Companies buying software to run business are not ‘consumers’, can't file consumer complaints: Supreme Court

The Supreme Court recently held that a company purchasing software to organise or automate its business processes cannot claim to be a “consumer” under the Consumer Protection Act, 1986 [M/S Poly Medicure Ltd. vs. M/S Brillio Technologies Pvt. Ltd.].

A Bench of Justices JB Pardiwala and Manoj Misra said transactions carried out to streamline a company’s commercial operations amount to a purchase for a commercial purpose, which is expressly excluded from the definition of “consumer” under Section 2(1)(d) of the 1986 Act.

The case arose from a consumer complaint filed by Poly Medicure before the Delhi State Consumer Disputes Redressal Commission in 2019. The company, engaged in the export and import of medical devices, had purchased a software licence for “Brillio Opti Suite” from Brillio Technologies.

It claimed the software malfunctioned and filed a complaint alleging deficiency of service and seeking refund of the licence fee and development costs with interest.

The State Consumer Commission dismissed the complaint in August 2019. It held that the software was purchased to facilitate the company’s commercial activity and therefore, Poly Medicure was not a “consumer”.

On appeal, the National Consumer Disputes Redressal Commission (NCDRC) upheld that finding in June 2020.

Poly Medicure then approached the Supreme Court, arguing that it had bought the software for “self-use” as an end user with no intention to resell it and that software purchased for internal functioning could not be treated as a commercial transaction.

It relied on earlier judgments that allowed self-employed individuals to be treated as consumers even when the goods purchased were linked to their livelihood.

The Court disagreed.

The Bench first noted that companies can file consumer complaints, but only when the goods or services are not acquired for a commercial purpose. It then examined whether the software in this case was linked to business profit.

After analysing the nature of the software, the Court found that it was used to create export documents, track consignments, handle foreign exchange, and manage statutory benefits. These were all activities directly tied to the company’s business.

It also distinguished the precedents relied upon by Poly Medicure, noting that they involved individuals purchasing goods for livelihood through self-employment. That protection does not extend to incorporated entities automating their businesses, the Court said.

It explained that the decisive test is the dominant purpose behind the software purchase. In its view, automating business processes is done to save time, reduce costs and improve efficiency, all of which ultimately contribute to profit.

It noted that the object of purchasing the software was to organise the company’s operations and maximise commercial gains, both of which are against the definition of a consumer under law.

“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 Court noted.

Accordingly, it upheld the findings of the State and National Commissions and dismissed the appeal.

[Read Judgment]