2025 INSC 288
SUPREME COURT OF INDIA
(HON’BLE
SUDHANSHU DHULIA, J. AND HON’BLE PRASHANT KUMAR MISHRA, JJ.)
CHIEF MANAGER CENTRAL
BANK OF INDIA
Petitioner
VERSUS
M/S AD BUREAU
ADVERTISING PVT LTD.
Respondent
Civil
Appeal No. 7438 OF 2023 With Civil Appeal No. OF 2025 (@
DIARY NO. 20192 OF 2024)-Decided on 28-02-2025
Consumer
Consumer Protection
Act, 1986, Section 2(1)(d)(ii) – Consumer – Bank Loan
for Commercial Purpose
- Whether the borrower of a project loan, falls within the definition of
‘Consumer’ under the provisions of the Act, 1986? – Bank loan – Commercial
purpose – Consumer – Held that though respondent No.1 would not be excluded
from the definition of consumer merely on account of the fact that it is a
commercial entity/enterprise yet what has weighed in coming to the conclusion that in the
instant case, respondent No.1 cannot be said to be a ‘consumer’ is the fact
that the transaction in question i.e. obtaining a project loan did have a close
nexus with a profit generating activity and in fact, the dominant purpose
for getting this loan sanctioned was to generate profits upon successful
post-production of the movie titled “Kochadaiyaan” – Appeal allowed only on the
ground of lack of jurisdiction of NCDRC
and have not expressed any opinion on the merits of the dispute between
the parties herein - Clarify that this judgment shall not come in the way of
respondent No.1 to pursue appropriate remedies in accordance with law.
(Para
18 and 23)
JUDGMENT
Sudhanshu Dhulia, J.
:- The
question which arises in these two appeals for our determination is that
whether the borrower of a project loan, falls within the definition of
‘Consumer’ under the provisions of the Consumer Protection Act,
1986 (hereinafter, ‘the Act’).
2.
These statutory appeals arise from the order dated 30.08.2023 passed by the
National Consumer Disputes Redressal Commission, New Delhi (hereinafter,
‘NCDRC’) in Consumer Complaint No. 23/2021. The appellant before us in Civil
Appeal No. 7483 of 2023 is the Chief Manager, Central Bank of India and has
filed the appeal under Section 23 of the Act, assailing the finding
arrived at by the NCDRC holding that there was a deficiency in service on part
of the appellant and thus, it is liable to pay compensation to the respondent
No. 1, which is M/s Ad Bureau Pvt. Ltd., (a company engaged in the business of
branding, consulting & advertising).
3.
On the other hand, Civil Appeal (Diary) No. 20192 of 2024 has been filed by M/s
Ad Bureau Pvt. Ltd., challenging the quantum of compensation awarded by the
NCDRC, on the ground that the same has been awarded inadequately. For the sake
of convenience, we shall refer to the parties as per their respective status in
Civil Appeal No. 7483 of 2023.
4.
The NCDRC vide its order dated 30.08.2023 has allowed the Consumer Complaint
filed by respondent No.1 herein and has directed the appellants[Appellant Nos. 1, 2 & 3 are the Chief
Manager, Mount Road Branch, Chennai; Field General Manager, Chennai; and the
Managing Director & Chief Executive Officer of the Central Bank of India
respectively.] to pay a compensation of Rs. 75,00,000/ to respondent No.1
and to issue a certificate stating that the loan account of respondent No.1
with the Central Bank of India was settled and no outstanding dues remained in
the said account and also holding that the Bank had wrongly reported the status
of respondent No.1 as a defaulter to CIBIL[Credit
Information Bureau of India Limited.], which caused loss to the respondent
No.1 in the market. Additionally, the appellants were also directed to pay to
respondent No.1, litigation costs of Rs. 20,000/.
5.
At the outset, it would be necessary to state the relevant facts. On
28.04.2014, a Project Loan of Rs. 10 crores was sanctioned by the Central Bank
of India in favour of respondent No.1, which is a private limited company
carrying on advertising business. The purpose behind availing this loan was
that respondent No. 1 was to engage in the postproduction of a movie. A
property located at old D.No. 61, new D. No. 194, St. Mary's Road,
Abhiramapuram, Chennai, which stood in the name of the Chairman and Managing
Director of respondent No.1 was pledged as collateral for the loan. After
availing the said loan, respondent No. 1 defaulted in repayment and its loan
account and was classified as NPA [Non
Performing Asset.] on 04.02.2015. When respondent No.1 failed to repay the
amount even after issuance of Demand Notice by the appellant bank, a Possession
Notice was issued on 21.05.2015 and pursuant to the same, symbolic possession
of the property pledged as collateral for the loan was taken in terms of the
provisions of the Securitisation and Reconstruction of Financial Assets
and Enforcement of Security Interest Act, 2002 (hereinafter referred to as
‘SARFAESI Act’).
