Purchase of Commercial Property Falls Outside Consumer Protection Unless Buyer Proves Self-Employment Use: NCDRC
Pranav B Prem
The National Consumer Disputes Redressal Commission (NCDRC), New Delhi, has held that when a commercial real estate transaction is undertaken, the buyer cannot claim protection under the Consumer Protection Act, 2019 unless it is clearly established that the property was purchased solely for the purpose of earning livelihood by means of self-employment. In the absence of evidence to this effect, such transactions fall outside the scope of the definition of 'consumer' under Section 2(7) of the Act.
The judgment was delivered by a bench comprising Mr. Subhash Chandra (Presiding Member) and AVM J. Rajendra (Member), which upheld the order of the State Consumer Disputes Redressal Commission, Punjab, dismissing the complaint filed by Vikesh Kumar and Sandeep Kumar against M/s Roselyn Square.
Background
The appellants had booked eight units measuring a total of approximately 2400 sq. ft. in a commercial project named “Roselyn Square” located on Airport Road, Zirakpur, Punjab. The project offered retail, office, and SOHO (small office/home office) spaces. The appellants opted for a “Partial Payment Plan with Assured Returns” and paid 95% of the basic sale price amounting to ₹1.56 crores. The Agreement for Sale was executed on 22.07.2019, and an Addendum nullifying the possession clause was executed on 25.07.2019. The developer agreed to provide assured monthly returns starting from 01.03.2021.
Upon the developer’s failure to honour the assured returns, the appellants filed a complaint before the State Commission alleging deficiency in service. The complaint was dismissed on the ground that the appellants were not 'consumers' under the Act, as the purchase was for commercial purposes.
Arguments Before the NCDRC
The appellants challenged the State Commission’s order, arguing that the purchase was for setting up a coaching institute to be run by family members, not hired professionals, and thus constituted self-employment. They contended that the State Commission misapplied the Supreme Court’s ruling in Laxmi Engineering Works v. PSG Industrial Institute [(1995) 3 SCC 583], which allows the exception of self-employment even in commercial transactions.
They also relied on Rohit Chaudhary & Anr. v. M/s Vipul Ltd [2023]. and Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti Developers [2019], asserting that once a party claims the purchase was for livelihood by self-employment, the matter should not be dismissed at the threshold, but evaluated on evidence.
The respondents argued that the property was booked purely for commercial purposes, evidenced by the appellants opting for assured returns instead of taking possession. It was submitted that under Section 2(7) of the Consumer Protection Act, 2019, services availed for a commercial purpose fall outside the definition of ‘consumer’, and the exception of self-employment was not substantiated in this case.
Findings of the NCDRC
The Commission noted that the project was a commercial complex and the appellants had purchased commercial office spaces. It observed that the appellants willingly opted for the assured return scheme and executed an addendum removing the clause for possession, thereby showing that their intent was investment, not use of the premises.
While acknowledging the legal position that self-employment use could bring a commercial transaction within the purview of the Act, the NCDRC emphasized that the burden lies on the complainant to prove such usage. In this case, the appellants provided no evidence to demonstrate that they were personally engaged in the proposed coaching venture or that the purchase was meant to support their livelihood.
Relying on the Supreme Court’s decision in Virender Singh v. Darshana Trading Co. [SLP (C) No. 5510/2020], the NCDRC reiterated that where there is no personal use and employees are hired to operate a commercial enterprise, the exception for self-employment is not available. It held: “Mere assertion regarding self-employment cannot be considered adequate justification... No evidence of the Appellants being engaged in self-employment for the purpose of earning their livelihood has been brought on record.”
The Commission distinguished the cited cases of Rohit Chaudhary and Parika Ganeriwal, noting that in those cases, unlike the present one, the commercial purpose was not conclusively established, or the purchasers provided proof of self-use.
Verdict
The NCDRC found no merit in the appeal and upheld the State Commission’s decision. It held that since the appellants failed to establish that the purchase of commercial units was for self-employment, they could not be treated as consumers under the Act. The appeal was dismissed with liberty granted to the appellants to pursue a civil suit, if so advised, with the benefit of Section 14 of the Limitation Act.
Cause Title: Vikesh Kumar & Anr. V. M/s. Roselyn Square
Case No: First Appeal No. NC/FA/390/2023
Coram: Hon'ble Mr. Subhash Chandra [Presiding Member], Hon'ble AVM J. Rajendra, AVSM VSM (retd.) [Member]
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