Who Is a Consumer? Decoding Section 2(7) of the Consumer Protection Act, 2019

The Statutory Question

Every consumer complaint filed in India has to clear one gate before anything else is argued: Section 2(7) of the Consumer Protection Act, 2019. The statute is Act 35 of 2019, it received the President's assent on 9 August 2019, and Section 1(3) Consumer Protection Act left commencement to notification, expressly permitting different dates for different States and for different provisions. Section 2(7) creates no right and imposes no penalty. It does one thing: it decides who may walk into a District, State or National Commission, and who is sent away to file an ordinary civil suit instead.

The definition is short enough to read before any case law is layered on top of it. Section 2(7) Consumer Protection Act says a "consumer" means any person who buys any goods, or hires or avails of any service, for a consideration "paid or promised or partly paid and partly promised, or under any system of deferred payment". It includes the approved user of those goods and the approved beneficiary of that service. And it "does not include a person who obtains such goods for resale or for any commercial purpose", or who avails a service for any commercial purpose. The text is reproduced in full on Indian Kanoon.

Two drafting choices decide most disputes. Consideration may be merely promised or deferred, so a flat on a construction-linked plan or an appliance on an EMI arrangement is a consumer transaction from the first instalment, not the last. And the definition reaches the approved user and approved beneficiary, not only the person named on the invoice, so a parent who pays and a child who uses are both inside Section 2(7).

Then comes the Explanation, where the real fighting happens. Clause (a) provides that "commercial purpose" does not include use by a person of goods bought and used by him exclusively for earning his livelihood by means of self-employment. Clause (b) provides that "buys any goods" and "hires or avails any services" include offline or online transactions through electronic means, or by teleshopping, direct selling or multi-level marketing — the 2019 Act's answer to a market the Consumer Protection Act, 1986 never contemplated.

The statutory question is therefore narrow and unavoidable. The Act never defines "commercial purpose"; it only says what that phrase does not include. Everything else has been worked out by the Supreme Court, and the two decisions that matter most are separated by almost four years.

What the Court Held

The leading modern authority is Lilavati Kirtilal Mehta Medical Trust v M/s Unique Shanti Developers and Others, Civil Appeal No. 12322 of 2016, decided on 14 November 2019 by Justices Mohan M. Shantanagoudar and Ajay Rastogi, reported at (2020) 2 SCC 265. The appellant trust, which runs a hospital, took possession of 29 of the 32 one-BHK flats in a building at Shanti Park, Thane, to house nurses it employed. The 29 agreements to sell were executed on 25 November 1995 and registered on 16 March 1996, and the entire consideration was paid. The National Commission held a hospital buying flats was not a consumer and dismissed the review application on 25 October 2016.

The Supreme Court disagreed, allowed the appeal, held the trust to be a consumer for that transaction and remanded the matter for a decision on merits. It culled out four broad principles for deciding whether a transaction is "for a commercial purpose", and those four propositions are now the working test in every commission in the country (judgement text):

1. The question depends on the facts of each case, though "commercial purpose" ordinarily includes manufacturing or industrial activity and business-to-business transactions between commercial entities.
2. The purchase must have a close and direct nexus with a profit-generating activity.
3. Neither the identity of the purchaser nor the value of the transaction is conclusive; what matters is whether the dominant intention was to facilitate profit generation for the purchaser or their beneficiary.
4. If the dominant purpose was personal use and consumption, or is otherwise unlinked to commercial activity, the question of "generating livelihood by means of self-employment" need not be looked into at all.

Applying those principles, the Court found no direct nexus between the flats and the hospital's profit-generating activity: the nurses paid no rent, no surplus was generated, and no buying and selling of flats was alleged. It distinguished Kalpavruksha Charitable Trust v Toshniwal Brothers (Bombay) Pvt. Ltd., (2000) 1 SCC 512, where CT scan machines bought by a diagnostic centre were held to be for a commercial purpose, because there the nexus was apparent. Better staff morale leading indirectly to higher hospital income was dismissed as conjecture with no direct causal chain.

