The Supreme Court has ruled that merely leasing out a residential flat does not automatically strip a homebuyer of consumer status. In a significant relief to homebuyers, the court set aside an order of the National Consumer Disputes Redressal Commission (NCDRC) that had dismissed a complaint against a real estate developer, holding that the dispute must now be heard on its merits.
Background of the Case
The dispute arose from a housing project named ‘The Villas’ launched in Gurgaon in 2005. The buyers, Vinit Bahri and another purchaser, booked a unit in the project by paying ₹15 lakh as booking amount in March 2005. They were allotted a ground-floor unit in Tower-C measuring about 3,590 square feet.
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A flat buyer’s agreement was executed in June 2006, which promised possession within 36 months, with an additional 90-day grace period. According to the buyers, the possession deadline expired in September 2009. They alleged that the developer later changed the tower’s layout without informing them and continued to raise payment demands under different heads.
The buyers eventually took possession of the flat in January 2015. They later approached the NCDRC in 2017 alleging deficiency in service and unfair trade practices. Their complaint included demands for interest on delayed possession, compensation for mental harassment, charges related to layout changes, excess payments, and litigation costs.
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Developer’s Defence
The developer argued that the buyers had already received delay compensation as per the agreement. It further contended that the total area of the flat had increased, which justified additional charges.
Crucially, the developer claimed that the buyers had leased the property after taking possession. On that basis, it argued that the purchase was for commercial purposes, meaning the buyers could not be treated as “consumers” under the Consumer Protection Act, 1986.
Accepting this argument, the NCDRC dismissed the complaint, holding that leasing the flat amounted to a commercial activity.
Issues Before the Supreme Court
The central question before the Supreme Court was whether leasing out a residential property automatically means that the buyer purchased it for commercial purposes, thereby excluding them from protection under consumer law.
The buyers argued that they had purchased the flat for personal use, mainly to stay closer to their parents, and that leasing it later did not change the original purpose.
Court’s Observations
The bench examined the definition of “consumer” under the Consumer Protection Act, which excludes persons who buy goods or services for commercial purposes. However, the court emphasised that determining commercial purpose depends on the dominant intention behind the purchase.
Explaining the legal position, the court noted that the test is whether the transaction is directly linked to profit-making activity. It observed that every case must be judged on its own facts and circumstances.
The bench further clarified the burden of proof. “The onus of proving that the service was obtained for a commercial purpose is on the service provider,” the court observed, adding that consumer law is intended to protect buyers and a negative burden cannot be placed on them.
The judges also made it clear that simply renting out a property is not enough to conclude that the buyer had commercial intentions at the time of purchase. The bench observed, “The mere factum of leasing out the flat does not, by itself, demonstrate that the appellants purchased the property with the dominant purpose of engaging in commercial activity.”
Decision of the Court
The Supreme Court held that the developer failed to provide sufficient material to show that the flat was purchased primarily for profit-making or commercial use.
Setting aside the NCDRC’s order dated May 11, 2023, the court restored the consumer complaint to its original file. It directed the NCDRC to decide the matter afresh on merits in accordance with law.
The appeal was accordingly allowed.
Case Title: Vinit Bahri and Another vs M/s MGF Developers Ltd. and Another
Case No.: Civil Appeal No. 6588 of 2023
Decision Date: February 4, 2026