6.
Thereafter, on 09.10.2015 the Bank filed an application under Section 19
(1) of Recovery of Debts Due to Banks and Financial Institutions Act, 1993
(hereinafter referred to as 'RDDBFI Act') before the Debts Recovery Tribunal,
Chennai for recovery of an amount of Rs 4,65,39,715/. This application came to
be allowed by the Debts Recovery Tribunal, Chennai vide order dated 05.12.2016
and the Bank was held to be entitled to recover an amount of Rs.4,65,39,715/
with interest @ 12% p.a. till the date of realisation along with costs.
Pursuant thereto, a communication was addressed to the appellant bank by
respondent No.1 offering a One Time Settlement of Rs. 3.56 Crores and the offer
was duly accepted by the appellant bank.
7.
Thereafter, the appellant bank called upon respondent No.1 to pay the ‘delayed
period interest’ which was computed as Rs. 14.43 lacs. Admittedly, this amount
was also paid by respondent No.1 to the appellant bank, pursuant to which ‘No Dues
Certificate’ was issued on 13.01.2017 and 20.03.2017 by the appellant bank
towards respondent No.1. Further, a ‘full satisfaction memo’ was also filed
before the DRT by the appellant bank, wherein the factum of payment of the
onetime settlement amount and delayed interest by respondent No. 1 was accepted
by the appellant bank.
8.
The precise case of the respondent No. 1 before the NCDRC, as well as before
this Court, has been that the appellant bank was grossly negligent and
deficient in providing banking services to respondent No. 1 and has consequently
caused monetary damages and a loss of reputation to it. As per the ‘Master
Circular on Wilful Defaulters’4 by the Reserve Bank of India (hereinafter,
‘RBI’), all nationalised banks and financial institutions have to report
information regarding borrower accounts which are classified as doubtful and
loss accounts with outstanding amount aggregating Rs. 1 Crore and above. These
borrowers are classified and reported as ‘wilful defaulters’ by the respective
banks and financial institutions to the RBI, which in turn, consolidates the
entire information reported in the form of a list on a yearly basis. The
grievance of respondent No. 1 towards the appellant bank has been that the
appellant bank, despite issuing a No Dues Certificate and despite filing a Full
Satisfaction Memo before the DRT, incorrectly reported the name of respondent
No. 1 to RBI as a defaulter with a total outstanding amount of Rs. 4.17 Crores.
4 Circular No. DBOD No.
BC/CIS/47/20.16.002/94 dated 23.04.1994.
9.
This incorrect reporting by the appellant bank not only led to a significant
loss of goodwill and reputation, but it also resulted in the respondent No. 1
losing an exclusive advertising tender/license by the Airports Authority of
India, which although, was initially awarded to respondent No. 1 but was
subsequently cancelled for the reason that a Bank Guarantee was required to be
submitted, but the same could not be done, as when the respondent No.1
approached HDFC Bank for issuance of the same, the bank refused to do so upon
finding the name of respondent No.1 in the list of wilful defaulters.
10.
Aggrieved by the wrongful reporting and the losses which it faced on account of
the same, respondent No. 1 filed Consumer Complaint No. 23 of 2021 before the
NCDRC. Vide Impugned Order dt. 30.08.2023, NCDRC
partly allowed the complaint, holding that the appellant bank was deficient in
service and also engaged in an unfair trade practice. It was observed by the
NCDRC that since the wrongful reporting by the appellant bank constitutes a serious
breach of duty, it is liable to compensate respondent No. 1 for the losses it
has incurred and accordingly, the NCDRC awarded a compensation of Rs. 75,00,000/ to respondent No. 1 which was to be paid
jointly and severally by the appellants herein and also directed them to pay
litigation costs of Rs. 20,000/. Further, the appellants were directed to issue
a certificate in favour of respondent No. 1, wherein it was to be stated by the
appellant bank that loan account of respondent No. 1 stood settled and no
outstanding dues remained. The appellant bank had to further state that it had
been wrongly reporting the status respondent No. 1 as a ‘defaulter’ from
31.03.2017 till 30.06.2020.
11.
We have heard learned counsel for the appellants as well as Shri M. Abirchand
Nahar, who appeared and argued as party in person, on behalf of respondent No.
