Supreme Court Holds Complainant Not a 'Consumer' for Lack of Privity; Sets Aside NCDRC Order Directing Lender to Pay Balance Consideration

A bench of Justices Sudhanshu Dhulia and Ahsanuddin Amanullah heard Civil Appeal No.14157 of 2024 in which M/s Citicorp Finance (India) Limited challenged the National Consumer Disputes Redressal Commission’s order of 19 January 2023 that had directed the lender to refund Rs.13,20,000 with interest and pay Rs.1,00,000 as litigation costs to a home-seller. The appeal raised the question whether the complainant fell within the definition of “consumer” under the Consumer Protection Act and whether any liability rested on the appellant to disburse the balance sale consideration allegedly promised under a purported tripartite agreement.

The Court allowed the appeal, set aside the Impugned Order and held that the complaint could not be maintained against the appellant in the facts of the case. The Court found that the NCDRC had proceeded without adequately addressing critical issues of privity, proof of the alleged tripartite agreement, limitation and non-joinder of the borrower. The bench noted that the earlier order of this Court had expressed only a "prima facie" view and had not finally adjudicated the consumer-status issue.

The Court, in its reasoning, observed: "Coming to the main merits, even if it is accepted that all the afore-mentioned agreements were validly there, primarily the Tripartite Agreement, as contended by the respondent, a conjoint reading of all would lead to the obvious conclusion that the essential transaction of sale was between the complainant-respondent and the borrower who was the buyer of the flat of the complainant-respondent for an agreed consideration of Rs.32,00,000/- (Rupees Thirty-Two Lakhs). In the specific factual setting, the respondent, having no privity of contract with the appellant, cannot be termed a ‘consumer’ under the Act. This alone was sufficient to dismiss the complaint."

The bench further observed that this Court’s earlier directions merely found that “prima facie” material existed to proceed on the consumer-status question and that the NCDRC should decide the matter on merits; it had not conclusively held that the respondent was a consumer. The Court also emphasised that the onus lay on the complainant to prove the existence of the alleged tripartite agreement and that absent such proof an adverse inference normally lay against the party asserting the document. It noted that the NCDRC had not recorded reasons for condoning delay under Section 24‑A and had overlooked the appellant’s plea on non-joinder of the borrower.

Background

The dispute arose from the 2006 sale of a flat by the respondent and a proposed sale in 2008 to one Mubarak Vahid Patel. The respondent alleged that a Memorandum of Understanding, a tripartite agreement dated 9 February 2008 and a registered Agreement for Sale dated 12 February 2008 contemplated payment of the balance sale consideration by the financier. The borrower obtained a home loan from the appellant, which paid Rs.17.80 lakhs to the respondent’s bank to foreclose an earlier mortgage; the remaining alleged shortfall of Rs.13.20 lakhs formed the basis of the consumer complaint filed on 16 April 2018.

The District/National Commission initially dismissed the complaint at the admission stage for lack of consumer status; this Court by order dated 6 September 2019 set aside that dismissal and remanded the matter for consideration on merits. On remand the NCDRC allowed the complaint and directed refund, which led to the present appeal. The appellant contended that it had no privity with the respondent, that no signed tripartite agreement was produced and that the borrower was a necessary party; it also urged that the complaint was barred by limitation. The respondent, appearing in person, maintained that the tripartite arrangement underpinned the loan approval and that the NCDRC correctly found deficiency and unfair trade practice.

The Supreme Court reviewed authorities including Indian Oil Corporation v Consumer Protection Council, Janpriya Buildestate v Amit Soni, Tata Motors v Antonio Paulo Vaz and M Hemalatha Devi, reiterated that absence of contractual privity would ordinarily preclude consumer forum liability, and found the NCDRC’s findings unsustainable on the record. The Court set aside the Impugned Order, allowed the appeal, directed parties to bear their own costs and recorded that the judgment would not affect any proceedings inter se the borrower and the respondent nor extend limitation for such remedies. The Court also noted that no order was required on certain pending interim applications and formally allowed the respondent’s application to appear in person.

Case Details: Case No.: Civil Appeal No.14157 of 2024 Case Title: M/s Citicorp Finance (India) Limited v Snehasis Nanda Appearances: For the Petitioner(s): Mr. Ritin Rai, Senior Counsel For the Respondent(s): Mr. Snehasis Nanda, Respondent-in-person