Supreme Court of India
M/S Nandan Biomatrix Ltd. vs S.Ambika Devi on 6 March, 2020Author: Mohan M. Shantanagoudar

Bench: Mohan M. Shantanagoudar, R. Subhash Reddy




CIVIL APPEAL NOS. 7357-7376 OF 2010






Civil Appeal No. 7357/2010

The instant appeal arises against the order dated

15.04.2009 passed by the National Consumer Disputes

Redressal Commission, New Delhi (“the National Commission”),

affirming the order dated 28.04.2008 of the Kerala State

Consumer Disputes Redressal Commission (“the State

Commission”) setting aside the order of the District Forum,

Kozhikode dismissing the complaint and remanding the matter

to the District Forum for disposal on merits.
Signature Not Verified

Digitally signed by
Date: 2020.03.06
16:05:46 IST

2. The brief facts leading to this appeal are as follows:

2.1 The complainant (the Respondent herein) is a small

landholder who responded to the advertisements issued by the

Appellant, a seed company, in 2003, regarding buyback of

safed musli, a medicinal crop, at attractive prices. She entered

into a tripartite agreement dated 15.01.2004 with the Appellant

and its franchisee M/s Herbz India. As per the agreement, the

Respondent purchased 750 kgs of wet musli for sowing from

the Appellant, at the rate of Rs. 400/- per kg, and cultivated the

same in her land. The Appellant was to buy back the produce at

a minimum price of Rs. 1,000/- per kg from the Respondent.

The Respondent lodged a consumer complaint alleging

negligence and breach of contract on the part of the Appellant

on the ground that the Appellant failed to buy back her

produce, leading to the destruction of the greater part of the


2.2 The District Forum dismissed the complaint, and held

that the same was not maintainable since the Respondent was

not a “consumer” within the meaning of the Consumer

Protection Act, 1986 (“the 1986 Act”). On appeal by the

Respondent, the State Commission set aside the order passed

by the District Forum, holding that the Respondent was a

“consumer” under the 1986 Act, and remanded the matter to

the District Forum for disposal on merits. It is this order which

was impugned before the National Commission by way of a

revision petition filed by the Appellant.

2.3 The National Commission upheld the finding of the

State Commission, holding that the covenants entered into

between the parties were in the nature of both sale of product

and rendering of service, since the Appellant had agreed to

provide wet musli for growing to the Respondent,

supplemented by technical support and guidance from its

franchisee, and had further agreed to insure the crop at

additional cost. Additionally, noting that the Respondent was a

small landholder owning about 1-1.5 acres of land, who had

started cultivation of musli for eking out a livelihood for herself,

the National Commission held that it could not be said that the

agreement was entered into for the commercial purpose of the

Respondent. The Revision Petition was dismissed with a cost of

Rs. 2,500/- imposed on the Appellant, payable to the


2.4 The instant appeal has been filed against the above

order of the National Commission.

3. Before us, learned Counsel for the Appellant, Mr.

Raghenth Basant, argued that the Respondent was not a

“consumer” as defined under Section 2(d) of the 1986 Act.

Firstly, it was argued that the tripartite agreement envisaged

buyback of musli by the Respondent from the Appellant, which

amounted to resale, which is excluded from the purview of

Section 2(d). Secondly, it was argued that the cultivation and

sale of musli by the Respondent was for a commercial purpose

and not for the purpose of earning livelihood, and hence

excluded from the purview of Section 2(d).

4. Learned Counsel for the Respondent, Mr. Santosh

Paul, on the other hand, argued that the cultivation of musli

was not being done on a commercial level, but was purely on a

self-employed basis done by a poor agriculturist for eking out a

livelihood, and hence such cultivation did not fall within the

meaning of “commercial purpose” under the Explanation to

Section 2(d) of the 1986 Act.

5. Heard the counsel on either side and perused the


6. Clearly, the only aspect for consideration before us is

whether the Respondent was excluded from the purview of the

definition of “consumer” under Section 2(d) of the 1986 Act on

account of the subject transaction amounting to resale or for

being for a commercial purpose.

