NEW DELHI: The Supreme Court has ruled that simply renting or leasing out a residential apartment does not automatically remove the buyer’s status as a “consumer” eligible for rights under consumer protection laws.
A bench composed of Justices Prashant Kumar Mishra and N V Anjaria stated that the responsibility lies with the property builder to demonstrate that the primary reason for purchasing the apartment was for “commercial purposes” to exclude the buyer from being classified as a “consumer.”
The bench noted that section 2(1)(d) of the Consumer Protection Act defines a “consumer” as anyone who purchases goods or services for consideration, excluding those who acquire goods for resale or commercial purposes.
“Leasing the flat does not, by itself, prove that the appellant bought the property with the main goal of engaging in commercial activity,” the court explained.
“Determining what constitutes ‘commercial purpose’ is a factual question that must be resolved based on the specific circumstances and intent behind the purchase of goods or properties,” the court stated.
The court emphasized that buying immovable property, even in multiple units, does not automatically invoke the exclusion clause of section 2(1)(d) unless it is shown that the primary purpose of the purchase was commercial.
“Without such evidence, the appellant remains classified as a ‘consumer’ under the 1986 Act,” it said.
The Supreme Court made this ruling in response to an appeal from Vinit Bahri, who challenged a decision from the National Consumer Disputes Redressal Commission (NCDRC) that dismissed his complaint regarding delayed possession of a flat, arguing that he didn’t meet the “consumer” definition due to leasing the flat out, which was viewed as a commercial activity.
This case involves real estate group MGF Developers Limited, which launched a group housing project named “The Villas” in Sahraul village, Sector-25, Gurugram, in 2005.
In March 2005, Bahri paid ₹15 lakh as a booking amount and was assigned a unit on the ground floor of Tower-C, with a super-built area of 3,590 square feet, on September 2, 2005.
Afterward, the layout plan changed, and Bahri alleged that the developer repeatedly demanded more funds, which he paid under protest. He stated that he received possession of the flat on January 8, 2015.
Bahri approached the NCDRC requesting compensation for the delayed possession and additional payments, among other costs.
The builder contended that Bahri acquired the flat for commercial use and rented it out starting March 2015.
The builder further argued that Bahri lacked the status of a consumer under the law and that his complaint should be dismissed.
The Supreme Court clarified that the explanation to section 2(1)(d) of the Consumer Protection Act indicates that “commercial purpose” does not exclude usage of goods bought and exclusively utilized for self-employment.
The court stated that the main intention or purpose behind the transaction determines whether the buyer falls under the exclusion clause.
The bench declared that the NCDRC had incorrectly dismissed Bahri’s complaint, as the burden of proof regarding his classification under section 2(1)(d) of the 1986 Act lies with the builder, who failed to meet this burden on a preponderance of probabilities.
“The crucial question is whether the primary intention behind purchasing the flat was to generate profit through commercial activity, and whether a clear and direct connection exists between the purchase and such profit-generating endeavors. The respondents failed to present credible evidence to demonstrate such a connection,” the court noted while overturning the NCDRC ruling and reinstating the complaint.
The court directed the NCDRC to evaluate the consumer complaint based on its merits and in accordance with the law.
