Companies Buying Software for Gains not Treated as Consumers

Source: Supreme Court 

Why in News? 

The bench of Justices J.B. Pardiwala and Manoj Misra in the case of M/s Poly Medicure Ltd. v. M/s Brillio Technologies Pvt. Ltd. (2025) dismissed the appeal filed by Poly Medicure Ltd., upholding that a company purchasing software for automating business processes cannot be considered a "consumer" under the Consumer Protection Act, 1986, as the transaction had a direct nexus with profit generation. 

What was the Background of M/s Poly Medicure Ltd. v. M/s Brillio Technologies Pvt. Ltd. (2025) Case? 

• The appellant, Poly Medicure Ltd., a company incorporated under the Companies Act, 1956, was engaged in export and import of medical devices and equipment. 
• The company purchased a product license of "Brillio Opti Suite," a software from the respondent, Brillio Technologies Pvt. Ltd., to install and implement an export/import documentation system at its plant. 
• After making the requisite payment, the appellant alleged that the software did not function properly, constituting deficiency in service. 
• In 2019, the appellant filed Consumer Complaint No. 515 of 2019 before the State Consumer Disputes Redressal Commission, Delhi, seeking refund of the entire amount paid for product license cost and additional development cost, along with 18% interest. 
• The respondent contested the complaint, claiming it was not maintainable as the appellant was not a "consumer" as defined in Section 2(1)(d) of the Consumer Protection Act, 1986. 
• The State Commission, vide order dated 19.08.2019, held that since the software license was purchased for commercial purpose, the complainant did not qualify as a "consumer" and dismissed the complaint as not maintainable. 
• The appellant filed First Appeal No. 1977 of 2019 before the National Consumer Disputes Redressal Commission (NCDRC), which was dismissed on 15.06.2020, affirming the State Commission's order. 
• The appellant then filed a Special Leave Petition before the Supreme Court, which was converted to Civil Appeal No. 6349 of 2024. 

What were the Court's Observations? 

On Definition of "Consumer": 

• The Court examined Section 2(1)(d) of the Consumer Protection Act, 1986, which defines "consumer" as any person who buys goods or avails services for consideration, but excludes persons who obtain goods for resale or for any commercial purpose. 
• The Explanation to Section 2(1)(d) clarifies that "commercial purpose" does not include use of goods or services exclusively for earning livelihood by means of self-employment. 
• The Court noted that the definition of "person" in Section 2(1)(m) is inclusive and not exhaustive, and therefore, an incorporated company could be a consumer within the meaning of Section 2(1)(d). 

On Commercial Purpose: 

• The Court relied on Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti Developers (2020) to establish that "commercial purpose" ordinarily includes manufacturing/industrial activity or business-to-business transactions between commercial entities. 

On Nexus with Profit Generation: 

• The Court examined the nature of "Brillio Opti Suite" software, which was used for Export Document Set, Clubbing/Splitting SAP Sales Documents, Letter of Credit Management, Container Indents and Tracking, Export Credit Guarantee Corporation (ECGC) Policy Management, and FOREX Forward Cover Management. 
• The Court found that the software was used to create documents necessary for import and export of goods and to track consignments and benefits under Government Schemes, having direct nexus with profit-generating activity. 
• The Court held that automation of business processes is undertaken not just for better management but to reduce costs and maximize profits. 

On Business-to-Business Transactions: 

• The Court noted that the Consumer Protection Act, 1986 is intended to address business-to-consumer disputes and provide simple and speedy redressal of consumer disputes. 
• If business-to-business transactions were allowed under the Act, it would defeat the very purpose of the legislation. 

Final Holding: 

• Since the transaction had a nexus with generation of profits, the appellant could not be considered a "consumer" as defined in Section 2(1)(d) of the Consumer Protection Act, 1986. 
• The Court upheld the decisions of both the State Commission and the National Commission, dismissing the appeal with no order as to costs. 

What is the Consumer Protection Act, 1986? 

About: 

• The Consumer Protection Act, 1986 was enacted to provide better protection of the interests of consumers and for matters connected therewith. 
• The Act established a three-tier quasi-judicial machinery at the district, state, and national levels for speedy and simple redressal of consumer disputes. 
• The Act was subsequently replaced by the Consumer Protection Act, 2019, which came into force on July 20, 2020. 

Definition of Consumer under Section 2(1)(d): 

• A "consumer" means any person who buys goods for consideration or avails of services for consideration. 
• The definition includes users of goods (other than the buyer) and beneficiaries of services (other than the person who avails services), when such use/benefit is with the approval of the buyer/person availing services. 
• The definition specifically excludes persons who obtain goods for resale or for any commercial purpose, and persons who avail services for any commercial purpose. 

Explanation to Commercial Purpose: 

• The Explanation clarifies that "commercial purpose" does not include use by a person of goods bought and used by him, and services availed by him, exclusively for earning his livelihood by means of self-employment. 
• This exception protects self-employed individuals who purchase goods or avail services for their livelihood, distinguishing them from commercial entities engaged in business for profit.