Kiran Raj

The Supreme Court Division Bench of Justice Prashant Kumar Mishra and Justice N.V. Anjaria set aside the National Commission’s order that had rejected a homebuyer complaint on the ground that the flat was later leased out. The dispute concerns allegations of deficiency in service and unfair trade practice by a builder in a group housing project, including delay in handing over possession, unilateral changes to the tower layout, and disputed demands towards statutory charges and promised fittings. The Court held that renting or leasing a residential flat, by itself, does not take the owner outside the definition of “consumer” under the Consumer Protection Act, 1986, unless the purchase was predominantly for commercial gain. It clarified that the builder must prove that dominant commercial intention.

The appellants filed a consumer complaint before the National Consumer Disputes Redressal Commission seeking multiple monetary reliefs, including interest for delay, compensation for mental agony, compensation for change in the location of a tower, refund of alleged excess amounts charged towards fixtures and fittings, and litigation costs.

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The respondents contended that delay compensation had been paid as per the Agreement, that the flat area had increased requiring additional payment, and that all demands were contractual. They further alleged that the flat was purchased for commercial purposes as it had been leased out after possession, thereby excluding the appellants from the definition of ‘consumer’ under Section 2(1)(d) of the Consumer Protection Act, 1986.

The NCDRC dismissed the complaint, holding that leasing the premises amounted to commercial purpose.

The Court stated, "The onus of proving that the appellants fall within the exclusion clause of Section 2(1)(d) of the 1986 Act rests upon the respondents, and the respondents have 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 mere factum of leasing out the flat does not, by itself, demonstrate that the appellants 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 recorded, “It must be emphasized that the mere act of purchasing 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.”

On the scope of ‘consumer’, the Court observed, "While the 1986 Act does not exhaustively define 'commercial purpose', though the Explanation to Section 2(1)(d) carves out an exception for self-employment and earning livelihood, the dominant intention or dominant purpose of the transaction is determinative of whether the purchaser falls within the exclusion clause."

Referring to precedents Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti Developers and Shriram Chits (India) Private Limited v. Raghachand Associates the court held: “The dominant intention or dominant purpose of the transaction is determinative of whether the purchaser falls within the exclusion clause. Since it is always the service provider who pleads that the service was obtained for a commercial purpose, the onus of proving the same would have to be borne by it.”

Clarifying the standard of proof, it recorded, “The standard of proof has to be measured against a ‘preponderance of probabilities’. The respondents have not placed any cogent material on record to establish such nexus.”

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The Court directed, “Accordingly, we set aside the impugned judgment dated 11.05.2023 passed by the NCDRC and restore Consumer Complaint No.74/2017 to its original number to the file of the NCDRC. The NCDRC shall proceed to decide the Consumer Complaint on merits and in accordance with law. The Appeal is allowed.”

Advocates Representing the Parties:

For the Petitioners: Krishnamohan K., AOR Ms. Priya, Adv. Ms. Dania Nayyar, Adv. Mrs. Prerna Jain Kala, Adv.
For the Respondents: Ms. Diya Kapoor, Sr. Adv. Mr. Yudister Singh, Adv. Mr. Akhil Sachar, Adv. Mr. Siddhartha Iyer, AOR Mr. Aman Gupta, Adv. Ms. Srishti Ghoshal, Adv. Mr. Tonmoy Talukdar, Adv. Ms. Payal Rani, Adv. Ms. Sonakshi Malhan, AOR

Case Title: Vinit Bahri and Another v. M/s MGF Developers Ltd. and Another

Neutral Citation: 2026 INSC 114

Case Number: Civil Appeal No. 6588 of 2023

Bench: Justice Prashant Kumar Mishra, Justice N.V. Anjaria