In a significant verdict, the national consumer disputes redressal commission (NCDRC) has directed German luxury car manufacturer Mercedes-Benz India Pvt Ltd and its Mumbai-based dealer Auto Hangar India Pvt Ltd to jointly pay Rs45 lakh compensation with interest to a consumer who was sold a defective Mercedes S-Class sedan. The commission also awarded Rs1 lakh in litigation costs to the buyer.
Delivering
its verdict in a consumer complaint on 16 May 2025, a bench comprising justice AP Sahi (president) and Dr Inder Jit Singh (member) held that both the manufacturer and dealer were liable for delivering a defective vehicle. However, only the dealer, Auto Hangar, was held liable for deficiency in service. The car has been lying unutilised at the dealer's workshop since August 2012.
NCDRC says, "Coming to the reliefs to which Kishor Shah (the customer) is entitled, keeping in view the entire facts and circumstances of the case, especially considering that as on 4 May 2012 i.e. when the trade in offer was given by the Mercedes Benz and Auto Hangar, vehicle had already run about 40,000kms for three and a half years, the trade in offer appeared to be somewhat reasonable. Mr Shah in his own communication dated 9 September 2010 has admitted that car in question gave good service for the initial 12-15 months and vide this letter, although desired a replacement, was per se not particular about replacement and was ready to bear some difference in cost for this replacement too, and vide his letter dated 31 January 2011 and 9 February 2011 subsequent to his meeting with officials of Mercedes Benz and Auto Hangar on 31 January 2011, did not press for replacement and agreed to keep the car based on certain promises and assurances, recorded therein."
"Further, the demand for compensation of Rs2.40 crore as stated in letter dated 31 January 2011, was not pressed in his letter dated 9 February 2011, stating that 'I have communicated a figure, and leave it to you to revert back'. Hence, we are of the considered view that Mr Shah though entitled to a compensation for having been supplied with a defective car by Mercedes Benz and Auto Hangar and for deficiency in service on the part of Auto Hangar, is not entitled to either the replacement of the defective car with a brand new car of similar description, model and specification or full refund of the price or cost of the car as per purchase invoice," the bench stated.
The consumer, Kishor Shah, had purchased the Mercedes-Benz S-Class 320 CDI on 13 November 2008 for Rs82.62 lakh. He alleged that the vehicle suffered from several mechanical and electronic defects soon after delivery, including steering jam, suspension noise, gear issues, malfunctioning air conditioning, and torn upholstery, and spent over 50% of its operational life in the workshop.
Despite repeated repairs, Mr Shah alleged that the problems persisted. He had demanded replacement of the car or a full refund, along with hefty compensation of Rs8.61 crore plus Rs2 lakh per day until the car was replaced. Mercedes-Benz and Auto Hangar, while denying all charges, claimed the vehicle had clocked over 40,000km and was used extensively. They also contended that Mr Shah was not a consumer as the car was allegedly purchased for business purposes.
NCDRC dismissed the contention about Mr Shah not being a consumer. Referring to Supreme Court decisions, it held: "Even if it is presumed that the respondent-complainant company had taken benefit of the deduction available under the Income Tax (I-T) Act… it could not be said that such a high-priced luxurious car was purchased… for its ‘commercial purpose’.”
The bench noted that Mr Shah had made several written complaints and had even been offered a trade-in value of Rs55 lakh by the company in 2012. However, he refused the offer and insisted on a new car. NCDRC observed that while the car did have defects, the request for full replacement was not justified.
“Mr Shah though entitled to a compensation for having been supplied with a defective car by Mercedes Benz and Auto Hangar, and for deficiency in service on the part Auto Hangar, is not entitled to either the replacement of the defective car… or full refund of the price/cost,” the commission says.
Instead, NCDRC awarded a lump sum compensation of Rs45 lakh with 6% interest per annum (pa) from 15 August 2012, the date when the car was left at the workshop of Auto Hangar, until the date of payment. If not paid within two months from the date of the order, the interest rate will escalate to 9% pa. Mercedes-Benz and Auto Hangar will have a joint and several liability to pay the compensation.
The judgement also confirmed that “As regards allegations of (the) car being defective… Mercedes-Benz India (manufacturer) and Auto Hangar (dealer) are liable. However… only the dealer is liable (for deficiency in service)."
The car, which is now over 16 years old, is considered to have only 'scrap value', the order noted.
(Consumer Complaint No301 of 2012 Date: 16 May 2025)