The second decision is Rohit Chaudhary and Another v M/s Vipul Ltd., Civil Appeal No. 5858 of 2015, 2023 INSC 807, decided on 6 September 2023 by Justices S. Ravindra Bhat and Aravind Kumar. The appellants booked office space and pleaded that they wanted premises "for their self-employment and to run their business and earn their livelihood". The National Commission threw the complaint out by order dated 11 May 2015 in Consumer Complaint No. 276 of 2015. The Supreme Court set that order aside, allowed the complaint in part and directed a refund of Rs 51,10,117 with interest at 12 per cent per annum from the date of complaint until payment, plus Rs 1 lakh as litigation cost (judgement text).

Reasoning

Dominant purpose, not the identity of the buyer

Principle (iii) of the four carries most of the weight: it is not the identity of the person but the purpose of the transaction that is relevant. Lilavati said in terms that a commercial entity may also be a consumer depending on the facts, and offered its own illustration — a large corporation hiring a caterer or a five-star hotel for a function for employees and their families. If that service is deficient, the provider cannot escape the Act merely because its customer is a profit-generating entity.

That cuts both ways, and small businesses tend to miss the second half. A sole proprietor is not automatically a consumer. If what was bought has a close and direct nexus with the revenue-earning side of the business, a Rs 40,000 laptop bought to run billing is as commercial a purchase as a machine on a factory floor. Principle (iii) expressly says the value of the transaction is not conclusive.

The Explanation clarifies; it does not create a second test

The respondents in Lilavati argued that only goods and services availed exclusively for earning a livelihood by self-employment escape the label "commercial purpose", so anything outside that carve-out must be commercial. The Supreme Court rejected that, drawing on Laxmi Engineering Works v P.S.G. Industrial Institute, (1995) 3 SCC 583, which had held the Explanation "is only explanatory; it is more in the nature of a clarification", that it "merely makes explicit what was implicit in the Act", and that "it is not as if the law is changed by the said explanation".

The consequence is principle (iv). A complainant need not prove self-employment first. The first question is whether the dominant purpose was personal use or consumption; if it was, the self-employment inquiry never begins. Laxmi Engineering also explains why the section reads as it does: the Act "provides for business-to-consumer disputes and not for business-to-business disputes", and commissions exist to render inexpensive and speedy remedies in a market dominated by large trading and manufacturing bodies.

Pleading and proof decide when the question is answered

Rohit Chaudhary supplies the procedural layer homebuyers most often need. Where the complaint asserts that goods or services were obtained for earning a livelihood, the Court held, "such complaint cannot be nipped at the bud and dismissed"; evidence must be evaluated on the pleadings before a commission concludes the complainant falls outside Section 2(7). Only where the averments on their face do not survive scrutiny can a complaint go at the threshold.

The Court also refused to draw an adverse inference from occupation. That the first appellant described himself as engaged in the business of investment and dealing in property did not "ipso facto suggest or indicate" that the office space was bought for a commercial purpose, since the premises could equally have been meant for running his own business. Both judgements say the same thing: there is no straitjacket formula, and no formula with mathematical precision.

Practical Takeaways

Individual buyers and borrowers. You are inside Section 2(7) for almost every retail transaction, including anything on a deferred-payment or instalment arrangement, and you need not be the payer. An approved user of goods and an approved beneficiary of a service are both consumers — the reasoning that brought patients within the Act in Indian Medical Association v V.P. Shantha, covered in our note on how doctors came under consumer protection law.

Small businesses and the self-employed. Plead the livelihood purpose in the complaint itself, with facts rather than as a label; Rohit Chaudhary turned on an averment in paragraph 6 of the complaint. Explanation (a) protects goods "bought and used by him exclusively" to earn a livelihood by self-employment, so purchases routed through a firm and used at scale will not qualify. If the item feeds directly into the revenue line, expect the Section 2(7) objection.

Companies, trusts and societies. Section 2(31) Consumer Protection Act defines "person" to include a firm whether registered or not, a Hindu undivided family, a co-operative society, an association of persons and any corporation or company, so an entity can be a consumer. Lilavati is the authority for welfare, staff and personal-use purchases that sit away from the profit line.