7. It would be pertinent to begin our discussion by

referring to the definition of the term “consumer” under Section

2(d) under the 1986 Act:

“(d) “consumer” means any person who—
(i) buys any goods, for a consideration which has
been paid or promised or partly paid and partly
promised, or under any system of deferred
payment and includes any user of such goods
other than the person who buys such goods for
consideration paid or promised or partly paid or
partly promised or under any system of deferred
payment when such use is made with the
approval of such person but does not include
a person who obtains such goods for
resale or for any commercial purpose; or

(ii) hires or avails of any services for a
consideration which has been paid or promised
or partly paid and partly promised, or under any

system of deferred payment and includes any
beneficiary of such services other than the
person who hires or avails of the service for
consideration paid or promised, or partly paid
and partly promised, or under any system of
deferred payment, when such services are
availed of with the approval of the first
mentioned person but does not include a
person who avails of such services for any
commercial purposes;

Explanation.— For the purposes of this clause,
“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” (emphasis

8. It is relevant to note that the explanation regarding

the meaning of “commercial purpose” was added vide an

amendment in 1993, and was considered for the first time by

this Court in Laxmi Engineering Works v. PSG Industrial

Institute, (1995) 3 SCC 583. In this case, the Court noted that

even prior to the 1993 amendment, the National Commission

had been taking a consistent view that was broadly in accord

with the amended definition, i.e. only persons purchasing goods

or availing of services for carrying on activity on a large scale,

for the purpose of earning profit, would be excluded from the

ambit of the definition of “consumer” [see Synco Textiles

Pvt. Ltd. v. Greaves Cotton and Company Ltd., (1991) 1

CPJ 499; Oswal Fine Arts v. HMT, (1991) 1 CPJ 330; and

Secretary, Consumer Guidance and Research Society of

India v. BPL India Ltd., (1992) 1 CPJ 140 (NC)].

8.1 On this basis, this Court affirmed that the

amendment was only clarificatory in nature, and that though

the question regarding whether the purpose for which goods

have been bought or services rendered is a “commercial

purpose” is to be answered on the facts of each case, a person

buying goods and using them himself exclusively for the

purpose of earning a livelihood by means of self-employment

would be covered by the definition of “consumer” within the

1986 Act, even if such use is commercial use. In this regard,

the Court in Laxmi Engineering observed:

“11. … a person who buys a typewriter or a car and
uses them for his personal use is certainly a
consumer but a person who buys a typewriter or a
car for typing others’ work for consideration or for
plying the car as a taxi can be said to be using the
typewriter/car for a commercial purpose. The
explanation however clarifies that in certain
situations, purchase of goods for “commercial
purpose” would not yet take the purchaser out of the
definition of expression ‘consumer’. If the commercial
use is by the purchaser himself for the purpose of
earning his livelihood by means of self-employment,

such purchaser of goods is yet a ‘consumer’. In the
illustration given above, if the purchaser himself
works on typewriter or plies the car as a taxi himself,
he does not cease to be a consumer. In other words,
if the buyer of goods uses them himself, i.e., by self-
employment, for earning his livelihood, it would not
be treated as a “commercial purpose” and he does
not cease to be a consumer for the purposes of the
Act. The explanation reduces the question, what is a
“commercial purpose”, to a question of fact to be
decided in the facts of each case. It is not the value
of the goods that matters but the purpose to which
the goods bought are put to. The several words
employed in the explanation, viz., “uses them by
himself”, “exclusively for the purpose of earning his
livelihood” and “by means of self-employment” make
the intention of Parliament abundantly clear, that the
goods bought must be used by the buyer himself, by
employing himself for earning his livelihood. A few
more illustrations would serve to emphasise what we
say. A person who purchases an auto-rickshaw to ply
it himself on hire for earning his livelihood would be a
consumer. Similarly, a purchaser of a truck who
purchases it for plying it as a public carrier by himself
would be a consumer. A person who purchases a
lathe machine or other machine to operate it himself
for earning his livelihood would be a consumer. (In
the above illustrations, if such buyer takes the
assistance of one or two persons to assist/help him in
operating the vehicle or machinery, he does not
cease to be a consumer.) As against this a person
who purchases an auto-rickshaw, a car or a lathe
machine or other machine to be plied or operated
exclusively by another person would not be a
consumer. This is the necessary limitation flowing
from the expressions “used by him”, and “by means
of self-employment” in the explanation. The
ambiguity in the meaning of the words “for the
purpose of earning his livelihood” is explained and

clarified by the other two sets of words.” (emphasis

8.2 Notably, it was emphasized that the employment of a

few persons for the purpose of assistance in the activity carried

out by the purchaser would not automatically render the

commercial activity as not being for self-employment and for

earning his livelihood; rather, this would have to be determined

from the facts and circumstances of a given case.

