Trust Not Disqualified From Filing Consumer Complaint: Centre To Supreme Court

The Union of India submitted before the Supreme Court on Thursday (October 17) that merely being a trust does not disqualify a legal entity from filing a consumer complaint if it meets other conditions of being a consumer.

“So your submission seems to be since definition is inclusive, considering the objects of the Act a public trust which otherwise qualifies under definition of consumer has to be held as a person. That is the long and short of your submission. And whether it will be a consumer or not for that the test will have to be applied”, Justice Abhay Oka summarised the argument of Additional Solicitor General Aishwarya Bhati.

A bench of Justice Abhay Oka, Justice Ahsanuddin Amanullah, and Justice Augustine George Masih is hearing the issue referred by a division bench of whether a charitable trust can be considered a “consumer” under the Consumer Protection Acts of 1986 and 2019.

The issue had been referred to a larger bench by a division bench, which had observed that the definition of “person” under the Act is inclusive, potentially encompassing charitable trusts.

In the previous hearing, the Court sought the Union Government's views on the issue. On Thursday, Bhati, representing the Centre, stated that the trust status of an entity should not be the sole criterion for determining whether it qualifies as a "consumer."

Bhati said that the Supreme Court's decision in Pratibha Pratisthan v. Manager, Canara Bank is the only case wherein it was held that a trust cannot file a consumer complaint. She cited the Lilavati Medical Trust case, submitting that the test laid down in it should be applied to determine whether an entity qualifies as a consumer.

“we are relying on Lilavati Kirtilal Mehta Medical Trust v. M/S Unique Shanti Developers in which the test has been laid down and it is the Union's respectful submission that this is the yardstick to be adopted to see whether it will be a consumer complaint or not. The entity of the person, once it is a legal entity my lords that is sufficient. The purpose will have to be ascertained to see whether they are consumer. Trustee or not can neither be a qualification nor a disqualification, that is our respectful submission.”

Bhati argued that the purpose for which the goods or services were availed should be considered to decide whether the trust qualifies as a consumer. “The dominant purpose of the transaction has to be considered”, she stated.

She argued that simply being a trust should neither qualify nor disqualify an entity from being a consumer. Bhati further contended that the decision in Pratibha Pratisthan was flawed in concluding that trust cannot be a consumer as it is not a "person" under the Act.

“Our stand is this - that the Pratibha Pratishthan judgement, with all due respect, made an error in saying that since it is not a person and therefore it is not a consumer”, Bhati said.

After the ASG's submissions, the counsel for the appellant-trust made his arguments, contending that an association of persons can qualify as a consumer, and a trust, being an association of trustees, should fall under this category.

Justice Oka questioned this interpretation, pointing out that a trust is not necessarily an association of persons. He said that a trust with a sole trustee could not be considered an association of persons and emphasized that the trust's nature must be examined.

“Where do you get the concept that a trust is an association of persons? Some trusts may have a sole trustee, and that can't be considered an association of persons,” Justice Oka remarked. He said that simply having trustees does not automatically make a trust an association of persons.

The counsel for the trust said that the trustees come together for a common purpose, making it an association of persons.

However, Justice Oka illustrated that a trust can be created by a single person's will, with trustees appointed later, which would not make it an association of persons.

Justice Oka remained unconvinced, stating that merely having trustees does not transform the trust into an association. He noted that in certain cases, once an entity becomes a trust, it ceases to be an association of persons.

The matter is kept next week for further arguments.

Case no. – SLP(C) No. 18636/2019

Case Title – Administrator Smt. Tara Bai Desai Charitable Opthalmic Trust Hospital, Jodhpur v. Managing Director Supreme Elevators India Pvt. Ltd & Ors.