Companies purchasing software to automate or manage business operations are no longer considered consumers under the Consumer Protection Act, the Supreme Court has ruled. The verdict bars businesses from claiming consumer rights in software-related disputes.
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NEW DELHI: The Supreme Court of India recently clarified that companies purchasing software to streamline or automate their business processes cannot be classified as “consumers” under the Consumer Protection Act, 1986. This ruling came in a case in which the apex court upheld earlier decisions by consumer forums that a commercial purchase does not fall within the ambit of consumer protection.
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Background of the Case
Poly Medicure Ltd., a company engaged in the export and import of medical devices, purchased a software license for “Brillio Opti Suite” from Brillio Technologies. The company claimed the software malfunctioned and filed a complaint before the Delhi State Consumer Disputes Redressal Commission in 2019, alleging deficiency in service and seeking a refund of the license fee, along with development costs and interest.
The State Commission dismissed the complaint, holding that the software was purchased for commercial purposes. Poly Medicure appealed to the National Consumer Disputes Redressal Commission (NCDRC), which upheld the dismissal in June 2020.
Undeterred, Poly Medicure approached the Supreme Court, arguing that the software was purchased for internal use and not for resale. Thus, it should qualify as a consumer under the law.
Supreme Court’s Verdict
A Bench of Justices JB Pardiwala and Manoj Misra disagreed with the company’s argument. The Court held:
- Companies can file consumer complaints only if the goods or services purchased are not for commercial purposes.
- The dominant purpose behind the software purchase is crucial. In this case, the software was used to:
- Create export documents
- Track consignments
- Handle foreign exchange transactions
- Manage statutory benefits
These activities were directly tied to the company’s business operations and profit generation.
Precedents cited by Poly Medicure, which allowed self-employed individuals to be treated as consumers, did not apply to incorporated companies.
The Court emphasized that automating business processes saves time, reduces costs, and enhances efficiency, ultimately contributing to commercial gains. Hence, the purchase of software with a profit-driven objective cannot be considered a consumer transaction.
“The transaction of purchase of goods/services (i.e., software) had a nexus with generation of profits and, therefore, qua that transaction the appellant cannot be considered a consumer as defined in Section 2(1)(d) of the 1986 Act,”
the Supreme Court noted.
Appearance:
The appellants: Senior Advocate Shashank Garg along with advocates Divyakant Lahoti, Kartik Lahoti, Praveena Bisht, Vindhya Mehra, Kumar Vinayakam Gupta, Adith Menon, Samridhi Bhatt, Shreya Gokel, Siddharth Tripathi, Akanksha Soni, Shubheksha Dwivedi and Nishtha Jain.
The respondents: Senior Advocate Jayant Mehta along with advocates Ankur Sangal, Sucheta Roy and Raghu Vinayak Sinha from Khaitan & Co.
Case Title:
Poly Medicure Ltd. vs. Brillio Technologies Pvt. Ltd.
CIVIL APPEAL NO. 6349 OF 2024
READ JUDGMENT