Kiran Raj

The Supreme Court Bench comprising Justice Sudhanshu Dhulia, Justice Prashant Kumar Mishra adjudicated on the applicability of the Consumer Protection Act, 1986, in a dispute concerning the classification of a borrower as a consumer. The judgment sets aside the decision of the National Consumer Disputes Redressal Commission (NCDRC) regarding the maintainability of a consumer complaint filed by M/s AD Bureau Advertising Pvt. Ltd. against the Central Bank of India. The Court held that a company availing a project loan for business purposes does not qualify as a consumer under the Act.

The case arose from a consumer complaint before the NCDRC, filed by M/s AD Bureau Advertising Pvt. Ltd., a company engaged in branding, consulting, and advertising. The company had taken a project loan of ₹10 crores from the Central Bank of India for post-production work on a film. The loan was secured against a property owned by the company’s Chairman and Managing Director. Following a default in repayment, the loan account was classified as a Non-Performing Asset (NPA) on February 4, 2015. The Bank issued a demand notice and subsequently initiated recovery proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The Debts Recovery Tribunal (DRT), Chennai, adjudicated in favor of the Bank, entitling it to recover ₹4.65 crores with interest.

M/s AD Bureau Advertising Pvt. Ltd. later entered into a One-Time Settlement (OTS) with the Bank, which was accepted. Upon full payment, the Bank issued a No-Dues Certificate and filed a Full Satisfaction Memo before the DRT. Despite this, M/s AD Bureau Advertising Pvt. Ltd. alleged that the Bank erroneously reported its defaulter status to the Credit Information Bureau (CIBIL) and the Reserve Bank of India (RBI). The company claimed that this wrongful reporting resulted in the loss of an exclusive advertising contract with the Airports Authority of India, as it was unable to secure a bank guarantee from HDFC Bank due to its reported default status.

The NCDRC, in its order dated August 30, 2023, allowed the consumer complaint and directed the Bank to pay ₹75,00,000 as compensation to M/s AD Bureau Advertising Pvt. Ltd. and to issue a certificate stating that the loan account was settled with no outstanding dues. The NCDRC also held that the Bank had wrongly reported the company's status as a defaulter to CIBIL, which caused market loss. Additionally, the Bank was directed to pay litigation costs of ₹20,000.

The Supreme Court examined whether M/s AD Bureau Advertising Pvt. Ltd. qualified as a consumer under Section 2(1)(d)(ii) of the Consumer Protection Act, 1986. The Act excludes persons who avail services for commercial purposes unless the services are used exclusively for livelihood by means of self-employment. The Court stated: "A plain reading of the above makes it clear that where a service is availed, for any ‘commercial purpose’ then the person who has availed such a service is not a ‘consumer’ for purposes of the Act." It further observed that the dominant purpose of availing the loan must be examined to determine whether it was for self-use or profit generation.

M/s AD Bureau Advertising Pvt. Ltd. argued that the loan was taken for self-branding purposes and not directly linked to profit generation. However, the Court rejected this argument, stating: "Even if partly, it may be true that the loan was availed for a self-branding exercise, the dominant purpose behind brand-building itself is to attract more customers and consequently generate profits or increase revenue for the business."

The Court relied on precedents, including National Insurance Company Limited vs. Harsolia Motors & Ors. and Lilavati Kirtilal Mehta Medical Trust vs. Unique Shanti Developers, to affirm that commercial transactions between business entities do not fall within the ambit of the Consumer Protection Act. The judgment stated: "The question of whether a transaction is for a commercial purpose would depend upon the facts and circumstances of each case. However, ordinarily, ‘commercial purpose’ is understood to include manufacturing/industrial activity or business-to-business transactions between commercial entities."

The Court found that the project loan had a close nexus with a profit-generating activity and that the dominant purpose was to generate profits upon successful post-production of the film. The judgement noted: "The transaction in question i.e., obtaining a project loan did have a close nexus with a profit-generating activity and in fact, the dominant purpose for getting this loan sanctioned was to generate profits upon successful post-production of the movie."

Based on these findings, the Supreme Court set aside the NCDRC’s order dated August 30, 2023, ruling that the NCDRC did not have jurisdiction to entertain the complaint filed by M/s AD Bureau Advertising Pvt. Ltd. The Court stated: "We have only dealt with the issue of maintainability of the Consumer Complaint filed by respondent No.1 before the NCDRC, and we have allowed this appeal only on the ground of lack of jurisdiction of NCDRC. We have not expressed any opinion on the merits of the dispute between the parties herein."

Regarding the separate appeal filed by M/s AD Bureau Advertising Pvt. Ltd. challenging the quantum of compensation awarded by the NCDRC, the Supreme Court dismissed the appeal, holding that the issue was no longer relevant in light of its decision on jurisdiction. The Court held: "We see absolutely no scope for our interference with the order dated 30.08.2023 of the NCDRC as regards the quantum of compensation awarded."

The judgment states that while M/s AD Bureau Advertising Pvt. Ltd. cannot seek relief under the Consumer Protection Act, it remains free to pursue legal remedies in other appropriate forums. The Court concluded: "We also clarify that this judgment shall not come in the way of respondent No.1 to pursue appropriate remedies in accordance with law."

Case Title: The Chief Manager, Central Bank of India & Ors.

                 vs. M/s AD Bureau Advertising Pvt. Ltd. & Anr.

Neutral Citation: 2025 INSC 288;

Case Number: Civil Appeal No. 7438 of 2023; Civil Appeal (D) No. 20192 of 2024

Bench: Justice Sudhanshu Dhulia, Justice Prashant Kumar Mishra

[Read/Download order]