Is Your Company a Consumer When a Fire Claim Is Repudiated? The Dominant-Purpose Test After Sant Rohidas

Most Indian corporates assume the consumer commissions are shut to them. The reasoning runs: a company is not a natural person, a policy on a plant or a stock of goods is bought in the course of business, the Consumer Protection Act, 2019 excludes anyone who hires services for a commercial purpose, and so the only routes left after a repudiation are arbitration or a civil suit. Risk managers act on that assumption every quarter, and it quietly costs them the fastest and cheapest forum available.

On 19 March 2026 the Supreme Court delivered judgment in Sant Rohidas Leather Industries and Charmakar Development Corporation Ltd. v. Vijaya Bank, reported as 2026 INSC 264 and carried as 2026 LiveLaw (SC) 267. The Court reapplied the dominant-purpose and direct-nexus test to decide whether a complainant hiring a service falls outside the statutory definition of consumer. Two holdings matter for insurance buyers.

First, the Court held that interest earned on a deposit does not by itself establish a commercial purpose. Earning a return on a transaction is not the same as the transaction being entered into for the purpose of generating profit in the complainant's line of trade. The presence of a commercial actor, or of money changing hands in a way that produces income, does not decide the question.

Second, the Court still upheld the dismissal of the consumer complaint, and the reason is as important as the first holding. The dispute turned on allegations of fraud and forgery, and those allegations required a trial with evidence and cross-examination rather than the summary procedure that consumer commissions run. Consumer status was not the barrier. The nature of the factual dispute was.

Read together, the two holdings are a fair description of how a commercial policyholder should think about a repudiated claim in 2026. The question is not whether the buyer is a company. The question is what the policy was bought for, and whether the dispute can be decided on documents.

The statutory exclusion in the definition of consumer is narrow, and the test the Supreme Court applied in Sant Rohidas has two limbs that must both be satisfied before a complainant is thrown out.

Limb one: what was the dominant purpose of the transaction

The enquiry looks at why the complainant entered into this transaction, not at what the complainant does for a living. A manufacturer is a commercial entity in everything it does, and that fact alone decides nothing. The question is whether this particular service was procured to generate profit, or to protect an asset the business already owns.

Limb two: is there a direct nexus with profit generation

Even where a transaction has some commercial flavour, the exclusion bites only when there is a direct and close nexus between the service hired and the complainant's profit-generating activity. A remote or incidental connection is not enough. This is the limb that Sant Rohidas turned on when the Court held that interest on a deposit did not, on its own, convert the depositor into a commercial user.

Applied honestly, the two limbs are demanding. They ask the insurer to show that the policy itself was an instrument of profit generation, not merely that the insured is in business. Insurers routinely plead the exclusion as a one-line objection and rarely discharge that burden with evidence. A policyholder who anticipates the objection and answers it in the complaint, with the placement file and the board note showing why the cover was bought, is in a materially better position than one who treats the point as settled against it.

The application to insurance follows from the nature of an indemnity contract. A fire, burglary or machinery breakdown policy does not generate revenue. It does not enter the production process, it does not appear in the cost of goods sold, and it does not create a margin. It restores the insured to the position it occupied before a loss, and nothing more. The recovery under it is capped at the loss suffered, which is the defining feature that separates indemnity from a commercial venture.

That is the argument a risk manager should be able to make in three sentences about a repudiated claim:

• The policy was bought to protect an existing asset against destruction, not to earn anything from it.
• No profit accrues to the insured from the contract of insurance itself; the maximum recovery is the loss.
• The nexus between the policy and the business's profit-generating activity is indirect, because the policy responds only when the profit-generating activity has already been interrupted.

The argument is strongest on pure asset covers. A fire policy on a showroom, a stock declaration policy on a warehouse, a burglary cover on a godown, an electronic equipment policy on a data room: all of these are protective, and the dominant purpose is preservation.

The argument is weaker, and sometimes fails, where the policy is itself part of the commercial bargain. Trade credit cover taken to expand a receivables book, marine cover bought and on-sold as part of a freight-forwarding service, or a policy whose economics the insured trades on, all sit closer to the profit-generating side of the line. The distinction is not company versus individual. It is protective versus productive.

Sant Rohidas is a warning as much as an opening. The complaint was dismissed even though the commercial-purpose objection did not carry, because fraud and forgery allegations needed a trial rather than summary proceedings.

Consumer commissions decide on affidavits, documents and written submissions. They do not run discovery, they rarely record oral evidence, and they do not conduct the kind of extended factual enquiry a contested forensic dispute needs. When the real fight is over facts that only cross-examination can settle, the commission will decline the case, and the policyholder loses the two or three years spent getting to that answer.

Disputes that survive the summary format:

• Repudiation on a policy exclusion where the surveyor's own report records the cause of loss.
• Denial for delayed intimation where the intimation record is documentary.
• Deduction disputes on the face of the policy wording, including sub-limit and average clause application.
• Delay in settlement after the surveyor's final report, where the timeline is undisputed.

