Before You Sign That Software Contract: A Supreme Court Ruling Every Business Should Know

Authored by Arundhathi Gopakumar

Every growing business eventually invests in software to automate processes, cut costs and improve efficiency. But what if the software fails to perform? Many business owners assume the consumer forum is a quick, low-cost route to a refund. The Supreme Court’s decision in Poly Medicure Ltd. v. Brillio Technologies Pvt. Ltd. (2025 INSC 1314) shows why that assumption can be costly.

The Dispute

Poly Medicure, a company engaged in the export and import of medical devices, bought a product licence for “Brillio Opti Suite” to build an export/import documentation system at its plant. It claimed the software did not function properly and approached the Delhi State Consumer Commission for a refund of the licence and development costs, with 18% interest, alleging deficiency in service.

The State Consumer Disputes Redressal Commission held that the company was not a “consumer”, since the purchase was for a commercial purpose. The National Commission upheld that view, and so did the Hon’ble Supreme Court.

The Court’s Reasoning

1. A company can be a “consumer”, but not for every purchase: The Court first confirmed that an incorporated company is a “person” and can, in principle, be a consumer. The real question is the purpose of the purchase.
2. The test is the dominant purpose and its nexus with profit: Relying on an earlier precedent, the Court reiterated that neither the identity of the buyer nor the value of the transaction is decisive. What matters is whether the dominant purpose was to facilitate profit generation, and whether the purchase has a close and direct nexus with a profit-generating activity. Ordinarily, manufacturing, industrial activity and business-to-business transactions are treated as commercial.
3. Automation is a profit-driven decision: The Court observed that automation of business processes is undertaken “not just for better management of the business but to reduce costs and maximise profits”. The software had a nexus with profit generation, so the purchase was commercial.
4. “Self-use” is not a safe harbour: Poly Medicure argued that it was the end user and never intended to resell the software. The Court held that self-use makes no material difference where a commercial entity buys goods or services to augment its efficiency and profits.
5. The self-employment exception is narrow: The law protects those who buy goods or services exclusively to earn a livelihood through self-employment. The Court drew a clear line between a self-employed individual and an established company, and distinguished earlier cases involving individuals starting out on their own.
6. Insurance remains a distinct case: The Court clarified that its earlier Harsolia Motors ruling ((2023 INSC 367), which allowed a business to seek consumer remedies for an insurance claim, turned on the nature of insurance, which secures against unforeseen loss rather than generating profit.

What This Means for Your Business

• If you buy software, machinery, or services to run, expand or optimise your business, expect your purchase to be treated as commercial, even if the item is used only internally.
• As statutory consumer remedies may be unavailable, the Service Agreement is likely to be your main route to recourse. Warranties, acceptance criteria, service levels, support obligations, refund triggers and liability caps deserve close scrutiny before signing.
• Dispute resolution clauses (arbitration, jurisdiction, escalation steps and timelines) in the Service Agreement determine how quickly and economically you can enforce your rights.
• Keep specifications, implementation milestones, defect reports and correspondence organised and documented from day one. If a dispute arises, a clear paper or e-mail trail strengthens your claim in whichever forum you pursue.
• Linking payments to delivery, testing and go-live milestones keeps leverage with you if the product underperforms

A Note on the Current Law

The case was decided under the Consumer Protection Act, 1986. The Consumer Protection Act, 2019 also retains the exclusion of purchases made for a commercial purpose, so the reasoning continues to be a useful guide for businesses today. However, the applicability will always depend on the facts of each transaction.

The Bottom Line

The ruling is a reminder that the consumer protection framework is designed for consumers, not for business-to-business technology purchases. For companies investing in software and other operational tools, protection has to be built into the contract at the outset, not sought from a consumer forum after things go wrong. In practice, this means insisting on a clearly defined scope and specifications, ownership, structured acceptance testing before go-live, and payments linked to milestones rather than upfront payment. The contract should carry express warranties and service levels, clear termination and refund rights if the product fails to perform, and a limitation of liability with necessary carve-outs Businesses should also seek indemnities for third-party claims, infringement of intellectual property rights, data protection and security obligations, and continuity safeguards such as support commitments or source code escrow for critical systems. Finally, a carefully drafted dispute resolution clause, specifying the governing law, forum and timelines, ensures that rights can be enforced swiftly if things go wrong. The time to secure your position is before you sign.