Principles to determine ‘Commercial Purpose’ with regard to hostel facilities to nurses in hospitals

Kosha Doshi | Symbiosis Law School, Pune | 31st March 2020

Lilavati Kirtilal Mehta Medical v. M/S Unique Shanti Developers

Facts:

In the year 1995, an agreement to sell was signed by Lilavati Kritilal Mehta Medical Trust and M/s Unique Shanti Developers. The developers had constructed 2 buildings called ‘Madhuvan’ with a total of 32, 1 BHK flats. This construction took place in the colony ‘Shanti Park’ located in Thane, Maharashtra. The hospital authorities had booked 29 out of 32 flats as accommodation for the nurses; eventually receiving the certificate of completion on 17th February, 1997. Due to the bad quality of construction, it became unfit to live in causing the tenants to vacate it. In 2002, the building flats were abandoned and since 2004 it had not been occupied by anyone. 

            A dispute arose among the trustees and a case was filed for the same. There came a situation where the repair cost for the flats was much higher than the cost for reconstruction. Claims came into picture that the developer had obtained the certificate of completion by fraud. When a complaint was registered, an assertion was made that the claim was barred by limitations under 24 A of the Consumer Protection Act, 1986 as 2 years had passed and the dispute among trustees could not form sufficient reason for the delay. 

            The judgment passed by NCDRC on the 25^th of October, 2016 stated that the hostel the hospital trust provided to the nurses was for a commercial purpose and therefore did not constitute as a consumer. An appeal was filed against the decision of NCDRC which was heard by Justice Mohan M Shatanagowdar and Justice Ajay Rastogi.

Issue:

The major issue was whether the purchase of flats by the hospital trust for accommodation and facility of nurses was purchase of services and does the act amount to a commercial purpose. 

            The actions taken by the hospital were as a duty of care they owed the nurses. The action of providing flats was to increase the medical care which would be provided to the hospital. The principle of commercial purpose as defined under Section 2 (1) (d) of the Consumer Protection Act, 1986 was the issue at hand for the following appeal.

Judgment:

A few principles were laid down while passing the judgment. The principles were:

• To determine whether the agreement was for a commercial purpose or not along with need to scan into the background, facts and circumstances of the situation. Under basic circumstances a commercial purpose meant industrial, manufacturing activities or a business transaction between commercial institutions. 
• There needs to exist a close connection and a directness test whereby establishment of a link between the purchase of goods/ services and the generation of profits is made. 
• The identity of the person purchasing goods/ services is unquestionable and only the dominant intent or purpose of the individual matters.
• The question of test does not come into picture regardless of whether the dominant purpose is for personal use or consumption for self/ beneficiary.

            The court stated that there might be a connection where providing of residence brings forth a sense of obligation upon the nurses towards the hospital. This could lead to improved efficiency among the nurses indirectly bringing about higher profits for the hospital. But the judges held that there exists no direct links or connections for the same. 

            The principles of ‘Commercial Purpose’ were established in this case where reference where made to Spring Meadows Hospital v. Harjol Ahluwalia; Laxmi Engineering Works v. PSG Industrial Institute and Paramount Digital Color Lab v. Agfa India Pvt. Ltd. This brought forth that the hiring of service for beneficiary is also included as a consumer. 

            The findings of the court consisted that no direct nexus between the hospital’s act of buying flats and the profit of the hospital. The flat was not used for any medical act or any facility which can be related to a hospital’s activities. Thereby the dominant purpose test failed. The purpose with which the hospital performed the act was to reduce the challenges faced by nurses due to lack of permanent residence. 

         The appeal brought about certain set of principles for further determination of ‘Commercial Purpose’. A note was made by the judges’ regarding the importance and duties of nurses and hospitals. The emotional strength they provide patients, the medication, assistance and vital resource was considered to be remarkable. The judgment consisted of the following aspects that the appeal is maintainable, the hospital is a consumer and the judgment of NCDRC is set aside.