Individual Investment Not A ‘Commercial Transaction’, Investor Treated As Consumer Under Consumer Protection Act: Kerala High Court
Safiya Malik
The High Court of Kerala Single Bench of Justice Ziyad Rahman A.A. held that a consumer complaint arising from the non-payment of interest under a debenture scheme is maintainable and clarified that an individual investing in a company in his personal capacity cannot be regarded as engaging in a commercial transaction for the purposes of the Consumer Protection Act, 2019. The dispute concerned allegations of deficient service relating to returns promised on non-convertible debentures issued by a finance company to an individual investor. The Court concluded that such an investment amounts to availing a service for consideration, bringing the investor within the definition of a consumer under Section 2(7), and upheld the findings of the Consumer Commissions while permitting limited time for further challenge.
The writ petition arose from proceedings initiated before the District Consumer Disputes Redressal Commission, Kollam, where the complainant alleged deficiency in service regarding non-payment of interest under a Non-Convertible Debenture scheme issued by a finance company. The petitioner, the opposite party in the consumer complaint, contested maintainability on the ground that the complainant was not a consumer under the Consumer Protection Act, 2019. It was contended that purchasing debentures did not constitute buying goods or availing services, and therefore the Consumer Commission lacked jurisdiction.
The petitioner filed an application before the District Commission seeking decision on maintainability as a preliminary issue. The District Commission did not consider this and instead proceeded to issue a final order. This was challenged before the High Court, resulting in a direction to decide maintainability first. Following this, the District Commission passed an order holding the complaint to be maintainable. The petitioner challenged that order by filing a revision petition before the State Consumer Disputes Redressal Commission, which affirmed the finding of maintainability.
The petitioner approached the High Court again, asserting that the transaction involving debentures could not be classified as goods or services under Section 2(7) of the Consumer Protection Act. It was argued that non-convertible debentures were investment instruments and that the consumer complaint created liabilities without jurisdiction. The petitioner further contended that even if treated as a service, the transaction was commercial in nature, intended for profit.
The Court examined the challenge raised by the petitioner on maintainability and first recorded the argument that non-convertible debentures could not constitute goods or services. The judgment observed that “even if the said contention is accepted, still, on account of clause (ii) of sub-section (7) of Section 2 of the said Act, 2019, the 3rd respondent could be treated as a consumer.”
While analysing the definition of “service,” the Court recorded that the District and State Commissions had relied on the principle that “when the Non convertible Debentures are issued, the company accepts money from the party agreeing to repay the money with interest on completion of the said period. Therefore, it would come under the ‘service’ for the purpose of the Consumer Protection Act.” It further noted that Section 2(42) includes facilities connected with banking and financing.
The Court observed that the statutory definition is broad, stating that “the term ‘Service’ is given a very wider meaning, and the same is in tune with the purpose for which the Consumer Protection Act, 2019, is enacted; to ensure the welfare of the consumer, as a class.” It also referred to the Supreme Court’s view that “the expression ‘service’ is defined to mean service of any description… a service of every description would fall within the ambit of the statutory provision.”
On the issue of commercial purpose, the Court recorded that such a ground “has not been raised before the District Commission as well as the State Commission.” It nevertheless considered the argument and contrasted it with precedents cited by the petitioner. The judgment stated that in the cited decisions, “the investments made in those cases were by commercial entities or those were the investments made by an individual on behalf of an entity engaged in business activities.”
The Court examined the complainant’s status and found: “the investments made by the 3rd respondent in his individual capacity… nothing is revealed before this Court to show that the investments… are connected with any commercial activity.” It further stated that “when an individual is making investments in his individual capacity for better profits to make his life better, under no circumstances, that could be treated as a commercial purpose.”
Referring to statutory explanation, the Court recorded that “the term ‘commercial purpose’… has to be understood with reference to the same” and that livelihood includes providing returns for stable living. It finally observed that the Consumer Protection Act “provides for ‘business-to-consumer’ disputes and not for ‘business-to-business’ disputes.”
The Court recorded that, “after carefully going through the entire materials placed before this Court, I find that no interference is warranted in the orders passed by the District Commission as well as the State Commission. This writ petition is dismissed, leaving open all the contentions of the petitioner other than those related to the maintainability of the complaint.”
The Court further recorded the request made on behalf of the petitioner “for keeping the further proceedings in C.C. 205/2022 on the files of 2nd respondent Commission, in abeyance for a short period, so as to enable the petitioner to challenge this judgment, by invoking his remedies.”
“The proceedings in the above complaint shall be kept in abeyance, till the expiry of ten days from the date of the receipt of the copy of this judgment.”
Advocates Representing The Parties
For the Petitioner: Smt. Liza Meghan Cyriac, Sri. Jolly John, Smt. C.S. Reshmi, Smt. Tania Maria Joy, Shri. Rubin Shibu
For the Respondents: Shri. Arun Ajay Shankar, Government Pleader
Case Title: Mathew K. Cherian v. State Consumer Disputes Redressal Commission & Others
Neutral Citation: 2025: KER:80559
Case Number: WP(C) No. 38924 of 2025
Bench: Justice Ziyad Rahman A.A.
