Supreme Court Holds Borrower-Company Not a 'Consumer' Where Project Loan Had Dominant Profit-Making Purpose

A bench of Justices Sudhanshu Dhulia and Prashant Kumar Mishra heard appeals arising from an NCDRC order that had held a nationalised bank liable for "deficiency in service" for wrongly reporting a corporate borrower as a defaulter. The principal question before the Court was whether a borrower who availed a project loan fell within the statutory definition of "consumer" under Section 2(1)(d)(ii) of the Consumer Protection Act, 1986.

The Court allowed the bank's appeal and set aside the NCDRC order for want of jurisdiction, holding that the respondent company did not qualify as a "consumer" because the loan was availed for a commercial purpose with the dominant intention of generating profit. The Court emphasised that the decisive inquiry was whether the "dominant intention or dominant purpose for the transaction was to facilitate some kind of profit generation" and concluded it was not a service covered by the Act. The Court, in its reasoning, observed: "From an analysis of the afore mentioned decisions, 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 Court also noted that "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 ... which was purely a business to business transaction, entered into for a commercial purpose."

Background The dispute arose after Central Bank of India sanctioned a project loan of Rs 10 crore on 28 April 2014 to M/s Ad Bureau Advertising Pvt. Ltd. for post-production work on a film. The loan became an NPA on 4 February 2015. The bank initiated SARFAESI proceedings, and on 9 October 2015 filed a recovery application before the DRT for Rs 4,65,39,715, which the DRT allowed on 5 December 2016. The parties negotiated a one-time settlement of Rs 3.56 crore, which the bank accepted; the borrower also paid delayed period interest of Rs 14.43 lakh. The bank issued "No Dues Certificate" in January and March 2017 and filed a "full satisfaction memo" before the DRT.

Despite these steps, the bank reportedly marked the company as a defaulter to the RBI/CIBIL as a wilful defaulter with an outstanding of Rs 4.17 crore. The company alleged that this wrongful reporting caused loss of reputation and led to the cancellation of an exclusive Airports Authority of India advertising tender because a bank guarantee could not be obtained. M/s Ad Bureau filed Consumer Complaint No. 23 of 2021 before the NCDRC. The NCDRC on 30 August 2023 found deficiency in service and unfair trade practice, directed the bank to pay Rs 75 lakh as compensation, to issue a certificate stating the loan account stood settled and that incorrect reporting had occurred from 31.03.2017 to 30.06.2020, and ordered litigation costs of Rs 20,000.

The bank challenged maintainability before this Court, contending that the transaction was a business-to-business loan availed for commercial purposes and therefore fell outside the Act's definition of "consumer". The borrower separately sought enhancement of compensation. The Supreme Court analysed Section 2(1)(d)(ii) and precedents including Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti Developers, Shrikant G. Mantri v. PNB and National Insurance Co. v. Harsolia Motors, and held that where the dominant purpose of availing services (here, a project loan) is profit-generation, the user is not a "consumer" under the Act. The Court set aside the NCDRC order for lack of jurisdiction and allowed the bank's appeal, while dismissing the appeal challenging quantum for want of scope to interfere. The Court expressly limited its decision to maintainability and did not express any view on the merits, noting that the respondent remained free to pursue other remedies in law.

Case Details: Case No.: Civil Appeal No. 7438 of 2023; Civil Appeal No. of 2025 (@ Diary No. 20192 of 2024) Case Title: The Chief Manager, Central Bank of India & Ors. v. M/s Ad Bureau Advertising Pvt. Ltd. & Anr. Appearances: For the Petitioner(s): Learned counsel for the appellants (names not specified in the judgment) For the Respondent(s): Shri M. Abirchand Nahar, party-in-person (for respondent No.1); learned counsel for respondent No.2 (TransUnion CIBIL Limited) (name not specified)

Date of Judgment: February 28, 2025.