Supreme Court Holds Mercedes Benz Liable For Faults In Vehicles

Supreme Court Holds Mercedes Benz Liable For Faults In Vehicles

States that people do not purchase high-end cars to suffer discomfort

The Supreme Court has upheld the orders of the National Consumer Disputes Redressal Commission (NCDRC) granting relief to two companies, which purchased vehicles for their directors from luxury car company, Mercedes-Benz.

A bench of Justice Bela M Trivedi and Justice Pankaj Mithal was dealing with appeals on a case of a car developing heating issues and another of an accident, wherein the vehicle’s airbags did not deploy.

The judges stated, “People do not purchase high-end luxurious cars to suffer discomfort, particularly when buying a vehicle keeping utmost faith in the supplier who makes the representations in the brochures or advertisements, projecting and promoting such cars as the finest and safest automobile in the world.”

The issue was if the vehicle’s purchase by a company for its director constituted a ‘commercial purpose’, which excluded it from consumer protection laws.

The court explained that whether a purchase was for a commercial purpose depended on the facts and circumstances of each case.

The judges held, “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 under Section 11 2(1)(d) of the Consumer Protection Act, 1986.”

They added, “The purchase should have a close and direct nexus with a profit-generating activity. It has to be seen whether the dominant intention or purpose for the transaction was to facilitate profit-generation for the purchaser and/or the beneficiary.”

The first case involved Daimler Chrysler India Pvt Ltd (now Mercedes Benz India) and Controls & Switchgear Company Ltd.

The company purchased two Mercedes cars for use by its executive directors. One car developed heating issues, particularly in the center hump area. Despite multiple attempts at rectification by Mercedes, the problem persisted.

The NCDRC ruled in favor of the complainant, directing Mercedes to replace the car or refund half the purchase price of Rs.1,15,72,280.

Aggrieved by the order, Mercedes approached the Supreme Court.

However, the court did not find evidence that the car was used for commercial purposes. It was used by the whole-time director and his family for personal purposes, and there was no nexus with any profit-generating activity of the respondent company.

The apex court rejected Mercedes’ argument that the purchase was for commercial purposes, stating that the burden of proof was with the seller to prove his case.

The tribunal had ordered tests and inspections, including appointing Local Commissioners to measure temperatures during a long drive. The results showed consistently high temperatures, especially around the center hump of the vehicle.

Thus, the top court upheld the tribunal’s decision but modified the compensation, partly allowing the appeal.

Since the complainant had used the car for 17 years, the court directed Mercedes to pay Rs.36 lakh instead of the original Rs.58 lakh ordered by the NCDRC and allowed the complainant to keep the car.

The second case involved Mercedes Benz India and CG Power and Industrial Solutions Ltd.

The dispute arose from a serious accident involving a Mercedes E-Class car purchased by CG Power for its managing director. In a head-on collision, the car's airbags failed to deploy, resulting in severe injuries to the officer.

The complainant asserted purchasing the vehicle on representations by Mercedes about its advanced safety features, including multiple airbags that were supposed to deploy in case of a collision, ensuring enhanced safety.

However, on 17 January 2006, during an accident, involving a head-on collision with a goods carrier, unexpectedly, neither the front airbags nor the side airbags functioned.

Mercedes Benz argued that the accident did not warrant airbag deployment, as the driver was sufficiently restrained by seatbelts. The front passenger airbag worked only when there was a person in the seat, whereas the director was sitting in the rear seat.

The tribunal penalized Mercedes Rs.5 lakhs for deficiency in service due to non-deployment of airbags and Rs.5 lakhs for unfair trade practices.

While Mercedes appealed the decision, CG Power filed a cross-appeal seeking higher compensation.

In its 11 September 2017 judgment, the National Commission reviewed the owner's manual submitted by the complainant. It noted the mention that the side airbags would only deploy on the impacted side in an accident, independent of front airbags.

The tribunal held that the absence of such critical information in the owner's manual was a deficiency, as it failed to inform the buyer adequately. It considered the omission alongside allegations that Mercedes marketed the vehicle as exceptionally safe, including comprehensive airbag protection, without disclosing vital deployment conditions.

The NCDRC ruled that Mercedes failed to disclose the limited conditions under which airbags would function, despite marketing them as a substantial safety feature. It constituted unfair trade practice under Section 2(1)(r).

The top court judges upheld the decision of the tribunal and dismissed the appeals.

Justice Trivedi and Justice Mithal held, “Incomplete disclosure or non-disclosure of complete details on the functioning of the airbags at the time of promotion of the car, has rightly been considered by the National Commission as ‘unfair trade practice’ on the part of the appellants.”