State Govt. The cost incurred on procurement of gunnies is reimbursed, alongwith the costs incurred on procurement of foodgrains,

That the Annual Accounts of PSWC i.e. Profit & Loss Account and Balance Sheet depicts the financial results of these two distinct activity (Warehousing Activity / Procurement Activity) separately.

The submission is that the activity of ‘procurement’ is undertaken by the Warehousing Corporation on a ‘no profit no loss’ basis. The costs of operations of ‘procurement’ incurred by the Corporation are reimbursed by Government of India through the Food Corporation of India. The ‘procurement’ activity per se is distinct and separate from the other activities of the Corporation. Even the annual accounts i.e. the profit and loss account and the balance sheet of the Corporation depicts the financial results of its ‘warehousing’ activities and its ‘procurement’ activities separately. The transaction in question i.e. transportation of gunny bales was undertaken as an integral part of its ‘procurement’ activities. As such the transaction was never commercial in nature. The purpose was not to facilitate some kind of profit-generation at all.

In rebuttal the learned counsel for the Transporter and the owner of the subject truck submits that all activities of the State Warehousing Corporation are commercial in nature. The transaction of transporting gunny bales was also commercial in nature. There is nothing on record that the gunny bales were not being sold. The ‘goods’ i.e. foodgrains which were to be filled up using the bales were also of commercial nature because the Corporation is involved in the sale and purchase of ‘goods’. He also draws attention to Sections 24, 29 and 30 of the Act 1962.

We have already reproduced hereinbefore Section 24, which deals with Functions of the State Warehousing Corporation . Sections 29 and 30, which deal with Investment of Funds and Disposal of profits , are also being reproduced below:

Investment of Funds

A Warehousing Corporation may invest its funds in the securities of the Central or any State Government or in such other manner as may be prescribed by the appropriate Government.

Disposal of profits

(1) Every Warehousing Corporation shall establish a reserve fund out of its annual net profits.

(2) After making provision for “bad” and doubtful debts, depreciation on assets and all other matters which are usually provided for by companies registered and incorporated under the Companies Act, 1956, a Warehousing Corporation may out of its net annual profits, declare a dividend:

Provided that for so long as the reserve fund is less than the paid-up share capital of the Central Warehousing Corporation and until there has been repaid to the Central Government such sum, if any, as that Government may have paid under a guarantee given in pursuance of sub-section (1) of section 5 or sub-section (4) of section 27 the rate of such dividend, in the case of the Central Warehousing Corporation, shall not exceed the rate guaranteed by the Central Government under sub-section (1) of section 5.

According to learned counsel both the District Commission and the State Commission have rightly concluded that the State Warehousing Corporation is not a ‘consumer’ under The Consumer Protection Act, 1986 and there is no reason to overturn the concurring view of the two fora below.

We have given our thoughtful consideration to the arguments advanced at the bar and perused the record in the light of the same.

We may first emphasise that whether or not a ‘person’ is a ‘consumer’ under the Act 1986 has principally to be determined by examining the facts and circumstances and specificities of the case.

This has been settled by Hon’ble Supreme Court in Lilavati Kirtilal Mehta Medical Trust vs. M/s Unique Shanti Developers & Ors. IV (2019) CPJ 65 (SC) , wherein the Hon’ble Court has held that:

To summarize from the above discussion, though a straight- jacket formula cannot be adopted in every case , 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.

(emphasis supplied)

The Hon’ble Court has thus laid-down ‘broad principles’, including the yardsticks of ‘close and direct nexus’ with a profit-generating activity and ‘dominant purpose’ of the transaction in order to fathom out the actual nature or the true essence of the activity involved in a given case.

The summarization made by Hon’ble Supreme Court in the Lilavati Kirtilal Mehta Medical Trust case has to be adopted with due understanding and without missing the significance of the pithy observations made by the Hon’ble Court holding that “a straight-jacket formula cannot be adopted in every case”. The other key expressions given by the Hon’ble Court like “broad principles”, and “The question of whether a transaction is for a commercial purpose would depend upon the facts and circumstances of each case”, ….. “close and direct nexus”, ….. “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.”, and the expression regarding the “dominant purpose” relating to the transaction in question, all of them are of pivotal import.

