Case Study: Indian Maritime University v. Smt. Nimmia Kundlia and anr.

“The State Consumer Disputes Redressal Commission, Uttarakhand, ruled that the District Commission lacked jurisdiction over the dispute as it did not arise in Dehradun. It further held that educational institutions are not "service providers" under the Consumer Protection Act, 1986, and disputes over fees and admissions do not constitute "deficiency in service." Consequently, the Commission set aside the District Commission's order and dismissed the complaint, allowing the University’s appeal.”

Citation: First Appeal No. 359/2019

Date of Judgment: 26^th July, 2023

Court: State Consumer Disputes Redressal Commission, Uttarakhand

Bench: Justice D.S. Tripathi (President), Udai Singh Tolia (Member-II)

Facts

• Smt. Nimmi enrolled her son, Vaanchit Kundlia, in the Marine Engineering Program at the Indian Maritime University, Kolkata Campus, for the academic year 2013-14. She paid a total fee of ₹1,54,500. Shortly after joining, Vaanchit faced ragging and mental stress, prompting him to withdraw from the program. On 14th August 2013, Smt. Nimmi requested a fee refund. Despite assurances, no refund was issued.
• Consequently, Smt. Nimmi filed a consumer complaint before the District Consumer Disputes Redressal Commission, Dehradun, alleging deficiency in service and unfair trade practices by the University and its director, Sh. M.K. Ghosh.

Decision of the District Commission

The University contended that:

1. The District Commission lacked territorial jurisdiction.
2. The dispute did not qualify as a "consumer dispute" under the Consumer Protection Act, 1986.
3. As per admission rules, fees were non-refundable.

Despite these objections, the District Commission ruled in favor of Smt. Nimmi, directing the University to refund ₹1,33,500 with additional compensation. The University appealed to the State Commission.

Decision of the State Commission

A. On Jurisdiction: The State Commission held that the District Commission lacked territorial jurisdiction as the cause of action did not substantially arise in Dehradun. The mere preparation of a demand draft in Dehradun was insufficient to confer jurisdiction.

B. On Merits: The Commission relied on established precedents, including:

1. Bihar School Examination Board v. Suresh Prasad Sinha[1]: Educational institutions do not render "services" under the Consumer Protection Act, 1986.
2. Maharshi Dayanand University v. Surjeet Kaur[2]: Students are not "consumers," and universities are not "service providers."
3. Anupama College of Engineering v. Gulshan Kumar[3]: Admission and fee-related disputes cannot constitute deficiency in service.

In light of these rulings, the State Commission determined that the University was neither a service provider nor was Smt. Nimmi is a consumer. Consequently, the dispute was outside the purview of consumer fora.

Key legal issues discussed

1. Does the District Commission in Dehradun have jurisdiction to entertain the dispute?

No

The State Commission found that the District Commission, Dehradun, erroneously assumed jurisdiction based solely on the fact that the demand draft for the fee was prepared in Dehradun. While the creation of a demand draft might connect the transaction to Dehradun in a limited way, it does not constitute a substantial part of the cause of action. The Consumer Protection Act, 1986, under Section 11(2)(c), requires that a "substantial part of the cause of action" must arise within the territorial limits of the District Commission to establish jurisdiction.The Commission further noted that all critical events related to the dispute i.e. admission, payment, alleged incidents of ragging, and the request for a refund, occurred outside Dehradun. Both the University and its director were located in Kolkata. Hence, the District Commission in Dehradun lacked territorial jurisdiction, and the filing of the consumer complaint there was procedurally unsound.Court in paragraph number 8 observed “The perusal of array of parties to the consumer complaint shows that none of the opposite parties to the consumer complaint actually reside or carry on business at Dehradun and both of them are placed at Kolkata, West Bengal. In the consumer complaint, there is no averment as to how the District Commission at Dehradun has 6 territorial jurisdiction in the matter. A perusal of the impugned judgment and order shows that the complainant has orally submitted that since the demand draft towards fee was got prepared at Dehradun, hence the District Commission, Dehradun, has territorial jurisdiction in the matter. The District Commission has opined that part cause of action has arisen at Dehradun. Such an observation on the part of the District Commission cannot be legally sustained. Merely because the demand draft was got prepared at Dehradun and the common entrance test was held at Dehradun, it cannot be held that part cause of action has arisen at Dehradun, particularly when admittedly, both the opposite parties to the consumer complaint belong to Kolkata”

Further in paragraph 9 too court noted that “Learned counsel for the appellant cited judgment of Hon’ble National Commission in the case of Chandra Toyota Vs. Jain Builders and another reported in I (2015) CPJ 93 (NC), wherein it was held that merely by sending money by RTGS from Ajmer, District Forum, Ajmer does not get jurisdiction. The aforesaid judgment applies to the facts and circumstances of the present case with full force.”

