On February 04, 2026, the Supreme Court of India (“Supreme Court”) in the case of Vinit Bahri v. Messrs MGF Developers Limited,  has held that mere leasing of a residential property by a person does not disqualify a homebuyer from being a "consumer" under the Consumer Protection Act, 1986.

 Facts:  

1. The Respondents launched a group housing project in the name of ‘The Villas’ at Village Sahraul, Sector-25, Gurgaon, in the year 2005. The Appellants in March 2005, deposited Rs.15,00,000/- (Rupees fifteen lac only) as the booking amount, and, on September 02, 2005, they were allotted Unit No.VP-C/802 located on the ground floor of Tower-C with super built area of 3590 square feet (“Flat”).

2. A Flat Buyer’s Agreement was executed on June 12, 2006 (“Agreement”) between the Parties. In terms of Clause 9.1 of the Agreement, the possession of the Flat was liable to be handed over within 36 (thirty-six) months from the date of the Agreement, subject to a grace period of 90 (ninety) days for obtaining the occupation certificate.

3. The Appellants alleged that the due date of possession expired on September 11, 2009 and that the Respondents had admittedly unilaterally changed the layout plan of Tower-C without informing the buyers. The Respondents vide letter dated January 02, 2015, invited objections against the change of layout plan and the Appellants filed their objections against the same. However, the Director, Town and Country Planning, Haryana, issued the occupation certificate on August 14, 2015.It was also alleged by the Appellants that the Respondents demanded monies on multiple occasions, which monies were paid by the Appellant under protest. The possession of the Flat was taken over by the Appellants on January 08, 2015. 

4. On January 10, 2017, the Appellants filed a Consumer Complaint bearing No. No.74/2017 (“Consumer Complaint”) before the National Consumer Disputes Redressal Commission (“NCDRC”) alleging deficiency in service and unfair trade practice. The Appellants challenged the demand of Rs. 30,81,894/- (Rupees thirty lac eighty-one thousand eight hundred ninety-four only) under various heads of External Development Charges, Internal Development Charges, Service Tax, etc. and also Rs.4,80,000/- (Rupees four lac and eighty thousand only) towards deficiency in providing promised fixtures in the Flat.

5. Before the NCDRC, the Respondent No.1 stated that the Appellants had already been paid/adjusted a delay compensation of Rs.12,10,237/- (Rupees twelve lac ten thousand two hundred and thirty-seven only) in terms of Clause 9.7 of the Agreement, and the same had been accepted unconditionally by the Appellant. It was also stated that the total area of the Flat has been increased and the Appellants were liable to pay for increase in the area. Further, all the demands raised by the Respondents were according to the Agreement.

6. It was also alleged by the Respondent No. 1 that the Appellants had purchased the Flat for commercial purposes and after taking over the possession, the Flat had been let out to a third party since March, 2015 and a lease deed to this effect had been executed. It was alleged that the Appellants were not “consumers” and on this ground, the Consumer Complaint was liable to be dismissed.  

7. The NCDRC vide the Judgement dated May 11, 2023 (“Impugned Judgement”) concluded that the Appellants did not fall under the definition of ‘consumer’ as they had leased the Flat to a third party and the said act was considered as commercial purpose.

8. An Appeal against the Impugned Judgement was preferred by the Appellants before the Supreme Court.

Submissions by the Parties: 

1. It was contended by the Appellants that the Flat was purchased by the Appellants solely for personal usage to live closer to their parents and the NCDRC had committed an error in observing that the Flat had been purchased for commercial usage. Reliance was placed on IREO Private Limited v. Aloke Anand, [(2022) 9 SCC 412] and Synco Textiles Private Limited v. Greaves Cotton and Company Limited, [1990 SCC OnLine NCDRC 3].

2. The Respondents supported the impugned Judgement and prayed for dismissal of the Appeal.

Relevant Provision:

Section 2 (1) (d) of the Consumer Protection Act, 1986 (“the Act”):

"2. Definitions

(1) In this Act, unless the context otherwise

…

d) “consumer” means any person who,—

(i)             buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose;

or

(ii)           hires or avails of any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payments, when such services are availed of with the approval of the first mentioned person; but does not include a person who avails of such services for any commercial purpose.

