Case Note & Summary
The Supreme Court considered two appeals arising from an order of the National Consumer Disputes Redressal Commission (NCDRC) dated 30.08.2023. The appellant, Central Bank of India, challenged the NCDRC's finding of deficiency in service and award of compensation to M/s Ad Bureau Pvt. Ltd., a company engaged in advertising. The respondent company had availed a project loan of Rs. 10 crores on 28.04.2014 for post-production of a movie, pledging property as collateral. The company defaulted, and the bank classified the account as NPA, took symbolic possession under SARFAESI Act, and filed a recovery application under RDDBFI Act before DRT, Chennai, which was allowed for Rs. 4,65,39,715 with interest. The company then offered a one-time settlement of Rs. 3.56 crores, which was accepted, and the company paid delayed period interest of Rs. 14.43 lacs. The bank issued No-Dues Certificates on 13.01.2017 and 20.03.2017 and filed a full-satisfaction memo before DRT. However, the bank incorrectly reported the company as a defaulter to RBI and CIBIL with an outstanding amount of Rs. 4.17 crores, causing the company to lose an advertising tender from Airports Authority of India as HDFC Bank refused to issue a bank guarantee upon seeing the defaulter listing. The company filed a consumer complaint before NCDRC, which partly allowed it, awarding Rs. 75,00,000 compensation and litigation costs, and directing the bank to issue a certificate of no dues and correct the defaulter status. The bank appealed, arguing that the company was not a 'consumer' under Section 2(1)(d)(ii) of the Consumer Protection Act, 1986, as the loan was for a commercial purpose. The company cross-appealed on quantum. The Supreme Court framed the issue as whether a borrower of a project loan falls within the definition of 'consumer'. The Court held that the service availed was for a commercial purpose, as the loan was taken to generate profits for the company, and the company did not use the service exclusively for earning livelihood by self-employment. Therefore, the company was not a consumer, and the consumer complaint was not maintainable. The Court allowed the bank's appeal and dismissed the company's cross-appeal, setting aside the NCDRC order.
Headnote
A) Consumer Law - Definition of Consumer - Commercial Purpose Exclusion - Section 2(1)(d)(ii) Consumer Protection Act, 1986 - The borrower of a project loan availed for a commercial purpose, i.e., post-production of a movie, is not a 'consumer' under the Act. The service availed was for generating profits and not for earning livelihood by self-employment. (Paras 1, 12-14) B) Banking - Deficiency in Service - Unfair Trade Practice - Reporting to CIBIL - The bank's incorrect reporting of the borrower as a defaulter after full settlement constitutes deficiency in service and unfair trade practice, but the consumer complaint is not maintainable as the borrower is not a consumer. (Paras 8-10) C) Consumer Law - Project Loan - Commercial Purpose - The dominant intention of the loan was to generate profits for the company, thus falling within the exclusion of 'commercial purpose' under Section 2(1)(d)(ii). (Paras 12, 14)
Issue of Consideration
Whether the borrower of a project loan falls within the definition of 'Consumer' under the provisions of the Consumer Protection Act, 1986.
Final Decision
The Supreme Court allowed the appeal of the bank (Civil Appeal No. 7483 of 2023) and dismissed the cross-appeal of the company (Civil Appeal (Diary) No. 20192 of 2024), setting aside the order of NCDRC dated 30.08.2023. The Court held that the respondent company is not a 'consumer' under the Consumer Protection Act, 1986, as the loan was availed for a commercial purpose.
Law Points
- Definition of consumer
- commercial purpose exclusion
- project loan
- banking service
- deficiency in service
- unfair trade practice
- wilful defaulter reporting
- CIBIL reporting
- Consumer Protection Act
- 1986
