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Synopsis

The Supreme Court has said that the dominant intention or the purpose of a transaction is to be looked into to find out if it had any nexus with some kind of profit generation as part of the commercial activities to exclude it from the ambit of the Consumer Protection Act.

A bench of Justices P S Narasimha and Pankaj Mithal said to determine whether the goods purchased by a person (which would include a legal entity like a company) were for commercial purpose or not within the meaning of the Act would depend upon the facts and circumstances of each case. 

"However, ordinarily 'commercial purpose' is understood to include manufacturing/industrial activity or business-to-business transactions between commercial entities. The purchase of the goods should have a close and direct nexus with a profit generating activity," the bench said.

If it is found that the dominant purpose behind purchasing the goods was for the personal use and consumption of the purchaser and/or the beneficiary, or was otherwise not linked with other commercial activities, the question whether such a purchase was for the purpose of “generating livelihood by means of self employment” need not be looked into, the court explained.

The bench relied upon M/s Daimler Chrysler India Pvt Ltd vs M/s Controls & Switchgear Company Ltd & Anr (2023) among other cases in this regard.

Court upheld the order of the National Consumer Disputes Redressal Commission which directed the appellant Omkar Realtors and Developers Pvt Ltd to refund flat cost of over Rs 7.16 Cr booked by Kushalraj Land Developers Pvt Ltd and others.

The complainant had booked the flat in Mumbai's Worli area in 2015 by paying Rs 51 lakh. It also paid over Rs 6.79 Cr as part consideration subsequently. The allotment letter for the flat for total sale consideration of Rs 34.50 Cr was issued in 2016 with date of possession as December 31, 2018. In August 2017, the respondent cancelled the booking, probably for want of arrangement of necessary funds, part occupancy certificate and due to the allotment of the said flat to another person.

As the appellant forfeited the amount, the respondent filed a complaint with the NCDRC for deficiency in service and adoption of unfair trade practices.

In the case at hand, the bench noted, the complainant specifically mentioned that the flat was being purchased for the purpose of residence of one of its Directors and his family and that the company was a family owned company. 

"The mere fact that the respondent-company is a real estate company, it does not mean that the flat was purchased by it for commercial purpose or for resale so as to earn profits," the court said.

Since the appellant contended that the respondent was not a consumer and as such the complaint was not maintainable, the bench said the burden lay heavily upon it to lead evidence to prove that the respondent in purchasing the flat in question was indulging in real estate business. 

However, there is no evidence on record to show that the flat so purchased by the respondent was in any way connected with the real estate business rather than for personal use of its Director and his family, it pointed out.

The bench thus held, "We do not find any error or illegality in the finding of the NCDRC that the purchase of the aforesaid flat was for personal use and not as part of the commercial activity and as such the complaint filed by the respondent was maintainable."

Going by the facts of the case, the court also found  that the NCDRC rightly held that the appellant was guilty of adopting unfair trade practice and since there was double allotment of the flat, there was deficiency in service, even though the appellant may have the power to advance the date of delivery of possession of the flat allotted or offer possession on the basis of part occupancy certificate.

Since the very cancellation/ termination of the allotment of the respondents in the facts and circumstances of the case is not justified, consequently the forfeiture is also bad in law, it said.

"We agree with the NCDRC that the complaint of the respondents was maintainable and that since the services rendered by the appellant were held to be deficient. It has thus rightly issued directions to refund the forfeited amount of Rs 7,16,41,493/- along with the delay compensation at the rate of 6% per annum from the date of deposit till refund within two months, failing which the interest would be payable at the date of 9% per annum," the bench said.

Dismissing the appeal, the court directed the appellant to refund a sum of Rs three crore out of the total amount within a period of two weeks and the balance on or before December 31, 2024 either in lump sum or in piecemeal, failing which it will be open for the Collector concerned to recover the entire amount as arrears of land revenue.

Case Title: Omkar Realtors And Developers Pvt Ltd Vs Kushalraj Land Developers Pvt Ltd & Anr