The Supreme Court rules that a borrower is not a 'consumer' if the loan is taken for profit-making purposes, making a complaint against the bank not maintainable.
On 28-02-2025, the Supreme Court Bench of Justice Sudhanshu Dhulia and Justice Prashant Kumar Mishra, while addressing a set of two civil appeals, held that a borrower of a project loan does not qualify as a ‘consumer’ under the Consumer Protection Act, 1986, since such loans are availed for commercial purposes and fall outside the ambit of consumer disputes—mere allegations of deficiency in service by the lender do not confer consumer status upon the borrower.
The Supreme Court adjudicated upon the question of whether the borrower of a project loan qualifies as a 'Consumer' under the Consumer Protection Act, 1986. The case arose from appeals against the order of the National Consumer Disputes Redressal Commission (NCDRC) dated 30.08.2023. The Chief Manager of the Central Bank of India, the appellant in Civil Appeal No. 7483 of 2023, challenged the NCDRC's finding of deficiency in service, which had resulted in a compensation award to M/s Ad Bureau Pvt. Ltd. Conversely, M/s Ad Bureau Pvt. Ltd. filed Civil Appeal (Diary) No. 20192 of 2024, disputing the inadequacy of the awarded compensation.
The dispute originated when the Central Bank of India sanctioned a project loan of Rs. 10 crores to M/s Ad Bureau Pvt. Ltd. for engaging in the post-production of a movie. The company defaulted, leading to its loan account being classified as a Non-Performing Asset (NPA) on 04.02.2015. The Bank initiated recovery proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and later approached the Debts Recovery Tribunal (DRT), which allowed its claim for Rs. 4.65 crores. Subsequently, a One-Time Settlement (OTS) was reached, and M/s Ad Bureau Pvt. Ltd. made the necessary payments, obtaining a No-Dues Certificate from the bank.
Despite the settlement, the Bank reported M/s Ad Bureau Pvt. Ltd. as a defaulter to the Credit Information Bureau of India Limited (CIBIL), which adversely affected its business, including the cancellation of a tender from the Airports Authority of India due to its inability to secure a bank guarantee. Aggrieved, M/s Ad Bureau Pvt. Ltd. filed a consumer complaint before the NCDRC, which ruled in its favor, awarding Rs. 75,00,000/- as compensation and directing the Bank to rectify the incorrect reporting.
The Supreme Court, while considering the appeals, examined whether M/s Ad Bureau Pvt. Ltd. could be classified as a 'consumer' under Section 2(1)(d)(ii) of the Consumer Protection Act. It noted that services availed for a 'commercial purpose' do not fall under the ambit of consumer protection unless they are exclusively for earning a livelihood through self-employment. The Court rejected the argument that the loan was used solely for self-branding, emphasizing that brand-building itself is aimed at revenue generation. Relying on its precedents, including National Insurance Company Limited v. Harsolia Motors and Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti Developers, the Court concluded that the loan transaction was a business-to-business arrangement and not a consumer dispute.
Accordingly, the Supreme Court held that M/s Ad Bureau Pvt. Ltd. did not qualify as a 'consumer' and set aside the NCDRC’s order, ruling that the Consumer Protection Act was not applicable in the given scenario.
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