Current Bank Account Holder - A Consumer Under Consumer Protection Act?

The rights and protection granted by the Act are extended and limited to only those who fall under the ambit of the given definition. The definition of the term 'Consumer' under the new Act, that we see today, is the result of continuous amendments. The 2019 Act defines the term 'Consumer' in context of services, as any person who hires any service for a consideration which has been paid, or has been promised to be paid, and it does not include a person who avails of such a service for any commercial purpose.

Commercial Purpose

It has been expressly mentioned in the new Consumer Act that a person who hires any service for a commercial purpose is not considered a consumer. The term 'commercial purpose' was mentioned in the old Consumer Act only with respect to the goods. By the Amendment Act of 1993, an explanation was added to carve out an exception excluding goods bought and used exclusively for the purpose of earning livelihood, by means of self-employment from 'commercial purpose'. It is to be noted that the given amendment and explanation was limited to the goods bought and used and did not extend to the services hired.

Then, again in 2002, an amendment to the said definition was brought in. In the definition of 'consumer' (in relation to services hired), the following words were inserted: “but does not include a person who avails of such services for any commercial purpose”. The earlier explanation was substituted with a new explanation, which read as follows: “commercial purpose does not include use by a person of goods bought and used by him and services availed by him exclusively for the purposes of earning his livelihood by means of self- employment.” Therefore, it was in 2002 that the Act, for the first time, dealt with the aspect of services being hired for a commercial purpose.

The explanation was again revamped with the emergence of the new Consumer Act, wherein its horizon has been narrowed down to include only “goods bought” and the part regarding services availed has been done away with. However, Section 2(7) defining 'consumer' still excludes those who avail services for any commercial purpose. The net effect of such a change is that if the services are used for commercial purpose, then the consumer forum does not have to deal with the question of whether such services were availed for earning a livelihood by means of self-employment, and the complainant will directly be considered as not a consumer.

The term 'commercial purpose' has not been defined anywhere in the Act. In the absence of a proper definition, the Supreme Court has relied upon its ordinary meaning. Collins English Dictionary defines the word 'commercial' as connected with, or engaged in commerce; mercantile; having profit as the main aim. The consistent view that the National Consumer Disputes Redressal Commission has taken with regards to 'commercial purpose' is that where a person purchases goods with a view of using such goods for carrying on any activity on a large scale for the purpose of earning profit, then he will not be considered as a “consumer”^[1].

In Synco Textiles Private Limited v. Greaves Cotton and Co. Ltd.^[2], Balakrishna Eradi, J., explained as follows: “The words “for any commercial purpose" are wide enough to take in all cases where goods are purchased for being used in any activity directly intended to generate profit.”

Above definitions and meanings attributed to 'commercial purpose' are used in cases of services as well. Recently, in Shrikant G. Mantri vs. Punjab National Bank^[3], the Apex Court elucidated 'commercial purpose' to include business-to-business transactions between commercial entities wherein there is a direct nexus with profit-generating activity and the dominant purpose or intention behind the transaction is to be seen rather than the person's identity or value of the transaction.

Locus of current bank account holders

It is well established that banking services are squarely covered under the ambit of the Consumer Protection Act. However, there are certain challenges which a current bank account holder has to face while holding a bank accountable in case of a deficiency in its services. This has a direct impact on the maintainability of the account holder's complaint before a consumer forum. A current account holder availing services of a bank for its business is hit by the test of commercial purpose, due to which it is thrown out of the definition of “Consumer”. Be it a corporate entity like a company or a HUF, or an individual, anyone opening a current account is not reckoned as a consumer.

In the recent case of PSS International and Another vs. Punjab National Bank through its Chief Manager and Another^[4], a current account holder was unable to get relief under the shadow of the Consumer Protection Act, wherein accusations of deficiency in service by the bank in providing safe and secure internet banking were raised. The complainant company alleged that huge amounts have been transferred from its current account without its knowledge via internet banking. The National Commission, without exploring the deficiency aspect, dealt with preliminary objection raised by the bank and held the consumer complaint to be not maintainable as being filed by a commercial company, thus hitting the commercial purpose bar.

Earlier also, the National Commission in Nidhi Knitwears (P) Ltd. vs. The Manager Bank of Maharashtra, Ludhiana and Others^[5], has held a company holding a current account filing a consumer complaint against the bank for putting operations on hold without any notice, resulting in heavy losses, as not a consumer. In Anand Nishikawa Company Limited vs. State Bank of Patiala and Others^[6], the complainant company alleged that pursuant to connivance of its officer and certain officers of banks, the banks allowed operation of their current accounts beyond the specified limit. The National Commission relied upon Subhash Motilal (supra) to uphold that a complaint filed by a company operating a current account is not maintainable. Again, in Sutlej Industries Ltd. vs. Punjab National Bank^[7], the National Commission, while dismissing the appeal of the complainant company, upheld the view of the State Commission that the complainant, being a commercial organization, had opened a current account for the purpose of carrying out its business activities serving the commercial interests of the Complainant and hence is not a consumer.

