Beneficiary is “consumer” under the Consumer Protection Act: SC

May 14, 2020
consumer protection law

By Reetika Wadhwa and Nishtha Das

The Supreme Court in the matter of Canara Bank vs United Indian Insurance Corporation and Ors. (here), on February 06, 2020 held that the beneficiaries of the policies taken out by the insured are also ‘consumers’ under the Consumer Protection Act, even though they are not parties to the contract of insurance.

Brief Facts of the case

  • The claimants in the captioned appeal are farmers who had stored their produce in a cold store, during the year 2012-­2013.

Contention by the claimants (farmers, cold store)

  1. The farmers contended that the cold store while levying general charges had also charges for the insurance premium to be paid to the insurance company, therefore, they were well within the ambit of filing the The cold store also pressed on the same fact
  2. The farmers also contended that they had entered into a tripartite agreement with the bank regarding their loan as the cold store had got the stocks insured from the insurance company and the stocks belonged to the farmers.

Contentions by the Insurance Company –

  1. The insurance company was of the view that farmers had no locus standi to make any claim as there was no privity of contract between farmers and the insurance company.
  2. The insurance company further contended that farmers were not ‘consumers’ under the Consumer Protection Act, 1986.
  3. They further went on to deny that the farmers had actually produced the agricultural produce and stored it in the cold store. They also contended that the fire was not accidental and hence they were not liable to pay any compensation for the same.


Whether in facts of the present case, the farmers/ beneficiaries could be defined as consumers?

Decision of State Commission

The Karnataka State Consumer Disputes Redressal Commission at Bangalore held that the farmers had proved that the fire took place on account of electrical short circuit and no element of human intervention or use of kerosene was found. The State Commission also found that as per the tripartite agreement entered into between the farmers, the Bank and the cold store, it was mandatory for the cold store to insure the goods so hypothecated by the farmers with the Bank. The insurance company was held liable to pay the amount to the farmers.

Decision of the National Commission

The National Commission concurred with the findings of the State Commission and held that the farmers very well fall within the definition of ‘Consumer’ under the Consumer Protection Act, 1986..

Definition of “Consumer” is very wide- Supreme Court

In the subsequent appeal, the Hon’ble Supreme Court in consonance with the observations made by the Hon’ble State Commission, Karnataka and Hon’ble National Commission observed that the definition of ‘consumer’ under the Consumer Protection Act is very wide and not only includes a ‘person who hires or avails of the services for consideration’ but also includes ‘the beneficiary of such services ‘who may be a person other than the person who hires or avails of services. In the present case, even though the farmers were not directly involved in undertaking the services of the insurance company, they were certainly the beneficiary to the same. The Hon’ble Court further disregarded other claims of the insurance company including the claim that the fire was not accidental and was a result of human intervention.

Considering the same, the the Hon’ble Supreme Court held that the definition of ‘consumer’ includes beneficiaries who can take benefit of the insurance availed by the insured.

The Supreme Court vide this decision has come to the rescue of farmers by giving a vivid and categorical representation to them within the definition of ‘consumer’ under the Consumer Protection Act, 1986. While the decision does not clearly categorize ‘farmers’ as ‘consumers’, it surely provides a way for them to be considered as ‘consumer’ when they are beneficiaries.

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