Buyers Purchasing Units To Earn Rental Profit Are Not 'Consumers': NCDRC Dismisses Complaint Against M3M India, Martial Buildcon, M-Worth Services

Brief Facts:

The Complainants purchased units in a project named 'M3M Urbana', located in Gurgaon, Haryana. The project was initiated by 'M3M India Pvt. Ltd.', 'Martial Buildcon Pvt. Ltd.' and 'M-Worth Services Pvt. Ltd.' (collectively referred to as “Builders”). It commenced in the year 2012 and comprised nine blocks of commercial spaces like restaurants, retail units, office spaces, etc. The price range of the units ranged from Rs. 57 Lakh to Rs. 1.94 Crore. Subsequently, the Complainants were informed that a new block would be formed on the land which was originally designated for parking purposes. Allegedly, the Complainants' consent was not taken before deciding to use the common space for the development of a new block.

Feeling aggrieved, the Complainants filed a consumer complaint in the National Consumer Disputes Redressal Commission (NCDRC), New Delhi. They contended that the new construction would strain the existing facilities and amenities. It would increase the burden on common areas meant only for the original blocks. Moreover, the potential rental income from these units should not be considered as a commercial activity since it did not align with commercial contracts that consider both profit and loss.

In response, the Builders filed an Interlocutory Application and contended that the Complainants do not come under the definition of 'consumer' under the Consumer Protection Act, 2019. The units bought by the Complainants were solely for generating rental income by further leasing them.

Observations of the NCDRC:

At the outset, the NCDRC clarified that the dispute pertained to deficiencies in the construction of commercial units and not regarding any goods defined under the Consumer Protection Act, 2019. The question was whether these services were used for 'commercial purposes'. In this regard, reliance was placed on Shri Ram Chits (India) Pvt. Ltd. vs Raghachand Associates [SLP (C) No. 15290 of 2021], wherein it was observed that the intention of the legislature differed under the Consumer Protection Amendment Act, 2002, and the 2019 Act. Under the 2019 Act, the exclusions for earning livelihood by self-employment applied only to goods, not services. Therefore, the explanation for services did not arise.

The NCDRC further held that the focus should be on whether the services availed of were for commercial purposes. It was held that a transaction is commercial when it involves investment aimed at earning profits. In the present case, the acquisition of commercial property was connected with leasing and earning rental income, which demonstrated a profit-driven motive. The Complainants' contention that their acquisition was for livelihood was held to be irrelevant because the dominant intention was commercial, and the purpose was to earn profit through rent.

Further reliance was placed on Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti Developers [(2020) 2 SCC 265], where it was held that there is no strict formula which applies to determine 'commercial purpose', as it depends on the facts. The NCDRC held that it was obvious that the acquisition and leasing out of the units in a large commercial complex showed a 'dominant' commercial intent on the part of the Complainants. The Builders managed to provide sufficient evidence to confirm the same. The NCDRC also dismissed the relevance of income tax definitions and clarified that they do not determine consumer status under the Consumer Protection Act, 2019.

As a result, it was held that the Complainants were not 'consumers' under the Consumer Protection Act, 2019. The complaint was dismissed.

Case Title: Varun Ahuja and Ors. vs M3M India Private Limited and Ors.

Case No.: Consumer Case No. 139 of 2023

Advocates for the Complainants: Mr Aditya Parolia, Ms Sumbul Ismail, Mr Pranjal Mishra and Ms Anvita Priyadarshi

Advocates for the Opposite Parties: Mr Jatin Sehgal, Mr Adhirath Singh, Ms Raymon Singh, Mr Aditya V Arun, Mr Abhay Jadaun and Ms Molly Sharma

Date of Pronouncement: 23^rd September 2024