Farmers in buyback seed schemes are ‘consumers’: SC rejects ‘resale/commercial purpose’ defence; seed company saddled with costs
Case name: M/s Nandan Biomatrix Ltd. v. S. Ambika Devi & Ors. (with connected appeals)
Date of Order: 06 March 2020
Citation: Civil Appeal Nos. 7357–7376 of 2010
Bench: Mohan M. Shantanagoudar, J.; R. Subhash Reddy, J.
Held: A small farmer who purchases foundation/wet safed musli from a seed company under a buyback arrangement, cultivates it on her own land, and sells the produce back (or in the open market) is a “consumer” under Section 2(d) of the Consumer Protection Act, 1986. Such cultivation is covered by the Explanation’s “self-employment/earning livelihood” carve-out and is not excluded as “resale” or “commercial purpose.” A buyback clause does not convert the transaction into resale; the farmer is not a seller vis-à-vis the seed company in the sense contemplated by the exclusion. Prior contrary National Commission views (treating similar claims as non-maintainable for being contractual/resale) are incorrect; consumer fora can adjudicate deficiencies arising from contractual undertakings.
Summary: Responding to advertisements, the respondent a small landholder with about 1–1.5 acres entered a tripartite agreement to purchase wet musli from the seed company (through its franchisee), cultivate it with promised technical support/insurance, and sell the produce at a minimum assured price. When the company allegedly failed to honour the buyback, causing crop loss, she filed a consumer complaint. The District Forum dismissed it as not maintainable, holding she was not a “consumer.” On appeal, the State Commission reversed, and the National Commission affirmed, recognising both sale of goods and rendering of services and applying the livelihood/self-employment exception. Dismissing the company’s further challenge, the Supreme Court reiterated that the 1993 Explanation to Section 2(d) is clarificatory: “commercial purpose” is fact-sensitive, and where goods/services are used by the purchaser herself to earn a livelihood by self-employment, consumer status subsists even if the produce is sold. The Court distinguished industrial-scale, profit-oriented activities and rejected the argument that a buyback clause equals “resale.” It approved the approach that farmers in seed-production programmes who buy inputs, apply their own labour/skill, and depend on the assured procurement remain consumers for the seed company’s promised goods/services. Emphasising the vulnerability of small agriculturists and the need for accessible redress, the Court deprecated seed companies’ tendency to litigate maintainability up to the apex court as a strategy, and it imposed costs to deter such conduct.
Decision: Appeals dismissed. The finding that the farmer is a “consumer” is affirmed; matters are to be heard on merits by the District Forum within three months. The appellant seed company shall pay ₹25,000 as costs in each appeal, to be shared among the respondents in that appeal.