The Apex Court Held That a Borrower of a Project Loan Does Not Qualify as a ‘Consumer’ When the Loan is Availed for Commercial Purposes

The Supreme Court allowed the appeals filed by the Chief Manager, Central Bank of India, setting aside the NCDRC’s order dated August 30, 2023, on grounds of lack of jurisdiction. It ruled that the loan transaction in question had a close nexus with profit generation and was a business-to-business transaction, thereby excluding the borrower from the definition of ‘Consumer’ under Section 2(1)(d)(ii) of the CPA, 1986.

The dominant purpose of availing the loan facility was for commercial purposes and not for earning livelihood through self-employment, disqualifying the borrower from being considered a ‘Consumer’ under the CPA, 1986.

Acts and Sections:

• Constitution of India (COI)

• Consumer Protection Act, 1986 (CPA) – Section 2(1)(d)(ii), Section 23

• Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act) – Section 19(1)

• Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act)

Subjects:

Consumer Protection, Commercial Purpose, Deficiency in Service, Project Loan, Banking Services, Consumer Complaint, Jurisdiction

Nature of Litigation:
Statutory Appeals filed before the Supreme Court of India challenging the order passed by the National Consumer Disputes Redressal Commission (NCDRC) regarding the definition of ‘Consumer’ under the CPA, 1986.

Relief Sought:
Appellants sought to overturn the NCDRC’s finding of deficiency in service and the compensation awarded. Respondents sought enhancement of the compensation awarded.

Reason for Filing the Case:
Allegation of wrongful reporting of the respondent’s loan account status to the Credit Information Bureau of India Limited (CIBIL) despite the issuance of a No-Dues Certificate, leading to loss of reputation and business opportunities.

Previous Decisions:
The NCDRC held the bank liable for deficiency in service and awarded Rs. 75,00,000/- in compensation and Rs. 20,000/- in litigation costs.

Issues:
a) Whether the borrower of a project loan availed for commercial purposes qualifies as a ‘Consumer’ under the CPA, 1986?
b) Whether the NCDRC had jurisdiction to entertain the consumer complaint in this case?

Submissions/Arguments:
a) Appellants contended that the loan was for commercial purposes and, hence, the respondent did not qualify as a ‘Consumer’.
b) Respondents argued that the loan was for self-use and not directly for profit generation, qualifying them as a ‘Consumer’.