Explanation.—For the purposes of this clause,

“commercial purpose” does not include use by a person of goods bought and used by him and services availed by him exclusively for the purposes of earning his livelihood by means of self-employment;”

 (Emphasis Supplied)

Observations of the Court:

1. The term ‘consumer’ encompasses any person who buys goods or avails services for consideration but excludes a person who obtains such goods for resale or for any commercial purpose. The Explanation to the said clause clarifies that ‘commercial purpose’ does not include use by a person of goods bought and used by him exclusively for the purposes of earning his livelihood by means of self-employment. While the Act does not exhaustively define ‘commercial purpose’, 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. 

2. This Court in Laxmi Engineering Works v. P.S.G. Industrial Institute [(1995) 3 SCC 583] observed that in absence of a statutory definition, the term ‘commercial’ denotes activities connected with or engaged in commerce, having profit as the main aim, whereas ‘commerce’ means financial transactions, especially buying and selling of merchandise on a large scale. The Explanation to Section 2(1)(d) of the Act, being an exception to an exception, clarifies that purchase of goods for ‘commercial purpose’ would not take the purchaser out of the definition of ‘consumer’, if the commercial use is by the purchaser himself for the purpose of earning his livelihood by means of self-employment. The Explanation reduces the question of what constitutes ‘commercial purpose’ to a question of fact to be decided in the circumstances of each case, and it is not the value of the goods that matters but the purpose to which the goods bought are put to.

3. The interpretation of expression ‘commercial purpose’ was further expounded in Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti Developers, [(2020) 2 SCC 265] wherein the following broad principles were laid down for determining whether an activity or transaction is “for a commercial purpose”.

a. 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.

b. The purchase of the good or service should have a close and direct nexus with a profit generating activity.

c. The identity of the person making the purchase or the value of the transaction is not conclusive to the question of whether it is for a commercial purpose. It has to be seen whether the dominant intention or dominant purpose for the transaction was to facilitate some kind of profit generation for the purchaser and/or their beneficiary.

d. If it is found that the dominant purpose behind purchasing the good or service was for the personal use and consumption of the purchaser and/or their beneficiary, or is otherwise not linked to any commercial activity, the question of whether such a purchase was for the purpose of “generating livelihood by means of self-employment” need not be looked into.

4. The burden of proving whether or not, the transaction falls within the exclusion clause of the term ‘consumer’ was addressed by the Supreme Court in Shriram Chits (India) Private Limited Earlier Known as Shriram Chits (K) Private Limited v. Raghachand Associates, [(2024) 9 SCC 509], wherein the Court held that the onus of proving that goods and services had been availed for a commercial purpose would necessarily rest on the service provider and not the complainant. This was in sync with the general principle embodied in Sections 101 and 102 of the Evidence Act, 1872 that “one who pleads must prove”. 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. The Court further held that the standard of proof that has to be met in order to discharge the onus has to be measured against a “preponderance of probabilities”. If and only if, the service provider discharges its onus of showing that the service was availed, in fact for a commercial purpose, does the onus shift back to the complainant to bring its case within the third part i.e. Explanation (a) to Section 2(7) of the Act— to show that the service was obtained exclusively for the purpose of earning its livelihood by means of self-employment. 

5. In the light of the law laid down by the Supreme Court, the Court held that the NCDRC had erred in dismissing the Consumer Complaint. The onus of proving that the appellants fall within the exclusion clause of Section 2(1)(d) of the Act rested upon the Respondents, and the respondents had failed to discharge this onus on a preponderance of probabilities. 

6. 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 had not placed any cogent material on record to establish such nexus. The mere factum of leasing out the Flat does not, by itself, demonstrate that the Appellants purchased it with the dominant purpose of engaging in commercial activity.  

7. 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. 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 Act unless and until it is proved that the dominant purpose behind such purchase was commercial in nature.

Decision of the Supreme Court:

The Supreme Court allowed the Appeal, set aside the Impugned Order and restored the Consumer Complaint filed by the Appellants before the NCDRC for consideration by it on merits and in accordance with law.

Comments:

This decision comes as a rescue to home buyers who have leased out their units to third parties since the first defence raised by all real estate companies in such cases is that the homebuyer is not a “consumer”. The Judgement also fixes the onus of proving that the homebuyer falls outside the definition of a “consumer” on real estate developers instead of such developers making mere allegations against the homebuyers, without furnishing any proof in support of the same. 

Please find attached a copy of the judgement, here.

This update has been contributed by Namitha Mathews (Partner) and Poorva Pant (Principal Associate).

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