'People Don't Purchase High-End Luxurious Cars To Suffer Discomfort' : Supreme Court Holds Mercedes Benz Liable For Faults In Vehicles

A bench of Justice Bela M Trivedi and Justice Pankaj Mithal was dealing with appeals arising out of a case of a car developing heating issues and another case of an accident wherein the airbags of the car did not deploy.

“People do not purchase the high-end luxurious cars to suffer discomfort more particularly when they buy the vehicle keeping utmost faith in the supplier who would make the representations in the brochures or the advertisements projecting and promoting such cars as the finest and safest automobile in the world”, the court observed.

The primary issue was whether the purchase of a car by a company for its director's use constituted a "commercial purpose," which would exclude it from consumer protection laws.

The court highlighted that the determination of whether a purchase is for commercial purposes depends on the facts and circumstances of each case.

“to determine whether the goods purchased by a person (which would include a legal entity like a company) were for a commercial purpose or not, within the definition of a “consumer” as contemplated in Section 11 2(1)(d) of the said Act, would depend upon facts and circumstances of each case…The purchase of the goods should have a close and direct nexus with a profit generating activity. 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.”

The first case involved M/s Daimler Chrysler India Pvt. Ltd. (now Mercedes Benz India Pvt. Ltd.) and M/s Controls & Switchgear Company Ltd. The latter had purchased two Mercedes cars for use by its executive directors. One car developed heating issues, particularly in the center hump area. Despite multiple attempts at rectification by the company, the problem persisted.

The National Consumer Disputes Redressal Commission (NCDRC) ruled in favour of the complainant, directing Mercedes to replace the car or refund half the purchase price of Rs. 1,15,72,280. Mercedes appealed this decision before the Supreme Court.

In this case, the court found no evidence that the car was used for commercial purposes. The car was used by the whole-time director and his family for personal purposes, and there was no nexus with any profit-generating activity of the respondent company, the court noted.

The court rejected the argument that the purchase was for commercial purposes, stating that the burden of proof lies with the seller (Mercedes) to prove commercial use.

The National Commission ordered tests and inspections, including appointing Local Commissioners to measure temperatures during a long drive, and results showed consistently high temperatures in the car, especially around the center hump, the court noted.

The court upheld the NCDRC's decision but modified the compensation, partly allowing the appeal. Given that the complainant had used the car for 17 years, the court directed Mercedes to pay Rs. 36 lakhs instead of the original Rs. 58 lakhs ordered by NCDRC, and allowed the complainant to keep the car.

The second set of cases involved Mercedes Benz India Pvt. Ltd. and CG Power and Industrial Solutions Ltd. The dispute arose from a serious accident involving a Mercedes E-Class car purchased by CG Power for its Managing Director. In a head-on collision, the car's airbags failed to deploy, resulting in severe injuries to the director.

The complainant asserted that it purchased the vehicle based on representations by Mercedes Benz about its advanced safety features, including multiple airbags that were supposed to deploy in case of a collision, ensuring enhanced safety. However, during an accident on January 17, 2006, involving a head-on collision with a goods carrier, neither the front airbags nor the side airbags deployed as expected.

Mercedes Benz contested these claims, arguing that the accident did not warrant airbag deployment as the driver was sufficiently restrained by seatbelts, and the front passenger airbag only deploys when there is a passenger in the seat whereas the MD was sitting in the rear seat.

The NCDRC awarded Rs. 5 lakhs for deficiency in service due to non-deployment of airbags and another Rs. 5 lakhs for unfair trade practices. Mercedes appealed this decision, while CG Power filed a cross-appeal seeking higher compensation.

The National Commission, in its judgment dated September 11, 2017, reviewed the Owner's Manual submitted by the complainants and observed that the it clarified that side airbags would only deploy on the impacted side in an accident, independent of front airbags.

The NCDRC held that the absence of such critical information in the Owner's Manual was a deficiency, as it failed to inform buyers adequately. The Commission considered this omission alongside allegations that Mercedes Benz had marketed the vehicle as exceptionally safe, including comprehensive airbag protection, without disclosing vital deployment conditions.

The Commission concluded that Mercedes Benz's failure to disclose the limited conditions under which airbags would function, despite marketing them as a substantial safety feature, constituted an unfair trade practice under Section 2(1)(r) of the Consumer Protection Act, 1986.

The Supreme Court upheld the NCDRC's decision and dismissed the appeals. “Incomplete disclosure or non-disclosure of the complete details with regard to the functioning of the airbags at the time of promotion of the car, has rightly been considered by the National Commission as the “unfair trade practice” on the part of the appellants”, the court held.

Senior Advocate Meenakshi Arora appeared for appellant Mercedes Benz in complaint by M/s Controls & Switchgear Company Ltd.

Senior Advocate Dhruv Mehta appeared for appellant Mercedes Benz in complaint by CG Power And Industrial Solutions Ltd. & Ors.

Senior Advocate Prashanto Chandra Sen and Advocate PS Sudheer represented complainant CG Power And Industrial Solutions Ltd. & Ors.

Case no. – Civil Appeal No. 353 of 2008

Case Title – M/S Daimler Chrysler India Pvt. Ltd. v. M/S Controls & Switchgear Company Ltd. & Anr.

Citation : 2024 LiveLaw (SC) 447