 "'People don't buy luxury cars to suffer': SC slams Mercedes for defects")
The Supreme Court on Tuesday upheld the rulings of the National Consumer Disputes Redressal Commission (NCDRC), granting relief to two companies that had encountered issues with luxury cars purchased from Mercedes-Benz for their directors, reported Live Law.
The bench, comprising Justice Bela M Trivedi and Justice Pankaj Mithal, addressed appeals from two separate cases — one involving a car with heating issues and another where the airbags failed to deploy during an accident.
“People do not purchase the high-end luxurious cars to suffer discomfort, more particularly when they buy the vehicle keeping utmost faith in the supplier who would make the representations in the brochures or the advertisements projecting and promoting such cars as the finest and safest automobile in the world”, the court said.
The core of the matter was whether a car purchased by a company for its director’s use could be deemed a ‘commercial purpose’, thus excluding it from the ambit of consumer protection laws. The court emphasised that this determination depends on the specifics of each case.
“To determine whether the goods purchased by a person (which would include a legal entity like a company) were for a commercial purpose or not, within the definition of a ‘consumer’ as contemplated in Section 11 2(1)(d) of the said Act, would depend upon facts and circumstances of each case… The purchase of the goods should have a close and direct nexus with a profit-generating activity. It has to be seen whether the dominant intention or dominant purpose for the transaction was to facilitate some kind of profit generation for the purchaser and/or their beneficiary,” the court noted.
Court orders Mercedes to compensate
The first case involved DaimlerChrysler India Pvt Ltd (now Mercedes Benz India Pvt Ltd) and Controls & Switchgear Company Ltd, which had purchased two Mercedes cars for its executive directors. One of the cars developed persistent heating issues, particularly in the centre hump area, despite multiple repair attempts by the company.
More From This Section
The NCDRC ruled in favour of the complainant, directing Mercedes to either replace the car or refund half the purchase price of Rs 1.15 crore. Mercedes appealed this decision to the Supreme Court. The court found no evidence that the car was used for commercial purposes, noting that it was used by the whole-time director and his family for personal purposes, with no connection to any profit-generating activity of the respondent company.
The court rejected Mercedes’ argument that the purchase was for commercial purposes, stating that the burden of proof lies with the seller to prove commercial use. The NCDRC had ordered tests and inspections, including appointing Local Commissioners to measure temperatures during a long drive, which consistently showed high temperatures in the car, especially around the centre hump.
While upholding the NCDRC’s decision, the Supreme Court modified the compensation, directing Mercedes to pay Rs 36 lakh instead of the original Rs 58 lakh ordered by the NCDRC, allowing the complainant to keep the car.
Ruling against Mercedes in another case
The second case involved Mercedes Benz India Pvt Ltd and CG Power and Industrial Solutions Ltd, where a serious accident involving a Mercedes E-Class car purchased for its managing director led to a dispute. In a head-on collision, the car’s airbags failed to deploy, resulting in severe injuries to the director.
CG Power said it purchased the vehicle based on Mercedes Benz’s representations of advanced safety features, including multiple airbags that were supposed to deploy in a collision, ensuring enhanced safety. However, during the accident on January 17, 2006, involving a head-on collision with a goods carrier, neither the front airbags nor the side airbags deployed as expected.
Mercedes Benz contended that the accident did not warrant airbag deployment, arguing that the driver was sufficiently restrained by seat belts, and the front passenger airbag only deploys when there is a passenger in the seat.
The NCDRC awarded Rs 5 lakh for deficiency in service due to the non-deployment of airbags and another Rs 5 lakh for unfair trade practices. Mercedes appealed this decision, while CG Power filed a cross-appeal seeking higher compensation.
The NCDRC reviewed the owner’s manual and found that it did not adequately inform buyers about the specific conditions under which the airbags would deploy. The Commission considered this omission alongside allegations that Mercedes Benz marketed the vehicle as exceptionally safe without disclosing vital deployment conditions, constituting an unfair trade practice under Section 2(1)(r) of the Consumer Protection Act, 1986.
Meanwhile, the Supreme Court upheld the NCDRC’s decision, dismissing the appeals and stating, “Incomplete disclosure or non-disclosure of the complete details about the functioning of the airbags at the time of promotion of the car, has rightly been considered by the National Commission as the “unfair trade practice” on the part of the appellants."