Read Time: 12 minutes

Synopsis

The Supreme Court has said that where a service is availed for any “commercial purpose,” the person who has availed such a service is not a “consumer” for the purposes of the Act.

A bench of Justices Sudhanshu Dhulia and Prashant Kumar Mishra, however, said that the explanation to Section 2(1)(d) of the Act clarifies that when a person uses the goods bought or avails of any service solely to earn a livelihood through self-employment, such a person would not be excluded from the definition of ‘consumer’ under the Act.

"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," the bench said.

The court held that a company that availed a project loan for the post-production of a movie, which had a close nexus with profit generation, cannot be called a consumer.

The court was dealing with two appeals to determine whether the borrower of a project loan for a movie fell within the definition of ‘consumer’ under the provisions of the Consumer Protection Act, 1986. The appellant, Chief Manager, Central Bank of India, was aggrieved by the order of the National Consumer Disputes Redressal Commission (NCDRC), which held that there was a deficiency in service on the part of the appellant and that it was liable to pay compensation to respondent No. 1, M/s Ad Bureau Pvt Ltd, a company engaged in the business of branding, consulting, and advertising.

M/s Ad Bureau Pvt Ltd, on its part, challenged the quantum of compensation awarded by the NCDRC on the ground that it had been awarded inadequately.

By its 2008 order, the NCDRC directed the bank to pay compensation of Rs 75 lakh, along with Rs 20,000 as litigation costs, to the respondent and to issue a certificate stating that the loan amount of Rs 10 crore for the movie production stood settled and that no outstanding dues remained pending.

In 2014, the bank issued a Rs 10 crore loan to the respondent for the post-production of the movie.

The grievance of respondent No. 1 against the appellant bank was that, despite issuing a No-Dues Certificate and filing a full satisfaction memo before the DRT, the appellant bank incorrectly reported the name of respondent No. 1 to the RBI as a defaulter, citing a total outstanding amount of Rs 4.17 crore.

This, the company claimed, not only led to a significant loss of goodwill and reputation but also resulted in respondent No. 1 losing an exclusive advertising tender/license from the Airports Authority of India.

The NCDRC partly allowed the complaint, holding that the appellant bank was deficient in service and had also engaged in an unfair trade practice.

Before the apex court, the appellant bank contended that the NCDRC's order was not sustainable in law, as it had been passed without first adjudicating whether respondent No. 1 fell within the definition of a consumer under Section 2(1)(d)(ii) of the Act.

The bank argued that it was a business-to-business transaction rather than a business-to-consumer transaction. It stated that respondent No. 1 had availed the service with the ‘dominant intention’ of generating profits and that the primary purpose behind the loan transaction was to increase or generate additional revenue for the company.

The respondent, however, claimed that the Rs 10 crore loan was used for the post-production of the movie titled “Kochadaiiyaan” and to ensure that the name of respondent No. 1 appeared on the movie title, posters, and advertisements. In other words, it was a self-branding exercise, with the sole purpose of building a brand name for respondent No. 1 in order to earn a livelihood, and thus, there was no nexus with profit generation.

The bench, however, said, "We are not convinced by this argument put forth on behalf of respondent No 1 for the simple reason that even if partly, it may be true that the loan was availed for a self¬ branding exercise, the dominant purpose behind brand-building itself is to attract more customers and consequently generate profits or increase revenue for the business."

"A bald averment that company engaged itself in the post production of the movie solely for the purposes of brand-building does not alter the fundamental nature of the transaction, i.e. the availing of credit facility from the appellant bank, which was purely a business-¬to-¬business transaction, entered into for a commercial purpose. Post¬ production of a film involves multiple activities, which finally gives shape and presentation to a film, which is a commercial venture," the bench said.

The court explained that respondent No. 1 would not be excluded from the definition of a consumer merely because it is a commercial entity or enterprise. However, respondent No. 1 cannot be considered a ‘consumer’ because the transaction in question—obtaining a project loan—had a close nexus with a profit-generating activity. In fact, the dominant purpose of securing this loan was to generate profits upon the successful post-production of the movie titled “Kochadaiiyaan," court held. 

The court held that respondent No. 1 is not a ‘consumer’ in terms of Section 2(1)(d)(ii) of the Act.

The bench allowed the appeal solely on the ground of the lack of jurisdiction of the NCDRC, after dealing with the issue of maintainability.

The court clarified that it had not expressed any opinion on the merits of the dispute between the parties and that this judgment would not prevent respondent No. 1 from pursuing appropriate remedies in accordance with the law.

It dismissed the respondent's civil appeal on the quantum of compensation.

Case Title: THE CHIEF MANAGER, CENTRAL BANK  OF INDIA & ORS. VS. M/s AD BUREAU ADVERTISING  PVT. LTD & ANR.