2. Can educational institutions be considered "service providers" under the Consumer Protection Act, 1986?

No

The State Commission clarified that educational institutions are primarily engaged in academic and statutory functions rather than providing commercial services. In this case, the Commission referred to the Supreme Court's decision in Bihar School Examination Board v. Suresh Prasad Sinha[4], where it was held that conducting examinations, evaluating answer scripts, and issuing certificates are statutory functions, not services rendered for consideration.The Commission emphasized that the relationship between a student and an educational institution does not fall within the traditional definition of "service provider" and "consumer" under the Act. This principle has been consistently upheld in judgments such as Maharshi Dayanand University v. Surjeet Kaur[5], where the Supreme Court reiterated that students are not consumers. The essence of education lies in imparting knowledge and providing academic resources, which cannot be equated to the provision of services under a commercial arrangement.Court in paragraph number 16 observed that “Considering the aforesaid facts and circumstances of this case as well as the law laid down in the case of Bihar School Examination Board; Maharshi Dayanand University; Anupama College of Engineering (supra) and Director of Xavier Institute of Management & Entrepreneurship Kinfra Hi-Tech Park and others[6], it is crystal clear that the appellant – University is neither “service provider”, nor the respondent No. 1 – complainant being a student is a “consumer”. Accordingly, we are of the view that the matter in question cannot be brought before the Consumer Fora”

3. Can disputes regarding fee refund constitute a "deficiency in service"?

No

The Commission observed that disputes related to fee refunds and admissions are fundamentally administrative matters and not consumer transactions. The argument that withholding a refund constitutes a "deficiency in service" is untenable because educational institutions are not service providers under the Act.The State Commission referred to Anupama College of Engineering v. Gulshan Kumar, where the Supreme Court categorically held that disputes over fees, admissions, and related issues are beyond the scope of the Consumer Protection Act. Further, in Director of Xavier Institute of Management v. Sujay Ghose[7], the National Commission confirmed that educational institutions, being non-commercial entities, are not obligated to provide consumer remedies for administrative decisions.In this case, the University had a clear policy, communicated at the time of admission, stating that fees would not be refunded if a student withdrew midway through the course. This policy was binding and precluded any claim for a refund. Consequently, there was no deficiency in service, and the complaint could not be sustained.Court in paragraphs 14 observed that “Hon’ble National Commission in its judgment rendered in the case of Director of Xavier Institute of Management & Entrepreneurship Kinfra Hi-Tech Park and others Vs. Sujay Ghose reported in III (2022) CPJ 6 (NC), has specifically held that the Educational Institute does not fall within purview of Consumer Protection Act, 1986, as it is not rendering any services. While coming to the above conclusion, Hon’ble National Commission has relied upon a decision of Larger Bench of three Members of Hon’ble National Commission in the case of Manu Solanki and others Vs. Vinayak Mission University and other connected cases reported in I (2020) CPJ 210 (NC), wherein the Larger Bench has held that educational matters do not come within the purview of the Consumer Protection Act, 1986 and, therefore, the complaint is not maintainable.”

4. Was the District Commission’s order legally sustainable?

No

The State Commission found the District Commission’s judgment to be legally flawed and materially erroneous. It noted that the District Commission had failed to properly examine the jurisdictional issue and wrongly assumed that the preparation of the demand draft in Dehradun amounted to a substantial part of the cause of action. The State Commission also criticized the District Commission for overlooking the established legal principles regarding the applicability of consumer law to educational institutions.Furthermore, the District Commission’s reliance on the complainant's oral submissions, without sufficient legal backing or precedents, weakened its order. By disregarding landmark judgments like Bihar School Examination Board v. Suresh Prasad Sinha, Maharshi Dayanand University v. Surjeet Kaur, and Anupama College of Engineering v. Gulshan Kumar, the District Commission failed to align its decision with binding legal precedents.Consequently, the State Commission declared the order unsustainable, dismissed the complaint, and allowed the University’s appeal.Court in paragraph 17 observed that “For the foregoing reasons, we are of the considered opinion that impugned judgment and order passed by learned District Commission suffers from material illegality and the same is erroneous. The appeal deserves to be allowed and impugned judgment and order passed by learned District Commission is liable to be set aside.”

[1] IV (2009) CPJ 34 (SC).

[2] (2010) 11 SCC 159.

[3] Civil Appeal No. 17802 of 2017.

[4] IV (2009) CPJ 34 (SC).

[5] (2010) 11 SCC 159.

[6] Civil Appeal No. 17802 of 2017.

[7] n III (2022) CPJ 6 (NC).

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