1 and we have also heard the learned counsel for respondent No. 2, i.e. Trans Union
CIBIL Limited.
12.
At the outset, it has been submitted by the learned counsel for the appellants
that the order dated 30.08.2023 of the NCDRC is not sustainable in law, as it
was passed without first adjudicating whether the respondent No. 1 falls within
the definition of consumer in terms of Section 2 (1) (d) (ii) of the Act.
It has been further submitted by the learned counsel for the appellants as well
as learned counsel for respondent No. 2 that respondent No. 1 does not
come within the definition of ‘consumer’ under Section 2 (1) (d)
(ii) of the Act since the service availed (sanction of project loan) by
respondent No. 1 from the appellant bank was purely for a commercial purpose
and it was a loan transaction between two business entities. In other words, it
was business to business transaction as opposed to a business to consumer transaction.
This is the first limb of the argument. The second limb, which is a
continuation of the first, is that this service was availed by respondent No.1
with the ‘dominant intention’ of generating profits and the main purpose behind
the loan transaction was to increase/generate additional revenue for the
company. In support of this argument, learned counsel(s) have relied upon
two decisions of this Court in National Insurance Company Limited vs.
Harsolia Motors & Ors. (2023) 8 SCC 362 &
Lilavati Kirtilal Mehta Medical Trust vs. Unique Shanti Developers, (2020) 2
SCC 265.
13.
Before dealing with the rival submissions advanced on behalf of the respondent
No. 1, we consider it necessary to refer to Section 2 (1) (d)
(ii) of the Act, which is reproduced as under:
(d) "consumer" means any person who—
(i) xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
(ii) hires or avails
of any services for a consideration which has been paid or promised or partly
paid and partly promised, or under any system of deferred payment and includes
any beneficiary of such services other than the person who 'hires or avails of
the services for consideration paid or promised, or partly paid and partly
promised, or under any system of deferred payment, when such services are
availed of with the approval of the first mentioned person but does not include
a person who avails of such services for any commercial purposes; Explanation.—
For the purposes of this clause, “commercial purpose” does not include use by a
person of goods bought and used by him and services availed by him exclusively
for the purposes of earning his livelihood by means of self employment;
(emphasis provided)
14.
A plain reading of the above makes it clear that where a service is availed,
for any “commercial purpose” then the person who has availed such a service is
not a “consumer” for purposes of the Act. All the same, this is subject to a
caveat which is provided by the Explanation to Section 2 (1) (d) of
the Act. The explanation clarifies that when the person uses the goods
bought, or avails any service for the sole purpose of earning his livelihood,
by means of self employment, then such a person would not be excluded from the
definition of ‘consumer’ under the Act.
15.
As a counter to the submission of the appellants that respondent No.1 is not a
‘consumer’ on account of fact that the it had availed the loan facility, with
the purpose of generating profits for its business, respondent No. 1 would
argue that it is squarely covered by the Explanation to Section 2 (1)
(d) of the Act and that loan was availed by it only for ‘self use’. This
argument was also put forth by respondent No. 1 before the NCDRC, where it
claimed that loan amount of Rs. 10 crores was used by it to engage itself in
the postproduction of a movie titled “Kochadaiiyaan” and to see to it that the
name of respondent No.1 is displayed on the movie title, the posters of the
movie as well as the advertisements of the movie. In other words, it was a self
branding exercise, the sole purpose being building a brand name for respondent
No.1, in order to earn livelihood and thus, there is no nexus to generation of
profits.
16.
We are not convinced by this argument put forth on behalf of respondent No. 1
for the simple reason that even if partly, it may be 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 company engaged itself
in the postproduction 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. Postproduction of a film
involves multiple activities, which finally gives shape and presentation to a
film, which is a commercial venture.
17. In Lilavati
Kirtilal Mehta Medical Trust vs. Unique Shanti Developers, (2020) 2 SCC 265,
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. The relevant
excerpt is reproduced hereunder:
“19. To summarise from
the above discussion, though a strait jacket formula cannot be adopted in every
case, the following broad principles can be culled out for determining
whether an activity or transaction is “for a commercial purpose”:
19.1. The question of
whether a transaction is for a commercial purpose would depend upon the facts
and circumstances of each case. However, ordinarily, “commercial purpose” is
understood to include manufacturing/industrial activity or business to business
transactions between commercial entities.
19.2. The purchase of
the good or service should have a close and direct nexus with a profit generating
activity.