Online purchases. Explanation (b) puts offline, online electronic, teleshopping, direct selling and multi-level marketing transactions on identical footing. Section 2(16) Consumer Protection Act defines "e-commerce" as buying or selling goods or services, including digital products, over a digital or electronic network, and Section 2(17) brings any online market place or online auction site within "electronic service provider".

Non-residents. Nothing in Section 2(7) turns on residence or citizenship. NRIs buying property, insurance or financial services in India are consumers on the same terms, which matters once a refund is ordered — our repatriation calculator and NRI tax calculator cover what happens to the money afterwards.

Borrower disputes. Commissions are not a route around secured-creditor enforcement. Where a lender has invoked the SARFAESI machinery, the borrower's remedy generally lies before the DRT, as set out in our explainer on Section 14 possession and the DRT remedy. Section 100 Consumer Protection Act says the Act is "in addition to and not in derogation of" other laws, which is not the same as displacing them.

Each carries an identically worded proviso letting the Central Government prescribe such other value as it deems fit, so confirm the limit currently notified before deciding where to file. Section 69(1) Consumer Protection Act bars admission of a complaint filed more than two years after the cause of action arose, and Section 69(2) allows condonation only where sufficient cause is shown and the commission records its reasons. Complaints can be filed through the official e-Daakhil portal, and the National Consumer Helpline is reachable on 1915.

One structural point remains. Section 35(1) Consumer Protection Act allows a complaint by the consumer and also by a recognised consumer association, whether or not the consumer is a member of it, while Section 2(5) extends "complainant" to numerous consumers having the same interest, to a legal heir where the consumer has died, and to a parent or guardian where the consumer is a minor. Section 2(7) decides who is a consumer; Section 2(5) and Section 35 decide who may bring that consumer's case.

FAQ

Does buying something on EMI make me a consumer from day one?

Yes. Section 2(7) Consumer Protection Act covers consideration "paid or promised or partly paid and partly promised, or under any system of deferred payment". The definition does not wait for the last instalment. A flat on a construction-linked payment plan or an appliance on a 12-month arrangement is a consumer transaction from the moment consideration is promised, which is why Rohit Chaudhary, decided on 6 September 2023, proceeded on payments made in instalments.

Can a company ever be a consumer?

Yes. Section 2(31) Consumer Protection Act defines "person" to include any corporation or company, and Lilavati Kirtilal Mehta Medical Trust, (2020) 2 SCC 265, held that a commercial entity may also be a consumer depending on the facts. The Court's own illustration was a large corporation hiring a caterer or a hotel for a staff function. What decides it is whether the purchase has a close and direct nexus with the entity's profit-generating activity.

What exactly is a "commercial purpose"?

The Act does not define it. Laxmi Engineering Works, (1995) 3 SCC 583, used the ordinary dictionary meaning: "commercial" denotes pertaining to commerce, and commerce means financial transactions, especially buying and selling of merchandise, on a large scale. Lilavati added that the phrase ordinarily includes manufacturing or industrial activity and business-to-business transactions, and that the transaction must have a close and direct nexus with a profit-generating activity.

I am self-employed. Do I have to prove that first?

No, and principle (iv) in Lilavati says so directly. The first question is whether the dominant purpose of the purchase was personal use and consumption; if it was, the self-employment inquiry never arises. Explanation (a) to Section 2(7) is a carve-out from "commercial purpose", not a second gateway you must pass. Laxmi Engineering described the Explanation as clarificatory, making explicit what was already implicit in the statute.

Can my complaint be dismissed at the threshold on this ground?

Only narrowly. Rohit Chaudhary, 2023 INSC 807, held that where the complaint asserts the goods or services were obtained for earning a livelihood, it "cannot be nipped at the bud and dismissed" — evidence must be evaluated on the pleadings first. A complaint goes at the threshold only where the averments on their face do not warrant examination on merits. Plead the purpose with facts.

How long do I have to file, and where?

Section 69(1) Consumer Protection Act bars admission of a complaint filed more than two years after the cause of action arose, subject to condonation for sufficient cause under Section 69(2) with reasons recorded. Forum depends on the consideration paid: Section 34 for the District Commission, Section 47 for the State Commission, Section 58 for the National Commission, each with a proviso allowing the Central Government to notify different values. Filing is available through e-Daakhil; the National Consumer Helpline is 1915.