9. In the matter on hand, though the Appellant has

sought to project that the Respondent were cultivating musli on

a large scale and with a profit motive, we find ourselves unable

to conclude that the cultivation being undertaken was for a

purpose other than for eking out a livelihood through self-


9.1 In matters such as the one on hand, the agriculturist

buys the foundation seeds from the seed company, or the

company itself reaches out and requests the farmers to

generate the seeds so that it may market the same. By

accepting such an offer, and after purchasing the foundation

seeds from the seed company, the agriculturist, with hard

labour and sweat, produces seeds to be marketed by the seed

company. Thus, the agriculturist is not reselling any product,

but grows his own product by utilizing the foundation seeds.

There cannot be any dispute that the agriculturist has to sell his

product in the open market or to the seed company, as the

case may be, in order to eke out his livelihood. In other words,

the agriculturist sustains himself by selling his product. This

cannot be termed as resale or activity in furtherance of a

“commercial purpose” bringing him out of the purview of the

definition of “consumer” under Section 2(d). Rather, it is purely

for the purpose of earning his livelihood by means of self-


9.2 Contrary to what the Appellant has sought to impress

upon us, we find that cases such as these cannot be compared

to activities undertaken by industrial concerns, for example,

where the employment of raw materials to produce finished

goods for sale has also been held by this Court to amount to

resale or being for a commercial purpose [see Rajeev Metal

Works v. Mineral & Metal Trading Corporation of India

Ltd., (1996) 9 SCC 422].

9.3 Indeed, in the matter on hand, the Respondent is a

housewife who has undertaken agricultural activity on land of

1-1.5 acres for the purpose of increasing her household income,

and would perhaps not have undertaken the growing of musli if

the Appellant had not assured a profitable price for buyback of

the crop. Of course, we cannot base our conclusion on any

surmise or conjecture in this regard. At the same time, in our

opinion, the fact that such profitable price was guaranteed by

the Appellant cannot now be relied upon to argue that the

activity was undertaken by the Respondent for a “commercial

purpose”, so as to exclude the same from the purview of the

1986 Act.

10. We particularly find the argument untenable that the

tripartite agreement would amount to resale by virtue of

containing a buyback clause, and would hence exclude the

Respondent from the ambit of the definition of “consumer”. In

this regard, we find it relevant to refer to the decision of this

Court in National Seeds Corpn. Ltd. v. M. Madhusudan

Reddy, (2012) 2 SCC 506, where this Court was seized of

appeals arising out of consumer complaints filed by farmers

engaged in agriculture and seed production, who had

purchased seeds from the National Seeds Corporation Ltd.

which had turned out to be defective, leading to below par

germination. Some of these farmers had entered into

agreements whereby they purchased foundation seeds from

the seed company and agreed to grow seeds and sell them

back to the company for profit. The company had rejected the

grown seeds for being unfit for certification. While dealing with

the question of whether a farmer would be excluded from the

definition of “consumer” because the seeds produced by him

were required to be supplied back to the seed corporation that

supplied the foundation seeds, this Court, taking note of the

elaboration on the scope and ambit of the expression

“commercial purpose” as undertaken in Laxmi Engineering

(supra), observed as follows:

“73. What needs to be emphasised is that the
appellant had selected a set of farmers in the area
for growing seeds on its behalf. After entering into
agreements with the selected farmers, the appellant
supplied foundation seeds to them for a price, with
an assurance that within a few months they will be
able to earn profit. The seeds were sown under the
supervision of the expert deputed by the appellant.
The entire crop was to be purchased by the
appellant. The agreements entered into between the

appellant and the growers clearly postulated supply
of the foundation seeds by the appellant with an
assurance that the crop will be purchased by it. It is
neither the pleaded case of the appellant nor was
any evidence produced before any of the Consumer
Forums that the growers had the freedom to sell the
seeds in the open market or to any person other than
the appellant. Therefore, it is not possible to take the
view that the growers had purchased the seeds for
resale or for any commercial purpose and they are
excluded from the definition of the term “consumer”.
As a matter of fact, the evidence brought on record
shows that the growers had agreed to produce seeds
on behalf of the appellant for the purpose of earning
their livelihood by using their skills and labour.”

