Case Law Details
Daimler Chrysler India Vs Controls & Switchgear Company Ltd.(Supreme Court of India)
SC order on maintainability of Consumer Protection Act on Car Purchase by company for Directors Personal use
In a recent judgment, the Supreme Court of India clarified the legal distinction between personal and commercial use of company cars within the context of consumer protection laws. The case involved Controls and Switchgear Company Ltd. (the company) and Mercedes Benz India Pvt. Ltd. (formerly Daimler Chrysler India Pvt. Ltd.). Controls and Switchgear had purchased two luxury cars for their directors’ personal use. When issues arose with the vehicles, they sought recourse under consumer protection laws. Mercedes Benz argued that the purchase did not qualify for consumer protection because the cars were intended for “commercial purpose.” The court rejected this argument, emphasizing that merely purchasing a vehicle for a company employee does not automatically classify it as having a “commercial purpose.” The key factor is whether the car purchase has a “close and direct nexus with a profit-generating activity.” Since the directors used the cars for personal reasons, and there was no evidence linking the purchase to any profit-making activity of Controls and Switchgear, the court held Mercedes Benz liable under consumer protection regulations. This ruling has significant implications for both employers and employees, highlighting the importance of clear distinctions between personal and commercial use of company property.
The litigation continued after Controls and Switchgear purchased a Mercedes car in 2006 and found defects. Despite continuous dialogue, the car was not made defect-free. Mercedes Benz argued that the company’s purchase for its director amounted to a commercial purpose, making the complaint non-maintainable. The Supreme Court, after referring to a series of decisions, held that whether the purpose is commercial or not must be proven by Mercedes, particularly since the company stated the car was bought for the directors’ personal and family use, though it was also used incidentally for company purposes. The court observed that even if the company claimed depreciation under the Income-tax Act, 1961, it was not material in deciding the issue.
When a consumer files a complaint alleging defects in purchased goods, and the seller objects on the ground that the goods were bought for a commercial purpose, the onus to prove this is on the seller. In this case, the company asserted that the car was for the personal use of its Whole-time Director and his immediate family, and there was no evidence of commercial use. Even if the company benefited from tax deductions, without proof that the purchase was linked to profit-generating activities, it could not be said that the car was bought for commercial purposes.
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