The Supreme Court has said mere leasing out or renting a residential flat does not by itself exclude the purchaser of the property from being called a "consumer" to avail his rights under the consumer-protection law.
A bench of Justices Prashant Kumar Mishra and N V Anjaria put the onus on the builder of a property to prove that the dominant intention for buying a flat was a "commercial purpose" to exclude the buyer from falling under the "consumer" category.
The bench said section 2(1)(d) of the Consumer Protection Act states that the term "consumer" encompasses a person who buys goods or avails services for consideration, but excludes a person who obtains such goods for a resale or any commercial purpose.
"The mere factum of leasing out the flat does not, by itself, demonstrate that the appellant purchased the property with the dominant purpose of engaging in commercial activity.
"The question of what constitutes 'commercial purpose' is a question of fact to be decided in the circumstances of each case based on the purpose to which the goods/properties were purchased," the court said.
It emphasised that the mere act of buying an immovable property, even multiple units, cannot ipso facto attract the exclusion clause of section 2(1)(d) of the 1986 Act unless and until it is proved that the dominant purpose behind such purchase was commercial in nature.
"In the absence of such proof, the appellant cannot be excluded from the definition of 'consumer' under the 1986 Act," it said.
The top court passed the order on an appeal filed by one Vinit Bahri, challenging an order of the National Consumer Disputes Redressal Commission (NCDRC) that dismissed his complaint for delayed possession of a flat on the ground that he did not fall under the definition of "consumer" as he had leased out the flat, and the said act was considered a commercial purpose.
The case pertains to real estate group MGF Developers Limited that had launched a group housing project in the name of "The Villas" in Sahraul village, Sector-25, Gurugram, in 2005.
In March 2005, Bahri deposited Rs 15 lakh as the booking amount and was allotted a unit on the ground floor of Tower-C, with a super-built area of 3,590 square feet, on September 2, 2005.
Later, the layout plan was changed and it was alleged by Bahri that the developer had raised a demand for additional funds on multiple occasions and he had paid the amount though under protest. He had said the possession of the flat was taken on January 8, 2015.
He approached the NCDRC for a direction to the builder to pay compensation for the delayed possession and over the payment of the excess amount, besides other costs.
The builder had alleged that Bahri had purchased the flat for commercial purposes and it was let out to another person since March 2015.
The builder had further claimed that Bahri was not a consumer under the law and that his complaint should be dismissed.
The top court, in its order passed on Wednesday, clarified that the explanation to section 2(1)(d) of the Consumer Protection Act says that "commercial purpose" does not include the use by a person of goods bought and used by him exclusively for the purpose of earning his livelihood by means of self-employment.
It said the dominant intention or purpose of the transaction is determinative of whether the purchaser falls within the exclusion clause.
The bench said the NCDRC had erred in dismissing the appellant's complaint as the onus of proving that he falls within the exclusion clause of section 2(1)(d) of the 1986 Act rests on the respondent (builder) who has failed to discharge this onus on a preponderance of probabilities.
"The determinative question is whether the dominant intention or dominant purpose behind purchasing the flat was to facilitate profit generation through commercial activity, and whether there exists a close and direct nexus between the purchase and such profit-generating activity. The respondents have not placed any cogent material on record to establish such a nexus," the court said while setting aside the NCDRC order and restoring the complaint.
It directed the commission to decide on the consumer complaint on merits and in accordance with law.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