10.1 It is amply evident from the above that an agreement

for buyback by the seed company of the crop grown by a

farmer cannot be regarded as a resale transaction, and he

cannot be brought out of the scope of being a “consumer”

under the 1986 Act only on such ground. Thus, even in the

instant case, the fact that there was a buyback agreement for

the musli crop would not bring the Respondent outside the

purview of the definition of “consumer” by rendering the

buyback arrangement a resale transaction or being for a

commercial purpose. We hasten to emphasise that the fact

situation herein diverges from Madhusudan to the extent that

in the instant case, the Respondent had the freedom to sell her

produce on the open market if she was able to obtain a better

price. However, as we have already mentioned, in our opinion,

this aspect would not take away from the conclusion that the

Respondent had entered into an agreement for growing the

musli crop for the purpose of earning a livelihood, since an

agriculturist would always have to sell his produce in order to

earn his livelihood.

11. It is pertinent to note at this juncture that the

Appellant has sought to rely on several decisions rendered by

the National Commission in order to argue that the Respondent

cannot be regarded as a “consumer” under the 1986 Act, and

we find it necessary to advert to the same below.

12. The Appellant has referred to Synco Textiles

(supra), a case decided before the 1993 amendment, where the

National Commission opined that large scale commercial

activities would be excluded from the purview of the definition

of “consumer”. It was held that a person purchasing a

generator used for generating electricity, to be used in an

industrial concern producing oil on a large scale, would not

amount to a “consumer”, since the generator was being used

for an activity directly intended to generate profit. This view

was upheld in Laxmi Engineering (supra) by this Court, and

we see no reason to depart from the same. At the same time,

the said decision cannot come to the rescue of the Appellant as

the facts in Synco clearly indicated that the generator

purchased was employed for production that was geared for a

commercial purpose, and had nothing to do with the

agricultural sector and the status of a farmer as a “consumer”.

13. However, the same cannot be said with regard to the

decision in Sakthi Sugars Ltd., Orissa v. Sridhar Sahoo,

II (1999) CPJ 4 (NC). In this case, the respondent farmer had

entered into an agreement with the appellant corporation for

financial assistance, agreeing to sell the sugarcane crop grown

by him to it. The corporation, in turn, had agreed to help the

farmer get a loan from specified sources for a diesel pump set

and dug-well. In 1991-92, the farmer obtained inadequate

output in his crop. In his complaint, he alleged that this was

because he was unable to irrigate his field properly because of

the lack of a dug-well and pump set, and that he had been

unable to procure a loan in this regard because of the failure of

the appellant to deposit margin money for the same.

13.1 The National Commission, following the view taken in

Fruit and Vegetable Project, New Delhi v. N. Sankar

Reddy, III (1994) CPJ 163 (NC) that a seller could not take the

benefit of the 1986 Act, held that the farmer was not a

“consumer” since he was selling his produce to the opposite

party. It was also held that in any case, the issue of specific

performance emanating from a contract between the parties

could not be the subject matter of a consumer dispute. The

Appellant in the instant case has referred to this reasoning

adopted by the National Commission to substantiate its case.

However, for reasons discussed below, we are of the

considered view that the proposition of law expressed in

Sakthi Sugars is incorrect.

