Summary
An advertising company that took a Rs 10 crore project loan to fund the post-production of a film, and later complained to the NCDRC that the bank wrongly reported it as a defaulter after a one-time settlement, was held not to be a 'consumer' under Section 2(1)(d)(ii) of the Consumer Protection Act, 1986: the loan had a close nexus with profit generation and its dominant purpose was commercial. The NCDRC's award of Rs 75 lakh compensation was set aside for want of jurisdiction, without any opinion on the merits.
Issues
- Whether the borrower of a project loan availed for a business purpose is a 'consumer' under Section 2(1)(d)(ii) of the Consumer Protection Act, 1986.
- Whether the borrower's plea that the loan was used only for a 'self-branding' exercise brought it within the Explanation (services availed exclusively for earning a livelihood by self-employment).
- Whether the compensation awarded by the NCDRC was inadequate (the borrower's cross-appeal).
Provisions considered
- Section 2(1)(d)(ii) and Explanation, Consumer Protection Act, 1986The Court read the definition, which excludes a person who avails services for any commercial purpose but, by the Explanation, saves services availed exclusively for earning a livelihood by self-employment. Applying the dominant-purpose test drawn from Lilavati Kirtilal Mehta Medical Trust, Shrikant G. Mantri and Harsolia Motors, it held that a project loan taken by an advertising company for post-production of a film was a business-to-business transaction with a close and direct nexus to profit generation, so the borrower was not a consumer. (¶¶ 13, 14, 16, 17, 18, 19, 20, 21)
- Section 23, Consumer Protection Act, 1986The bank's statutory appeal to the Supreme Court against the NCDRC's order was filed under this section. (¶ 2)
Held
- Where a service is availed for a commercial purpose, the person availing it is not a consumer under the 1986 Act, subject to the Explanation that saves goods or services used exclusively for earning a livelihood by self-employment. (¶ 14)
- A commercial entity is not excluded from the definition of consumer merely by its identity; the test is whether the transaction has a close and direct nexus with a profit-generating activity and whether its dominant intention or purpose was to facilitate profit generation for the person availing the service. (¶¶ 17, 18, 21)
- A company's assertion that a Rs 10 crore project loan was used for post-production of a film solely as a self-branding exercise does not alter the fundamental nature of the transaction: brand-building itself aims at attracting customers and generating profit, post-production of a film is a commercial venture, and the credit facility was a business-to-business transaction for a commercial purpose. The borrower was therefore not a consumer and the consumer complaint was not maintainable. (¶¶ 16, 18, 21)
- The appeal was allowed solely on the NCDRC's lack of jurisdiction; no opinion was expressed on the merits of the dispute, and the borrower remains free to pursue appropriate remedies in accordance with law. (¶ 23)
Result
Bank's appeal allowed; NCDRC order of 30.08.2023 set aside for want of jurisdiction, with liberty to the borrower to pursue other remedies in accordance with law. Borrower's cross-appeal on the quantum of compensation dismissed (delay condoned). Pending applications disposed of.