Project Loan Borrowers for Commercial Purposes Excluded from “Consumer” Definition Under the Consumer Protection Act

Introduction

The Supreme Court of India in “The Chief Manager, Central Bank of India & Ors. vs. M/s AD Bureau Advertising Pvt. Ltd. & Anr.” (2025 INSC 288, decided on February 28, 2025) addressed whether a borrower of a project loan, availed for a purely commercial purpose, falls within the ambit of the term “consumer” under the Consumer Protection Act, 1986 (“the Act”). The question arose after the National Consumer Disputes Redressal Commission (NCDRC) had assumed jurisdiction over a complaint filed by M/s AD Bureau Advertising Pvt. Ltd. (“AD Bureau”), awarding them compensation for alleged deficiency in service by the Central Bank of India.

While the NCDRC ruled in favor of AD Bureau, awarding monetary damages and a direction to issue a certificate stating that no dues remained, the appellants (the Chief Manager and other officers of Central Bank of India) challenged the maintainability of the complaint on the ground that the loan in question was purely commercial in nature. Ultimately, the Supreme Court held that a borrower is excluded from the definition of “consumer” where the dominant purpose of availing the service (in this case, a project loan) is to generate profit or enhance commercial activity, thus falling outside the purview of the Act.

Summary of the Judgment

The appeals arose from an NCDRC decision in which AD Bureau, a private limited company engaged in branding and advertising, had initially succeeded in its consumer complaint by alleging that the Central Bank of India wrongfully reported it to the Reserve Bank of India (RBI) as a “defaulter,” causing reputational and monetary harm. The NCDRC labeled the Bank’s actions as “deficiency in service” and granted compensation of INR 75 lakhs alongside an order to clear AD Bureau’s defaulter status.

Central Bank of India appealed to the Supreme Court, challenging the NCDRC’s jurisdiction. The Bank’s main contention was that AD Bureau did not qualify as a “consumer” because the loan transaction was a business-to-business arrangement for a commercial purpose—namely financing the post-production of a film. The Supreme Court agreed with this argument, ruling that the dominant purpose of taking the loan was to conduct a profit-generating activity, thereby excluding AD Bureau from the ambit of “consumer.” As a result, the Court set aside the NCDRC’s order on jurisdictional grounds, emphasizing that AD Bureau could seek redress in other appropriate forums if so advised.

Analysis

A. Precedents Cited

The Supreme Court relied on several prior authorities to determine whether AD Bureau qualified as a “consumer.” Noteworthy cases include:

• National Insurance Company Limited v. Harsolia Motors & Ors. (2023) 8 SCC 362: The Court explained that a “commercial purpose” includes both product or service use that directly facilitates profit generation or trade. If the motivation behind the transaction is strongly profit-centric (e.g., goods for resale or commercial expansion), the party is generally not a “consumer.”
• Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti Developers, (2020) 2 SCC 265: This judgment set out guiding factors to ascertain whether an activity is a “commercial purpose,” highlighting the “dominant purpose” test. If the transaction’s chief objective is profit generation, it is unlikely to be classified as a consumer transaction.
• Shrikant G. Mantri v. Punjab National Bank, (2022) 5 SCC 42: Here, the Court dealt with an overdraft facility availed by a stockbroker for purely business expansion. The Court held that such a transaction is a “business-to-business” arrangement, removing it from the scope of consumer protection under the Act.

These decisions strongly influenced the appellate outcome. In the Supreme Court’s view, they leave little doubt that purely commercial transactions—such as sizable project loans for business growth—lie outside the Consumer Protection Act’s jurisdiction.

B. Legal Reasoning

The Court’s reasoning centered on interpreting Section 2(1)(d) of the Consumer Protection Act, 1986. This provision excludes persons from the definition of “consumer” if the services are availed for a “commercial purpose.” Meanwhile, the Explanation to Section 2(1)(d) preserves coverage for individuals where goods or services are used strictly for livelihood and self-employment.

In assessing whether AD Bureau’s loan was truly outside the ambit of consumer protection, the Court examined whether the “dominant purpose” behind availing the project loan was to facilitate profit generation. AD Bureau had contended that the funds were used for “self-branding” and not robust profit-making. However, the Court rejected this argument, concluding that even brand-building within a film’s production context ultimately seeks commercial gain and thus predominantly involves “generating more customers and revenue.”

Consequently, the Supreme Court held that AD Bureau’s loan was for a commercial purpose, making it ineligible for consumer status. Since the NCDRC’s jurisdiction only extends to “consumers,” its judgment granting relief to AD Bureau was set aside for lack of jurisdiction.

C. Impact

This decision adds clarity by reinforcing the “dominant purpose” test: even if part of the availed loan is employed to build intangible assets such as “brand reputation,” the overall arrangement can still be classified as commercial. Key implications include:

• Strict Boundary for Consumer Claims: Businesses must recognize that large-scale loans for the expansion of commercial operations will likely be excluded from consumer-friendly legal provisions.
• Reinforcing Banking and Commercial Litigation Forums: Disputes arising out of purely business-oriented loan transactions or lines of credit will be routed through specialized tribunals (e.g., Debts Recovery Tribunal, civil courts), rather than consumer fora.
• Encouragement of Due Diligence: As banks are more guarded against “deficiency in service” claims in purely commercial loans, prospective borrowers should ensure clarity in contractual terms and remedies, if any, in specialized tribunals.

Complex Concepts Simplified

Several legal principles and technicalities appear in this judgment:

1. Consumer: Under Section 2(1)(d) of the Consumer Protection Act, a consumer is one who purchases goods or avails services primarily for personal or non-commercial use. Where the principal interest in a transaction is profit generation, “consumer” protection typically does not apply.
2. Commercial Purpose: The Court interprets this phrase to mean transactions that have a direct nexus with profit-making or business expansion, rather than household or personal usage.
3. Dominant Purpose Test: One asks, “What is the main objective behind the service or product usage?” If the intent is to enhance business profits or income of a professional enterprise, courts treat it as commercial in nature.
4. Jurisdiction of Consumer Fora: The Consumer Protection Act is designed to shield individuals or small groups using goods/services for personal use or self-employment. While it has a broad scope, it does not ordinarily extend to purely “business-to-business” dealings.

Conclusion

The Supreme Court’s ruling in The Chief Manager, Central Bank of India & Ors. vs. M/s AD Bureau Advertising Pvt. Ltd. & Anr. underscores that when a loan or credit facility is availed chiefly for commercial gain or profit, the party availing it will be ineligible for consumer claims under the Consumer Protection Act, 1986. Through its comprehensive review of previous authorities, the Court reaffirmed the importance of discerning between commercial and personal usage and gave effect to the legislative intent that consumer fora are meant for genuine consumers, not commercial entities pursuing profits.

In practical terms, this judgment clarifies once again that banking disputes involving substantial commercial undertakings should be adjudicated by specialized bodies such as Debts Recovery Tribunals or through civil courts. While the Court’s pronouncement narrows the scope of consumer complaints to non-commercial dealings, it also reminds businesses that appropriate redress may still be available elsewhere.