NEW DELHI: In a landmark verdict, the Supreme Court -- clarifing the scope of 'consumer and 'commercial purpose under the Consumer Protection Act -- has held that the mere ownership of multiple residential properties, or the act of renting out a flat, does not alter the status of a homebuyer as a 'consumer' under the Consumer Protection Act.
The Court clarified that a homebuyer cannot be excluded from the definition of 'consumer' unless it is clearly established that the dominant purpose of the transaction was commercial in nature, namely, engagement in the business of real estate for profit. Mere leasing of a residential unit, or ownership of more than one property, does not by itself constitute a commercial purpose.
In a recent verdict, a bench of Justices P.K. Mishra and N.V. Anjaria ruled that a buyer retains the status of a “consumer” under the Consumer Protection Act, 1986 even if the property is not used for personal residence, unless it is proven that the dominant purpose of the purchase was commercial.
Significantly, the top court held that the burden to prove that the transaction was for a commercial purpose lies on the respondent builder, and not on the homebuyer. In the absence of cogent material demonstrating a close and direct nexus between the purchase and a profit-oriented commercial activity, homebuyers remain entitled to invoke consumer jurisdiction and seek compensation, damages, and other reliefs.
The case was argued by Krishmohan K Menon, lawyer and Advocate-on-Record (AOR) and others on behalf of appellants in the top court.
The appeal was filed before the Supreme Court against the judgment of the National Consumer Disputes Redressal Commission (NCDRC) dismissing the consumer complaint preferred by the appellants.
The top court, hearing the appeal, set aside the NDRC order which had dismissed the complaint filed by a man who bought a flat in Gurgaon in 2005 and later leased it out.
"The respondents (M/S MGF Developers Ltd and other) have 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 the property with the dominant purpose of engaging in commercial activity," the SC said.
The buyer had in the appeal alleged unfair trade practices by the builder, including delays, changes in the layout and increased charges. The NCDRC had rejected the complaint on the ground that the flat was rented and therefore being used for “commercial purpose.”