13.2 To begin with, a perusal of the decision in Sankar

Reddy, which was relied upon in Sakthi Sugars, shows that in

that case, the National Commission had held that a farmer who

was selling his produce through an intermediary was not a

“consumer” vis-à-vis such intermediary. The complainant

therein was a horticulturist who was selling his produce to an

intermediary for further sale. One of the consignments had

been rejected by the intermediary for non-adherence with

standards pertaining to quality and packaging, but in view of

the perishable nature of the goods, the complainant requested

the intermediary for help in disposal, who arranged for the sale

of the consignment through an authorized commission agent

for a specified price. The complaint was filed alleging that the

intermediary had failed to pay the complainant the entire

amount promised. On these facts, the National Commission had

held that while obliging with the request of the complainant,

the intermediary was acting only as an agent, and that too only

in order to minimize the loss that the complainant would have

suffered if the consignment remained unsold, without receiving

any consideration. Thus, it could not be said that the

intermediary had undertaken to render a service for


13.3 It is relevant to note that from the order of the

National Commission, no material is forthcoming to the effect

that the parties had entered into an agreement whereby the

intermediary agreed to render a service to the farmers

regarding the further sale of their produce. Additionally, the

National Commission found that even if it was presumed that

the intermediary had purchased goods in terms of an

agreement between the parties, the fact remained that in such

transaction, it was the farmer who was a seller, and could not

be deemed to be a “consumer” under the 1986 Act.

13.4 It is evident that in Sakthi Sugars, there was a clear

agreement between the farmer and the corporation for the

latter to render financial assistance by way of help in procuring

a loan, which amounted to the rendering of a service, a

deficiency in which would give rise to a cause of action under

the 1986 Act. Thus, the farmer was not purely a seller and was

also availing of services from the corporation. In this respect,

reliance on Sankar Reddy may not have been proper.

13.5 We also find that the view that a consumer dispute

may not arise out of a contractual arrangement is erroneous

since it falls foul of the clear stipulation under Section 2(f) of

the 1986 Act that a deficiency in service may arise out of “ any

fault, imperfection, shortcoming or inadequacy in the quality,

nature and manner of performance which is required to be

maintained by or under any law for the time being in force or

has been undertaken to be performed by a person in

pursuance of a contract or otherwise in relation to any service”.

13.6 In view of the above, we find that Sakthi Sugars

cannot be relied upon to argue that a farmer selling his produce

cannot under any circumstance amount to a “consumer” under

the 1986 Act. As we have discussed supra, in cases where the

farmer has purchased goods or availed of services in order to

grow produce in order to eke out a livelihood, the fact that the

said produce is being sold back to the seller or service provider

or to a third party cannot stand in the way of the farmer

amounting to a “consumer”.

14. The Appellant has also referred to the decision of the

National Commission in Wimco Limited v. Ashok Sekhon, II

(2008) CPJ 210 (NC). In this case, the complainant had

purchased 1800 poplar transplants for a corporation on a large

scale for growing trees and selling them back to the

corporation. The National Commission referred to its prior

decision in Synco Textiles (supra) and the decision of this

Court in Laxmi Engineering (supra), for the principle that the

“self-employment” exception to the “commercial purpose”

clause was applicable only when the goods bought by the

buyer were used by the buyer himself by employing himself for

earning his livelihood. It was held that the planting of 1800

trees on a 9-acre field, and that too for resale, could not be said

to be on a self-employment level and without a commercial

purpose. Thus, the complainant was held to not be a consumer

within the 1986 Act. We find that this decision is clearly

distinguishable since it is evident from the facts therein that

the trees were being grown for a “commercial purpose”, which

is not the case here.

15. Finally, we may refer to the decision in Prithviraj

Narayanrao Chavan v. The National Seeds Corporation

Ltd., [2012] SCC OnLine NCDRC 7, cited by the Appellant. This

was also a case involving buyback of seeds produced with the

help of foundation seeds provided by the seed company. The

seed company had approached farmers to participate in its

seed production programme for a variety of jute, and were

assured a certain minimum procurement price per quintal of

seed produced. The area under cultivation was withdrawn from

the certification of the seed company due to poor germination

of crop, leading to heavy losses for the farmers, based on which

consumer complaints were filed.

15.1 The State Commission in Prithviraj had adopted the

view taken in Sakthi Sugars (supra) that a seller could not be

treated as a consumer, to hold that since the complainants

therein had entered into a buyback transaction, they were

acting as sellers and hence could not be treated as consumers.

This view was upheld by the National Commission, which also

placed reliance upon the decision in Wimco (supra).

15.2 As we have already noticed, we find ourselves unable

to agree with the view taken in Sakthi Sugars. Moreover, for

reasons expressed already, and particularly in view of the

decision of this Court in Madhusudan (supra), we find that the

National Commission in Prithviraj erred in holding that

entering into a buyback transaction would preclude a farmer

from taking benefit as a “consumer” under the 1986 Act.