Disputes that usually do not:

• Alleged fabrication of stock records, invoices or the claim itself.
• Arson and moral-hazard allegations, where the insurer wants to lead evidence.
• Non-disclosure defences requiring the proposal history, the broker's file and witness testimony to unpick.
• Quantum fights where two surveyor reports diverge on methodology and both experts must be examined.

The practical test is simple. If the insurer's defence needs a witness box, the consumer commission is the wrong forum whatever the policyholder's status. If the defence is an argument about documents already on the file, it is the right one.

The forum choice is not a menu a policyholder can sample in sequence. Rule 14(5) of the Insurance Ombudsman Rules, 2017 bars a complaint before the ombudsman on a subject matter that is pending before, or has been disposed of by, any court, consumer forum or arbitrator.

The bar has three consequences risk managers routinely discover too late:

1. Filing a consumer complaint first forecloses the ombudsman on the same subject matter, whether or not the complaint is ever decided on merits. Pendency alone triggers the bar.
2. Invoking an arbitration clause has the same effect. Once the subject matter is before an arbitrator, the ombudsman route on that matter is gone.
3. A dismissal that never reached the merits, of the kind Sant Rohidas upheld, is still a disposal by a consumer forum. A policyholder who is turned away because the dispute needed a trial does not get the ombudsman back as a fallback.

The sequencing rule that follows is: exhaust the internal grievance mechanism first, then decide once, deliberately, between ombudsman, consumer commission, arbitration and civil suit. The ombudsman scheme's jurisdiction and monetary limits for commercial policyholders will already rule it out for most large corporate claims, but where it is available it is the cheapest route and should not be spent by accident.

The arbitration position changed with the IRDAI circular dated 27 October 2023. It requires all commercial-lines policies to carry a clause under which the parties may mutually agree to a separate arbitration agreement, and it excludes arbitration clauses from retail-lines policies altogether.

Two points follow, and both are frequently misread in placement discussions.

First, the commercial-lines clause is an agreement to agree, not a standing arbitration agreement. A policyholder facing a repudiation is not automatically bound to arbitrate; the parties must mutually agree to a separate arbitration agreement for that dispute. A broker reading the clause as an automatic bar on every other forum is reading it wrongly.

Second, arbitration is not the neutral default it is often assumed to be. It is the slowest and most expensive of the four routes once tribunal fees, counsel and expert evidence are counted, and Indian insurance arbitration clauses have historically been drafted to cover quantum only, leaving liability disputes outside the reference. A policyholder who agrees to arbitrate a repudiation, where the insurer denies liability outright, may find the tribunal has no jurisdiction over the only question that matters. The drafting and scope traps in Indian insurance arbitration clauses deserve a reading before any such agreement is signed.

Arbitration earns its place in two situations: where the dispute is a genuine quantum disagreement between two experts and speed matters more than cost, and where the policy is a large layered programme with foreign reinsurance support and the parties want a single confidential process. Outside those, a policyholder who can establish consumer status is generally better served by the commission.

Work the questions in this order after a repudiation or a materially short settlement, and record the answers in the claim file.

1. Has the internal grievance mechanism been exhausted? Nothing else should be filed until the insurer's grievance cell has issued a final written decision. It is free, it is fast, and the written repudiation it produces is the document every later forum will read first.
2. Does the insurer's defence need a witness box? If the repudiation rests on fraud, arson, fabricated records or a contested non-disclosure history, the summary forums will not decide it. Plan for a civil suit and build the evidence accordingly.
3. Can consumer status be argued on the dominant-purpose test? For a protective indemnity cover on an owned asset, the answer is usually yes, and 2026 INSC 264 gives the argument its current shape. Pecuniary jurisdiction under the 2019 Act is calculated on the consideration paid, which for an insurance dispute is the premium and not the claim amount, so even large claims frequently sit lower in the commission hierarchy than buyers expect.
4. Is the ombudsman still available and worth using? Check the scheme's limits, then check Rule 14(5) exposure. If any part of the subject matter is already before a court, consumer forum or arbitrator, the answer is no.
5. Is there a mutually agreed arbitration agreement, and does it cover liability or only quantum? Under the 27 October 2023 circular the commercial-lines clause is an option, not an automatic reference. Do not agree to arbitrate a liability denial under a quantum-only reference.
6. What is the limitation position in the chosen forum? Limitation runs from the repudiation, and different forums have different periods. Pick one forum, and file in it in time, rather than filing protectively in two.

The broader framework for dispute-resolution routes open to commercial policyholders and the operation of the Consumer Protection Act, 2019 in insurance sit behind each of these questions. What Sant Rohidas changes is step three. The consumer route should be assessed on the dominant purpose of the policy, and it should be ruled out on evidence rather than on the assumption that a company can never be a consumer.