Commercial use clarified for nurses’ residences

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In a recent judgment, the Supreme Court laid down broad principles for determining whether an activity is for a commercial purpose for the purpose of section 2(1)(d) of the Consumer Protection Act, 1986.

In Lilavati Kirtilal Mehta Medical Trust v M/S Unique Shanti Developers & Ors, Shanti Developers had developed two buildings with 32 single-bedroom flats with living room and kitchen in the Thane area of Maharashtra state. Out of these, Lilavati Trust took possession of 29 flats for the provision of hostel facilities for nurses employed by Lilavati Hospital, which was run by the trust.

The flats were used for the purpose of hostel facilities until 2002. However, within two to three years of completion of the project, because of alleged poor building quality, the structure became dilapidated. Lilavati Trust vacated the flats in 2002, and since 2004 the flats remained unused.

Lilavati Trust filed a complaint before the National Consumer Commission alleging deficiency of service, however the complaint was dismissed on the ground that the trust was not a consumer within the meaning of section 2(1)(d) of the Consumer Protection Act, 1986, as the section excludes a person who obtains goods and services for a commercial purpose.

Since providing hostel facilities to the nurses was held to be directly connected to the commercial purpose of running the hospital, and was consideration for the work done by them in the hospital, the appellant was held not to be a consumer under the act. An appeal was then filed before Supreme Court.

The legal question before the Supreme Court was whether the purchase of flats for the purpose of providing accommodation to nurses employed by the trust’s hospital qualifies as a purchase of services for a commercial purpose or not.

The court found that there was no direct nexus between the purchase of flats by the trust and its profit-generating activities. The flats were being provided to the nurses without any rent. It was not the respondent’s case that the appellant was generating any surplus from occupying the flats or engaging in buying and selling of flats.

The provision of hostel facilities to nurses so as to facilitate better medical care is a positive duty enjoined upon the hospital so as to maintain the beneficial effects of the curative care efforts undertaken by it. Hence, the appellant trust was held by Supreme Court to be a consumer under section 2(1)(d) of the 1986 act and the case was remanded to the National Consumer Commission for re-consideration in accordance with law.

The dispute digest is compiled by Bhasin & Co, a corporate law firm based in New Delhi. The authors can be contacted at [email protected]. Readers should not act on the basis of this information without seeking professional legal advice.