Introduction:
In Mathew K. Cherian v. State Consumer Disputes Redressal Commission & Ors., WP(C) 38924/2025, the Kerala High Court was called upon to determine a crucial and recurring issue under the Consumer Protection Act, 2019—whether a person who invests in Non-Convertible Debentures (NCDs) in his individual capacity can be treated as a “consumer” and whether failure to pay interest on such debentures would amount to “deficiency of service.” Justice Ziyad Rahman A.A. examined the legality of concurrent findings delivered by both the District Consumer Disputes Redressal Commission and the State Commission, each of which had upheld the maintainability of a complaint filed by an individual investor alleging non-payment of interest by Kosamattam Finance. The petitioner, who was the Managing Director of the finance company, challenged the consumer fora orders on the ground that NCDs do not qualify as “goods” and that the complainant was not a “consumer” due to the alleged commercial nature of the transaction. This litigation had an extensive procedural history, with earlier High Court directions for reconsideration of maintainability by the District Commission being disregarded, compelling multiple rounds of writ petitions. Ultimately, the question before the High Court was whether such investments constituted a “service” under Section 2(42) of the 2019 Act and whether they fell within the exclusion relating to “commercial purposes.” Through a meticulous statutory and precedential analysis, the Court affirmed that an individual investing in NCDs to secure returns cannot automatically be labelled a commercial player and must be protected under consumer law, thereby sustaining the maintainability of the complaint.
Arguments of Both Sides:
The petitioner, represented by counsel Liza Meghan Cyriac and team, advanced a multifold challenge to the orders of the District and State Commissions. Primarily, he argued that the Consumer Protection Act, 2019 does not extend to disputes relating to debenture investments because NCDs do not constitute “goods” under the Act. Furthermore, the petitioner contended that the complainant was not a “consumer,” as his investment was allegedly in the nature of a commercial activity undertaken for profit. Relying on the exclusion contained in Section 2(7)(ii), he argued that transactions intended for commercial gain fall outside the Act’s protective umbrella, and therefore the complaint was not maintainable. The petitioner also emphasized that the earlier directions of the High Court to decide the maintainability issue had not been properly considered by the District Commission, thereby violating principles of natural justice. He maintained that NCDs, being financial instruments governed by corporate and securities law, belong to a highly specialized investment domain that should not be adjudicated by consumer fora but by regulatory or civil forums. He further argued that the complaint essentially involved profit-oriented investment and not “service deficiency,” making it a commercial dispute outside consumer jurisdiction.
On the other hand, the respondents, represented by Government Pleader Arun Ajay Shankar, strongly defended the orders passed by both Commissions, asserting that the complainant was an individual investor who purchased NCDs from the finance company with the legitimate expectation of receiving interest as contractually promised. The respondents argued that failure to pay interest despite holding the investor’s money constituted a classic instance of “deficiency in service” within the meaning of Section 2(42). They further argued that the statutory scheme of the 2019 Act provides a very expansive definition of “service,” expressly including banking, financing and related facilities, thereby covering investment-based financial services. The respondents maintained that there was no material to suggest that the investor had purchased the NCDs as part of a business or commercial activity. Instead, the complainant acted purely in his personal capacity. They further relied on Supreme Court precedents such as Standard Chartered Bank Ltd. v. Dr. B.N. Raman and Vodafone Idea Cellular Ltd. v. Ajay Kumar Agarwal, to contend that the Consumer Protection Act must be construed broadly to advance consumer welfare. The respondents also argued that the petitioner was attempting to avoid responsibility by repeatedly challenging maintainability rather than responding to the merits of the complaint. They contended that both Commissions had examined the nature of the transaction thoroughly and found it to be consumer-oriented, thus leaving no ground for interference under Article 226 of the Constitution.
Court’s Judgment:
The Kerala High Court, through Justice Ziyad Rahman A.A., delivered an elaborate reasoning upholding the concurrent findings of the District and State Consumer Commissions. The Court began its analysis by referring to the definition of “consumer” under Section 2(7) of the Consumer Protection Act, 2019, which includes any person who avails services for a consideration, but excludes individuals who obtain goods or services for resale or for commercial purposes. The Court emphasized that the statutory exclusion applies only when the transaction is demonstrably commercial in nature, such as when investments are tied to business ventures or profit-making activities undertaken in the course of trade. In the present case, the Court underscored that there was no evidence whatsoever to show that the third respondent was acting on behalf of a business entity or that his investment was part of a commercial enterprise. Instead, the investment in NCDs was made in his personal capacity, which the Court deemed sufficient to place him within the protective scope of “consumer.”
The Court then moved to interpret “service” under Section 2(42), noting that it is intentionally drafted to provide broad protection. The inclusion of banking, financing, and insurance services reflects the legislative intent to treat financial transactions as service-oriented. Citing Supreme Court precedents, the Court reaffirmed that financial institutions offering debentures or investment schemes provide a form of service for consideration, and failure to pay interest or redeem the investment constitutes deficiency. The Court stressed that the only exclusion under Section 2(42) is that of services rendered free of charge, which was not applicable.
Addressing the petitioner’s argument that NCDs are not “goods,” the Court highlighted that the maintainability of the complaint is not contingent upon whether debentures constitute goods, since the transaction could very well fall under “service.” The Court held that the District Commission correctly examined maintainability and found that the complaint was about non-payment of returns, which squarely amounts to service deficiency.
On the issue of whether the investment was a “commercial transaction,” the Court held that this contention lacked substance. The Court meticulously clarified that Supreme Court decisions relied upon by the petitioner were distinguishable because they involved transactions carried out by individuals on behalf of companies or commercial entities for business gains. In contrast, the complainant here invested solely in his personal capacity without links to any commercial endeavor. The Court referred to the Explanation to Section 2(7) which specifies that goods or services used exclusively for earning livelihood through self-employment are not considered commercial, and noted that the petitioner failed to show the investment was connected to any business activity.
The Court concluded that there was no legal infirmity in the findings of the consumer fora and that the petition challenged the maintainability of a complaint that had been correctly upheld. Since the petitioner expressed intent to challenge the judgment further, the Court kept the proceedings before the District Commission in abeyance for ten days. Ultimately, the writ petition was dismissed, reaffirming that an individual investing for personal financial security retains consumer status under the law.