Consumer Protection Act| Dominant Purpose Of Transaction Is To Be Looked Into To Find Out If It Had Any Nexus With Profit Generation As Part Of Commercial Activities: SC

The Court said that merely because the purchaser is a real estate company it does not mean that the flat was purchased by it for commercial purposes or resale to earn profits.

The Court was hearing a statutory appeal under Section 67 of the Consumer Protection Act, 2019 which challenged the judgment and order passed by the National Consumer Disputes Redressal Commission that has partly allowed the complaint of the respondent and directed the appellant to refund Rs.7.16 Cr along with delay compensation @ 6% per annum.

The bench of Justice Pamidighantam Sri Narasimha and Justice Pankaj Mithal observed, “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 dominant intention or the dominant purpose of the 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.”

Senior Advocate Vinay Navare appeared for the Appellant and Advocate Malvika Kapila appeared for the Respondent.

Brief Facts-

The Respondent, which is a real estate development company, booked a flat in the Appellant's project for one of its directors. The flat was allotted and possession was set for December 2018. However, in March 2017, the Appellant advanced the possession date and demanded the remaining balance. The respondent was unable to arrange the funds, it also discovered that the flat was also allotted to another person. The respondent refused to take the flat after which the appellant cancelled the booking and forfeited his payments. The Appellant contested the respondent’s plea before NCDRC and argued the respondent was not a "consumer" under Section 2(7) of the Consumer Protection Act, and the flat was for commercial use. The NCDRC held the respondents to be a "consumer" and found the appellant at fault for double allotment, unjustified cancellation, and forfeiture, amounting to a deficiency in service.

The Court mentioned its decision in M/s Daimler Chrysler India Pvt. Ltd. vs. M/s Controls & Switchgear Company Ltd. & Anr. where according to the Court it was observed, “…in sum and substance 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.”

The Court observed, “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. 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 said that the burden lies heavily upon the appellant to lead evidence to prove that the respondent in purchasing the flat in question is indulging in the real estate business.

Accordingly, the Court said that there is no 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.

Finally, the Court dismissed the Civil Appeal.