Supreme Court rules that companies purchasing software for business processes don't qualify as "consumers" - software used to automate export/import documentation with direct profit nexus constitutes commercial purpose, excluding business-to-business transactions from consumer forum jurisdiction.
If your company purchases software to automate business processes and the software doesn't work properly, can you file a complaint under the Consumer Protection Act for refund and compensation?
No, business-to-business software purchases for automation don't qualify for consumer protection.
The Supreme Court has ruled that when a company purchases software to automate its business processes with a direct nexus to profit generation, such transactions constitute "commercial purpose" under Section 2(1)(d) of the Consumer Protection Act, 1986. The purchaser company cannot be considered a "consumer" and cannot approach consumer forums for remedies.
Poly Medicure Ltd. purchased "Brillio Opti Suite" software license for export/import documentation automation
Software failed to function properly despite payment for product license and additional development costs
Complaint No. 515 of 2019 filed before Delhi State Commission seeking refund of ₹18.75 lakhs with 18% interest
State Commission held complaint not maintainable - appellant not a "consumer" as purchase was for commercial purpose
National Commission affirmed State Commission's view - software purchase for business automation is commercial purpose
Supreme Court dismissed appeal - "Transaction had nexus with generation of profits, therefore commercial purpose"
| Legal Principle | What It Means | Application in This Case |
|---|---|---|
| Commercial Purpose Definition | Goods/services purchased for resale or any commercial activity | Software purchased to automate business processes = commercial purpose |
| Dominant Purpose Test | Court examines dominant intention behind purchase | Dominant purpose was business automation and profit maximization |
| Profit Nexus Requirement | Purchase must have close and direct nexus with profit generation | Software directly linked to export/import profit-making activities |
| Business-to-Business Exclusion | Consumer Protection Act meant for business-to-consumer transactions | Both parties were commercial entities in business transaction |
Legislation to protect interests of consumers and provide speedy redressal of consumer disputes through quasi-judicial bodies.
Use of goods or services for activities directly intended to generate profit, including manufacturing and business-to-business transactions.
Legal test to determine whether the main intention behind a purchase was commercial or personal consumption.
The direct connection between the purchased goods/services and the generation of profits in business activities.
Commercial transactions between businesses, as opposed to business-to-consumer (B2C) transactions.
"When a commercial entity purchases software to automate its business processes, the object is to maximize profits. The transaction has a direct nexus with generation of profits, and therefore constitutes commercial purpose. The Consumer Protection Act was never intended to be an alternative forum for resolving business-to-business commercial disputes. Companies must seek their remedies through civil courts or contractual dispute resolution mechanisms, not consumer forums."
This judgment clarifies the boundary between consumer protection and commercial disputes, ensuring that consumer forums remain accessible to individual consumers while business entities pursue their commercial disputes through appropriate civil channels.
This content is for informational purposes only and does not constitute legal advice. Consult a qualified legal professional for specific legal guidance. The information provided is based on judicial interpretation and may be subject to changes in law.
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This analysis decodes a complex business law dispute to help companies understand their rights and remedies when facing software failures and how to navigate the distinction between consumer protection and commercial disputes.