The Supreme Court of India has ruled that a borrower does not fall under the definition of a "consumer" under the Consumer Protection Act, 1986, if the loan was taken for a profit-generating purpose. The Court held that such complaints against banks are not maintainable under the Act, as they are considered "pure business-to-business transactions for a commercial purpose."
The judgment was delivered by a bench comprising Justice Sudhanshu Dhulia and Justice Prashant Kumar Mishra. The Court was hearing an appeal filed by the Central Bank of India against an order from the National Consumer Disputes Redressal Commission (NCDRC), which had directed the bank to pay Rs. 75 lakh in compensation and litigation costs to Ad Bureau Advertising Pvt. Ltd. for incorrectly reporting the company as a defaulter to the Credit Information Bureau of India Limited (CIBIL).
Background of the Case
In 2014, the Central Bank of India sanctioned a loan of Rs. 10 crore to Ad Bureau Advertising Pvt. Ltd. for the post-production of the Rajinikanth-starrer film Kochadaiyaan. However, the loan account became irregular, leading to litigation before the Debt Recovery Tribunal (DRT). Eventually, a One-Time Settlement (OTS) was reached for Rs. 3.56 crore.
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Ad Bureau claimed that despite paying the OTS amount, the bank incorrectly reported it as a defaulter to CIBIL, causing reputational damage and business losses. The company filed a consumer complaint before the NCDRC, alleging deficiency of service by the bank.
Supreme Court's Ruling
The Supreme Court allowed the bank's appeal, setting aside the NCDRC's order. The Court held that the borrower, Ad Bureau, could not be considered a 'consumer' under Section 2(1)(d)(ii) of the Consumer Protection Act, as the loan was taken for a profit-generating activity.
The Court observed:
"We are not convinced by this argument put forth on behalf of Respondent No.1 for the simple reason that, even if it is partly true that the loan was availed for a self-branding exercise, the dominant purpose behind brand-building itself is to attract more customers and consequently generate profits or increase revenue for the business. A bald averment that the company engaged in the post-production of the movie solely for the purpose of brand-building does not alter the fundamental nature of the transaction—i.e., the availing of a credit facility from the appellant bank—which was purely a business-to-business transaction entered into for a commercial purpose."
The Court emphasized that the dominant purpose of the loan was to generate profits, which made it a commercial transaction. Therefore, the borrower could not claim protection under the Consumer Protection Act.
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The Court referred to several precedents to support its decision:
- Shrikant G. Mantri vs. Punjab National Bank (2022): In this case, the Court held that a stockbroker who availed an overdraft facility for his business could not be considered a 'consumer' under the Act. The transaction was deemed a business-to-business relationship, falling outside the scope of the Consumer Protection Act.
- National Insurance Company Limited vs. Harsolia Motors & Ors. (2023): The Court reiterated that the dominant intention or purpose of the transaction must be examined to determine if it was commercial in nature. If the goods or services were used for profit generation, the transaction would be considered commercial.
The Court concluded:
"From an analysis of the aforementioned decisions, it is quite clear that what is to be seen here is whether the dominant intention or dominant purpose of the transaction was to facilitate some kind of profit generation for the person who has availed the service. Therefore, it is our considered opinion that Respondent No.1 is not a 'consumer' in terms of Section 2(1)(d)(ii) of the Act."
The Supreme Court clarified that it had only dealt with the issue of the maintainability of the consumer complaint and not the merits of the dispute between the parties. The Court also stated that its judgment would not prevent Ad Bureau from pursuing other legal remedies available under the law.
Case : The Chief Manager Central Bank of India v. Ad Bureau Advertising Pvt Limited
