2024 (2) TMI 1529 - SC - Indian Laws

Scope of Consumer under the provisions of the Consumer Protection Act 1986 - borrower of a project loan falls within the definition of Consumer or not - HELD THAT - A bald averment that company engaged itself in the post-production of the movie solely for the purposes of brand-building does not alter the fundamental nature of the transaction i.e. the availing of credit facility from the appellant-bank which was purely a business-to-business transaction entered into for a commercial purpose. Post-production of a film involves multiple activities which finally gives shape and presentation to a film which is a commercial venture. In Lilavati Kirtilal Mehta Medical Trust vs. Unique Shanti Developers 2019 (11) TMI 1824 - SUPREME COURT this Court has observed that no straitjacket formula can be laid down for determining whether an activity or transaction is for a commercial purpose and has laid down certain principles which are to be kept in mind. What is to be seen here is that whether the dominant intention or dominant purpose for the transaction was to facilitate some kind of profit generation for the person who has availed the service. Therefore the respondent No.1 is not a consumer in terms of Section 2 (1) (d) (ii) of the Act. Conclusion - The borrower was not a consumer thus rendering the consumer complaint non-maintainable. Appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal question considered in this judgment is whether the borrower of a project loan falls within the definition of 'Consumer' under the provisions of the Consumer Protection Act, 1986. This determination is crucial to assess the maintainability of the consumer complaint filed by the borrower before the National Consumer Disputes Redressal Commission (NCDRC).

2. ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents:

The legal framework centers around Section 2(1)(d)(ii) of the Consumer Protection Act, 1986, which defines a 'consumer' as a person who avails of any services for consideration, excluding those who avail services for commercial purposes. The explanation to this section clarifies that 'commercial purpose' does not include services availed for earning livelihood by means of self-employment. The Court also considered precedents such as Lilavati Kirtilal Mehta Medical Trust vs. Unique Shanti Developers and National Insurance Company Limited vs. Harsolia Motors & Ors., which provide guidance on determining whether a transaction is for a commercial purpose.

Court's interpretation and reasoning:

The Court interpreted the term 'consumer' by examining whether the service availed was for a commercial purpose. It emphasized that the dominant purpose of the transaction should be considered to determine if it is commercial. The Court noted that a transaction with a direct nexus to profit generation is typically considered commercial.

Key evidence and findings:

The borrower, M/s Ad Bureau Pvt. Ltd., availed a project loan from the Central Bank of India for post-production activities related to a movie. The borrower argued that the loan was for self-branding to earn livelihood, thus falling within the exception to the commercial purpose exclusion. However, the Court found that the dominant purpose of the loan was to generate profits through the post-production of a commercial movie, which is inherently a profit-driven activity.

Application of law to facts:

The Court applied the principles from precedents to the facts, concluding that the loan transaction was a business-to-business transaction with a commercial purpose. The post-production of a movie, even if partly for branding, ultimately aims to attract customers and generate revenue, aligning with the definition of a commercial purpose.

Treatment of competing arguments:

The borrower's argument that the loan was for self-use and brand-building was not convincing to the Court. The Court reasoned that brand-building itself is a commercial activity aimed at profit generation. The borrower's reliance on the explanation to Section 2(1)(d) was deemed insufficient to classify the transaction as non-commercial.

Conclusions:

The Court concluded that the borrower does not qualify as a 'consumer' under the Act, as the loan was availed for a commercial purpose. Consequently, the NCDRC lacked jurisdiction to entertain the consumer complaint.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning:

The Court emphasized: "...the dominant intention or dominant purpose for the transaction was to facilitate some kind of profit generation for the person who has availed the service."

Core principles established:

The judgment reinforced the principle that transactions with a direct nexus to profit generation are commercial, and borrowers in such transactions do not qualify as consumers under the Consumer Protection Act.

Final determinations on each issue:

The Court set aside the NCDRC's order, ruling that the borrower was not a consumer, thus rendering the consumer complaint non-maintainable. The Court clarified that its decision was solely on jurisdictional grounds, not on the merits of the underlying dispute.

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