Kerala High Court Upholds Consumer Rights in Non-Convertible Debentures Case

Investments in NCDs by Individuals Deemed Non-Commercial, Protecting Consumer Status under the Consumer Protection Act, 2019

In a significant ruling, the Kerala High Court, presided over by Justice Ziyad Rahman A.A, has reinforced the rights of individual investors under the Consumer Protection Act, 2019. The court dismissed the writ petition filed by Mathew K Cherian, Managing Director of Kosamattam Finance Ltd., challenging the orders of the District and State Consumer Disputes Redressal Commissions. The orders had deemed a complaint filed by an individual investor regarding Non-Convertible Debentures (NCDs) as maintainable.

The petitioner, Mathew K Cherian, contested that the investment in NCDs by the respondent did not qualify him as a "consumer" under the Act, arguing that such investments were commercial in nature. However, the court found that investments made by individuals in their personal capacity for financial returns do not constitute a "commercial purpose" and thus, the investors are protected as consumers under the Act.

The judgment emphasized that the Consumer Protection Act, 2019, provides a broad definition of "consumer" and "service" to safeguard individuals engaging in financial transactions, such as purchasing NCDs, from being excluded from its protective ambit. The court highlighted the necessity of interpreting these terms expansively to uphold consumer rights, especially when the transactions are not linked to any commercial activity.

Justice Rahman underscored that the Consumer Protection Act is designed to protect individual consumers rather than commercial entities engaging in business-to-business transactions. The court reiterated that individual investments aimed at enhancing life standards do not fall under "commercial purpose," thereby affirming the maintainability of the consumer complaint.

The decision is a pivotal affirmation of consumer rights, ensuring that individuals investing in financial products for personal financial betterment can seek recourse under the Consumer Protection Act, 2019, in cases of service deficiency.

Bottom Line:

Consumer Protection Act, 2019 - Investment in Non-Convertible Debentures (NCDs) by an individual in personal capacity is not considered a "commercial purpose" under Section 2(7) of the Act, and such individuals are deemed to be "consumers."

Statutory provision(s): Consumer Protection Act, 2019 Section 2(7), Section 2(42)

Mathew K. Cherian v. State Consumer Disputes Redressal Commission Sisuvihar Lane, (Kerala) : Law Finder Doc Id # 2809049