Prospective Consumer is not a ‘Consumer’ within the meaning of Consumer Protection Act

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The ethos of Consumer Protection Act are based on the principle of protection of Consumer against exploitation by sellers or service provider. However, when a person who intends to purchase any goods or service has an apprehension of getting duped, can that person be considered to be consumer. The said proposition defies logic, but the question came up for consideration before the Hon’ble Supreme Court in the case of Morgan Stanley Mutual Fund v. Kartick Das.

In the said case, the Complainant filed a Complaint before the District Forum alleging that the mutual fund that is proposed to be floated has not complied with all the necessary guidelines as per law. While the District Forum granted ad-interim injunction against the said Mutual Fund company, the Hon’ble Supreme Court examined the preliminary issue as to whether the Complainant could be considered Consumer within the Act.

The Apex Court explaining the concept of Consumer observed “The consumer as the term implies is one who consumes. As per the definition, consumer is tile one who purchases goods for private use or Consumption. The meaning of the word ‘consumer’ is broadly stated in the above definition so as to include anyone who consumes goods or services at the end of the chain of production. The comprehensive definition aims at covering every man who pays money as the price or cost of goods and services. The consumer deserves to get what he pays for in real quantity and true quality. In every society, consumer remains the centre of gravity of all business and industrial activity. He needs protection from the manufacturer, producer, supplier, wholesaler and retailer.

  1. In the light of this, we will have to examine whether the ‘shares’ for which an application is made for allotment would be ‘goods’. Till the allotment of shares takes place, “the shares do not exist”. Therefore, they can never be called goods.’

Consider previous case laws and aforesaid propostition, the Apex Court observing that prespective investor would not be Consumer within the Act held ‘Therefore, it is after allotment, rights may arise as per the contract (Article of Association of Company). But certainly not before allotment. At that stage, he is only a prospective investor (sic in) future goods. The issue was yet to open on 27-4-1993. There is no purchase of goods for a consideration nor again could he be called the hirer of the services of the company for a consideration. In order to satisfy the requirement of above definition of consumer, it is clear that there must be a transaction of buying goods for consideration under Section 2(1)(d)(i) of the said Act. The definition contemplates the pre-existence of a completed transaction of a sale and purchase. If regard is had to the definition of complaint under the Act, it will be clear that no prospective investor could fall under the Act.”

Full Judgement -> Morgan Stanley Mutual Fund v. Kartick Das

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