Supreme Court: Borrower Of A Project Loan For A Profit Generating Activity Does Not Qualify As A Consumer Under Consumer Protection Act
The Supreme Court set aside NCDRC’s Order directing the Bank to compensate the Company that took a project loan for the post-production of the movie ‘Kochadaiyaan’.
The Supreme Court held that the borrower of a project loan for a profit generating activity does not qualify as a consumer under the Consumer Protection Act.
The Court set aside the Order of the National Consumer Disputes Redressal Commission (NCDRC) which had held that the Central Bank of India (Appellant/Bank) was “grossly negligent and deficient in providing banking services” to M/S Ad Bureau Advertising Pvt. Ltd. (Respondent/Company) which had availed the loan to engage in the post-production of the movie ‘Kochadaiyaan’.
A Bench of Justice Sudhanshu Dhulia and Justice Prashant Kumar Mishra held that “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.”
The Senior Advocate Siddharth Luthra appeared for the Appellant, while M. Abirchand Nahar appeared as party-in-person for the Respondents.
Brief Facts
The primary issue before the Court was whether a borrower of a project loan falls within the definition of ‘Consumer’ under the Consumer Protection Act, 1986 (the Act).
The Bank challenged the NCDRC’s Order, arguing that the loan was taken for a commercial purpose and, therefore, the borrower could not be classified as a ‘consumer’ under Section 2(1)(d)(ii) of the Act. Conversely, the Respondent submitted that the loan was a “selfbranding exercise,” solely for the purpose of building a brand name for the Company in order to earn a livelihood and thus, there was no nexus to generation of profits.
Court’s Reasoning
The Supreme Court, however, clarified that the dominant purpose behind ‘brandbuilding’ itself was 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 brandbuilding does not alter the fundamental nature of the transaction, i.e. the availing of credit facility from the appellantbank, which was purely a businesstobusiness 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,” the Bench explained.
The Court clarified 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 profitgenerating activity and in fact, the dominant purpose for getting this loan sanctioned was to generate profits upon successful postproduction of the movie titled Kochadaiyaan”
Consequently, the Court held, “In view of the aforesaid, we find merit in this appeal and accordingly set aside the order passed by the NCDRC. The Civil Appeal stands allowed.”
Accordingly, the Supreme Court allowed the Appeal.
Cause Title: The Chief Manager, Central Bank Of India & Ors. v. M/S Ad Bureau Advertising Pvt. Ltd & Anr. (Neutral Citation: 2025 INSC 288)
Appearance:
AOR Viresh B. Saharya and Pranaya Goyal; Advocates Ashish Wad, Manoj Wad, Swati Arya, Akriti Arya, Mohd. Hadi, Dhawal Desai and Dharav Shah