If, in respect of a particular transaction or activity, a corporation wants to enter the consumer protection fora, whether or not it is a ‘consumer’ has to be (reasonably and logically) adjudged in the given facts and circumstances and specificities of each case (“a straight-jacket formula cannot be adopted in every case” ; “The question of whether a transaction is for a commercial purpose would depend upon the facts and circumstances of each case”).

The elucidating expression “The identity of the person - - - is not conclusive to the question of whether it is for a commercial purpose” implicitly conveys that the Warehousing Corporation cannot be ousted from the realm of ‘consumer’ just because it happens to be a corporation and nor can the same be divested of its right to seek redress under the Consumer Protection Act on that basis alone, the nature and specificities of the activity per se and the transaction involved have to be seen in perspective.

Before we proceed further it may be made explicit that we cannot accede to the contention of the Warehousing Corporation’s learned counsel whereby he has attempted to assert that none of the activities which the Corporation undertakes is for commercial purpose. Such a blanket plea is specious and untenable. Having regard to the preamble (“An Act to provide for the incorporation and regulation of corporations for the purpose of warehousing of agricultural produce and certain other commodities and for matters connected therewith.”) and to the provisions of The Warehousing Corporations Act, 1962, and adverting specifically to Section 24, which deals with ‘ Functions of the State Warehousing Corporation ’, to Section 29 which deals with ‘ Investment of Funds ’, and to Section 30, which deals with ‘ Disposal of profits ’ under Chapter 3 (‘State Warehousing Corporations’), we do not agree with the argument advanced by the learned counsel for the State Warehousing Corporation that all the various activities of the State Warehousing Corporation are a-commercial in nature.

But we do find merit in his argument that the activity of procurement per se , which is the subject matter in question, is undertaken on a ‘no profit no loss’ basis and is not commercial in nature. ‘Procurement’ is undertaken under the scheme of minimum support price. The procured foodgrains i.e. wheat and paddy are subsidized for distribution under the public distribution system. The cost of operations of ‘procurement’ by the Corporation is reimbursed by Government of India. This activity has no close and direct nexus with any other profit-generating activity of the Corporation at all. The annual accounts in respect of the distinct activity of ‘procurement’ are depicted separately. As such by no stretch of imagination can the activity of ‘procurement’ per se be treated as a commercial activity. The transaction in question i.e. transportation of gunny bales was in relation to the activity of ‘procurement’. When we apply the test of ‘close and direct nexus’ and ‘dominant purpose’ as laid down by Hon’ble Supreme Court in the Lilavati Kirtilal Mehta Medical Trust case we see that there is no close and direct nexus of the transaction in question with any other profit-generating activity and its dominant purpose is not linked to any commercial activity or profit-generation.

We are therefore of the considered opinion that both the fora below have erred in cursorily holding the State Warehousing Corporation not to be a ‘consumer’ under the Act 1986, ignoring the principles settled by Hon’ble Supreme Court in the Lilavati Kirtilal Mehta Medical Trust case and overlooking that the dispute in question was in relation to a distinctly separate non-profit generating area of activity undertaken on ‘no profit no loss’ basis having no proximate or close and direct nexus with any of the other profit-generating activities of the Corporation whichever they might be.

Sequel to the above the Orders of both the fora below are set aside and the matter is remitted back to the District Commission to decide the complaint on merit as per the law. The parties are directed to appear before the District Commission on 18.05.2022. Seeing that the complaint was filed way back in the year 2011, the District Commission is requested to dispose the case as expeditiously as possible and preferably within a period of six months. We clarify that we have not expressed any views on the merits of the case. We also clarify that nothing here restrains the Warehousing Corporation to separately take departmental action against the Transporters as per its rules.

The Registry is requested to send a copy each of this Order to all parties in the petition and to their learned counsel as well as to the District Commission immediately. The stenographer is also requested to upload this Order on the website of this Commission immediately.