16. Before we part with this matter, we feel constrained

to note that the Indian agricultural scenario, today, is in a very

imperilled state. Agriculturists have to deal with serious

environmental concerns like topsoil depletion, contamination of

food, water and soil due to toxic fertilizers and pesticides, and

the vagaries of the weather, which are becoming more and

more severe and unpredictable as the climate deteriorates. In

some parts of the country, such as Punjab, pesticides being

used are toxic enough to have led to unprecedented incidence

of diseases like cancer. The mechanization of farms has

undoubtedly led to many advances in the food security of the

country, but this has come at a grave cost.

16.1 Practices such as crop diversification and rotation,

which are crucial to species diversity and thus to maintain soil

health and ensure farm security, and are in-built in traditional

forms of farming, are under threat from the increasing inroads

being made into the Indian farm by corporates of all sizes,

which come with the promise of increased yields and attractive

returns. This is true with regard to the sale of seeds as well,

even though Indian law protects plant material including seeds

from patentability.

16.2 Most Indian farmers own only small landholdings,

which require expensive inputs such as irrigation, electricity,

seeds, fertilizer, and pesticide, but do not generate sufficient

output to cover the costs of the same. Though the sway of seed

companies over small farmers in India is, as of now, minimal,

when agriculturists with such small landholdings do enter into

agreements to grow crops on terms dictated by seed

companies, it is in the hope of earning some profit that would

offset the cost of their inputs and generate some income for

the household. Often, the crops require the intensive usage of

labour and mechanization. Therefore, agreements such as the

one in the instant case often guarantee technical and financial

assistance to the farmer in order to be able to discharge his

end of the deal. Needless to say, the success or failure of the

crop would make or break the income of the farmer for the

entire season. This can result in situations where small and

medium scale farmers find themselves trapped in contracts

where they buy expensive seeds which turn out to be defective,

resulting in a failed season and severe financial hardship. The

problem of indebtedness further worsens the plight of the

farmer, and, all too often, manifests in the tragedy of suicide.

Farmer suicides are indeed a systemic issue that has persisted,

and perhaps worsened, over the last few decades.

16.3 The summary redressal available to the farmer under

the 1986 Act may go a small but crucial way to provide instant

relief in a sector which is already facing stress on several

counts. Undoubtedly, farmers faced with grievances against

seed companies, may, in suitable cases, opt for other remedies

such as a civil suit, relief under the Seeds Act, 1966 (the reform

of which has been under process for some time), and so on. But

excluding such farmers from the purview of the 1986 Act would

be a complete mockery of the object and purpose of the


16.4 We are alarmed by the growing trend amongst seed

companies of engaging in frivolous litigation with farmers,

virtually defeating the purpose of speedy redressal envisaged

under 1986 Act. In the instant case, the Appellant contested

the farmers’ claims before consumer fora on the preliminary

point of maintainability right up to this Court, compelling small

agriculturists such as the Respondents to spend unnecessarily

on litigation in order to secure relief for themselves, amounting

to a sum which probably exceeds even the quantum of relief

claimed. This tendency to resist even the smallest of claims on

any ground possible, by exploiting the relatively greater

capacity of seed companies to litigate for long periods of time,

amounts to little more than harassment of agriculturists. To

discourage such conduct in the future by the Appellant as well

as other seed corporations, we deem it fit to impose costs on

the Appellant

17. Thus, we find no reason to interfere with the order

passed by the National Commission affirming that the

Respondent is a “consumer” within the meaning of the 1986

Act, and dismiss the instant Appeal. The concerned District

Forum shall hear and decide the complaints within a period of

three months from the date of receipt of this judgment. Costs

are imposed on the Appellant to the tune of Rs. 25,000/-

payable to the Respondent.

Civil Appeal Nos. 7358-7376/2010

18. These appeals arise out of facts similar to Civil

Appeal No. 7357/2010. Hence, they are dismissed in terms of

the order passed in the said appeal. It is made clear that the

cost of Rs. 25,000/- is to be paid by the Appellant in each of

these appeals, to be divided equally amongst the respondents

in each appeal.



New Delhi;
March 06, 2020



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