19.3. The identity of
the person making the purchase or the value of the transaction is not
conclusive to the question of whether it is for a commercial purpose. It has to
be seen whether the dominant intention or dominant purpose for the transaction
was to facilitate some kind of profit generation for the purchaser or their
beneficiary.”
(emphasis provided)
18.
We are cognisant of the fact that respondent No.1 would not be excluded from
the definition of consumer merely on account of the fact that it is a
commercial entity/enterprise. But what has weighed with us in coming to the
conclusion that in the instant case, respondent No.1 cannot be said to be a
‘consumer’ is the fact that the transaction in question i.e. obtaining a
project loan did have a close nexus with a profit generating activity and in
fact, the dominant purpose for getting this loan sanctioned was to
generate profits upon successful postproduction of the movie titled
“Kochadaiyaan”.
19.
We may also refer to the decision of this Court in Shrikant G. Mantri vs.
Punjab National Bank (2022) 5 SCC 42. The facts of this case were that the
appellant therein was a stock broker who availed an overdraft facility from the
respondent bank, the purpose of which was to facilitate his daily transactions
in the stock and share market. As collateral for the overdraft facility, the
appellant therein had pledged his shares, which were not returned to him
despite the matter being settled between the parties through a onetime
settlement. Alleging deficiency in service by the respondent bank, the
appellant approached the NCDRC which dismissed the complainant on the grounds
of maintainability, holding that he is not a consumer under the provisions of
this Act. When the matter came up before this Court, it was the appellant’s
case that he had availed the overdraft facility for his ‘self employment’. This
Court found no merit in this argument and held that the overdraft facility was
taken by the appellant therein to expand his business profits and the
relationship between the appellant and respondent bank would purely be a
‘business to business’ relationship and therefore, the transaction would
clearly come within the ambit of the term “commercial purpose”.
20.
Further, in National Insurance Company Limited vs. Harsolia Motors &
Ors. (2023) 8 SCC 362, this Court has laid down the determining factors
which have to be kept in mind while considering whether a service is availed
for a commercial purpose or not. The relevant excerpt is reproduced hereunder:
“39. Applying the
aforesaid test, two things are culled out : (i)
whether the goods are purchased for resale or for commercial purpose; or (ii)
whether the services are availed for any commercial purpose. The twofold
classification is commercial purpose and non commercial purpose. If the goods
are purchased for resale or for commercial purpose, then such consumer would be
excluded from the coverage of the 1986 Act. For example, if a manufacturer who
is producing product A, for such production he may be required to purchase
articles which may be raw material, then purchase of such articles would be for
commercial purpose. As against this, if the same manufacturer purchases a
refrigerator, television or air conditioner for his use at his residence or
even for his office has no direct or indirect nexus to generate profits, it
cannot be held to be for commercial purpose and for aforestated reason he is
qualified to approach the Consumer Forum under the 1986 Act.
40. Similarly, a hospital which hires services
of a medical practitioner, it would be a commercial purpose, but if a person
avails such services for his ailment, it would be held to be a non commercial
purpose. Taking a wide meaning of the words “for any commercial purpose”, it
would mean that the goods purchased or services hired should be used in any
activity directly intended to generate profit. Profit is the main aim of
commercial purpose, but in a case where goods purchased or services
hired is an activity, which is not directly intended to generate profit,
it would not be a commercial purpose.”
(emphasis provided)
21.
From an analysis of the aforementioned decisions, it is quite clear that 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, it is our considered opinion
that the respondent No.1 is not a ‘consumer’ in terms of Section 2 (1) (d)
(ii) of the Act.
22.
In view of the aforesaid, we find merit in this appeal and accordingly set
aside the order dated 30.08.2023 passed by the NCDRC. The Civil Appeal stands
allowed, accordingly. Pending applications, if any, shall stand disposed of.
23.
However, we deem it necessary to add that we have only dealt with the issue of
maintainability of the Consumer Complaint filed by respondent No.1 before the
NCDRC, and we have allowed this appeal only on the ground of lack of jurisdiction
of NCDRC. We have not expressed any opinion on the merits of the dispute
between the parties herein. We also clarify that this judgment shall not come
in the way of respondent No.1 to pursue appropriate remedies in accordance with
law.
Civil
Appeal No. of 2025 (@ Diary No.20192 OF 2024)
24.
Delay condoned.
25.
In view of the aforesaid, we see absolutely no scope for our interference with
the order dated 30.08.2023 of the NCDRC as regards the quantum of compensation
awarded.
26.
The civil appeal stands dismissed, accordingly.
27.
Pending application(s), if any shall stand disposed of.
------