The aforementioned decisions were made despite the fact that a company is statutorily recognised as a consumer and comes under the purview of the Consumer Protection Act. Though the term 'company' has not been initially included expressly in the old Consumer Act, yet, the Supreme Court in the case of Karnataka Power Transmission Corporation. and Others vs. Ashok Iron Works Private Limited and Others^[8] held that the definition of 'person' is inclusive and not exhaustive, so no doubt that a company is a person within the meaning of Section 2(1)(d) r/w Section 2(1)(m). The scope of the term 'person' under the new Consumer Act has now been widened, and the term 'company' has been expressly included under Section 2(31)(vi).

The consumer commissions, also, expressed their inability to look into allegations by current account holders not being a company. In Subhash Motilal Shah and Others vs. Melegaon Merchants Co-op Bank Limited^[9], wherein serious accusations of honouring various cheques by the bank were made, which, according to the complainant, were not issued by it but were forged, the National Commission held that its jurisdiction was not invoked. The Commission, keeping in view the amendment of 2002 to the Act, rendered the consumer complaint filed by HUF, a juristic person, not maintainable as it related to a current bank account opened for doing business transactions.

It can be seen from the above mentioned judgments, which have further been echoed by various consumer forums, that a holder of a current account with a bank, is not covered under the definition of 'Consumer' and hence a complaint filed by it is not maintainable. This view taken by the National Commission stands in conflict with the objective of the Act to provide an affordable and speedy cure, as it is keeping a current account bank holder, who is availing services of a bank, outside the scope of a consumer and leaving all the holders with no remedy under the Act.

On the other hand, in any of the cases mentioned above, if the complaint would relate to a savings bank account then the complainant could have easily been provided relief under the Consumer Act. Hence, a bank which has committed a deficiency in its services is set free without any repercussions under the Consumer Act, simply on account of the complainant being a current account holder.

The Commission could have considered the fact that it is not necessary that a current account is opened only for furthering the business of a company. The banking services could be availed for other purposes which have no direct relation to the profit-generating activity of a holder. This aspect was considered in V and S International (P) Limited. vs. Axis Bank and Others^[10], wherein the National Commission held a bank liable under the Consumer Act for honouring the cheques by ignoring stop payment instructions of the complainant company as such transaction was not furthering the profit-making activity of the company. The Commission held the complaint to be maintainable even though it relates to the current account of a company. It further stated that the question of whether a current account is used for commercial purpose is to be dealt with on a case-to-case basis. The National Commission held as follows:

“18. ….The acquisition of the goods or the hiring or availing of services, in order to bring the transaction within the purview of Section 2(1)(d) of the Consumer Protection Act, therefore, should be aimed at generating profits for the Company or should otherwise be connected or interwoven with the business activities of the Company. The purpose behind such acquisition should be to promote, advance or augment the business activities of the Company, by the use of such goods or services…

19. It is pertinent to mention that the transactions in the instant case do not squarely fall within the four factors of production which directly relate to profit-making of the Company to be construed as 'commercial'…”

The National Commission acknowledged that the deficiency by the bank is in respect of an ordinary transaction relating to stop payment instruction and does not result in generation of profit for the current account holder. However, an appeal against this judgment is pending in the Supreme Court^[11] and its operation has been stayed.

Similarly, in Laxmi Engineering Works (supra), the Apex Court, while explaining the term 'commercial purpose' in context of goods, stated that it is a question of fact that is to be decided on the basis of the facts and circumstances of each case. Thus, for the determination of commercial purpose, each and every transaction relating to a particular case alleging deficiency shall be examined by viewing its direct effect on the profitability of a complainant rather than them being a current account holder.

In these modern times, services provided by banks have become an indispensable part of conducting businesses, majorly for fulfilling the requirement of payment obligations in any business activity. All business entities or professionals are required to maintain their current bank accounts and undertake transactions in their day-to-day operations. It is evident that there is no direct nexus between the main profit-generating business of an entity and such banking services relating to payment terms, availed by them. As stated in Shrikant G. Mantri (supra), instead of considering a person's identity, the dominant purpose or intention has to be seen behind a transaction. In consideration of these aspects and the meaning of “commercial purpose” as expounded in Laxmi Engineering (supra), the Supreme Court may consider the ratio of the National Commission's judgment in V and S International (P) Ltd. (supra) and lay down principles to be employed for assisting in applying the “commercial purpose” test as per the facts of each case. If, upon consideration of facts, it is established that a current account holder is engaging banking services not intertwined in the main activity of their business, it is essential that they be granted protection under the provisions of the Consumer Protection Act.

Authors: Pankhuri Jain, Partner and Anmol Chawla, Associate at ZEUS Law. Views expressed are personal.