Borrower Not 'Consumer' If Loan Was For Profit Generation, Consumer Complaint Not Maintainable Against Bank : Supreme Court

The Supreme Court held that a borrower will not come within the definition of "consumer" under Section 2 (1) (d) (ii) of the Consumer Protection Act, 1986 if the loan was taken for a profit-generating exercise.

The Court held that the complaint filed by the borrower against the bank was not maintainable under the Consumer Protection Act as it was a "pure business-to-business transaction for a commercial purpose."

A bench comprising Justice Sudhanshu Dhulia and Justice Prashant Kumar Mishra held that the borrower cannot be said to be a 'consumer' since transaction in question—i.e., obtaining a project loan—had a close nexus with a profit-generating activity. 

The Court was deciding an appeal filed by the Central Bank of India against an order of the National Consumer Disputes Redressal Commission asking the Bank to pay a compensation of Rs 75 lakh and litigation cost to the complainant, Ad Bureau Advertising Pvt Limited, for the alleged incorrect reporting of the borrower as a defaulter to the Credit Information Bureau of India Limited (CIBIL). 

In 2014, the Central Bank had advanced a loan of ₹10 crore to Ad Bureau for the post-production of the Rajinikanth film Kochadaiyan. The loan became irregular, leading to litigation before the DRT. Ultimately, a One Time Settlement was reached for ₹3.56 crore. Ad Bureau claimed that despite paying the amount as per the OTS, the Bank marked it as a defaulter to the CIBIL, which resulted in its reputational damage and business loss. It filed a consumer complaint before the NCDRC alleging deficiency of service on the part of the Bank.

Allowing the Bank's appeal against the NCDRC order, the Court noted that the dominant purpose of the loan was to generate profits. The Court rejected the argument of Ad Bureau that the loan was availed for self-use and hence it was a consumer as per the Explanation to Section 2 (1) (d) (ii).

The Court observed :

"We are not convinced by this argument put forth on behalf of Respondent No.1 for the simple reason that, even if it is partly 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. A bald averment that the company engaged in the post-production of the movie solely for the purpose of brand-building does not alter the fundamental nature of the transaction—i.e., the availing of a credit facility from the appellant bank—which was purely a business-to-business transaction entered into for a commercial purpose."

Reference was made to the judgment in Shrikant G. Mantri vs. Punjab National Bank 2022 LiveLaw (SC) 197, where the Court held that a stock broker, who availed an overdraft facility for his business, cannot be a 'consumer' within the meaning of the Act.

Reliance was also placed on National Insurance Company Limited vs. Harsolia Motors & Ors. 2023 LiveLaw SC 313 which held that the dominant intention or dominant purpose of the transaction has to be seen to ascertain if it was commercial in nature.

"From an analysis of the aforementioned decisions, it is quite clear that what is to be seen here is whether the dominant intention or dominant purpose of the transaction was to facilitate some kind of profit generation for the person who has availed the service. Therefore, it is our considered opinion that Respondent No.1 is not a 'consumer' in terms of Section 2(1)(d)(ii) of the Act."

The Court however clarified that it has only dealt with the issue of maintainability of the consumer complaint and not the merits of the dispute.

Case : The Chief Manager Central Bank of India v. Ad Bureau Advertising Pvt Limited

Citation : 2025 LiveLaw (SC) 264

 Click here to read the judgment