NEW DELHI: The Supreme Court has said that merely renting out or renting out a residential flat does not in itself preclude the buyer of the property from being called a “consumer” from availing his rights under the Consumer Protection Act.A bench of Justices Prashant Kumar Mishra and NV Anjaria placed the onus on the builder of a property to prove that the dominant intention for purchasing an apartment was for ‘commercial purpose’ to exclude the buyer from falling under the category of ‘consumer’.
The court said in section 2(1)(d) of the Consumer Protection Act that the term ‘consumer’ includes a person who purchases goods or avails services for payment but excludes a person who obtains such goods for resale or for any commercial purpose.
“The mere fact that the flat was rented out does not in itself show that the appellant purchased the property for the predominant purpose of carrying on commercial activities.“The question of what constitutes ‘commercial purpose’ is a question of fact to be assessed in the circumstances of each case on the basis of the purpose for which the goods/property were purchased,” the court said.
It emphasized that the mere act of purchasing a property, even if multi-unit, cannot ipso facto trigger the exclusion clause of Section 2(1)(d) of the 1986 Act unless and until it is proven that the dominant purpose behind such purchase was commercial in nature.
“In the absence of such evidence, the appellant cannot be excluded from the definition of ‘consumer’ under the 1986 Act,” the report said.
The top court passed the order on an appeal filed by one Vinit Bahri, challenging an order of the National Consumer Disputes Redressal Commission (NCDRC) which dismissed his complaint for delayed possession of a flat on the grounds that he did not fall under the definition of “consumer” as he had rented out the flat, and the said act was considered to be for a commercial purpose.
The case pertains to real estate group MGF Developers Limited which had launched a group housing project called “The Villas” in Sahraul village, Sector-25, Gurugram in 2005.
In March 2005, Bahri deposited Rs 15 lakh as booking amount and was allotted a unit on the ground floor of Tower-C on September 2, 2005, with a super built-up area of 3,590 sq ft.
Later, the development plan was changed and Bahri claimed that the developer had asked for additional money several times and that he had paid the amount under protest. He had said that possession of the flat was seized on January 8, 2015.
He approached the NCDRC for a direction to the builder to pay compensation for the delayed possession and payment of the excess amount, besides other costs.
The builder claimed that Bahri had bought the flat for commercial purposes and that it had been rented out to someone else since March 2015.
The builder had further alleged that Bahri was not a consumer under the law and his complaint should be dismissed.
The top court in its judgment on Wednesday clarified that the interpretation to Section 2(1)(d) of the Consumer Protection Act says that “commercial purpose” does not include the use by a person of goods purchased and used by him solely for the purpose of earning his livelihood through self-employment.
It said the dominant intention or purpose of the transaction determines whether the buyer is covered by the exclusion clause.
The court said that the NCDRC had erred in dismissing the appellant’s complaint as the burden of proving that he falls within the exclusionary clause of Section 2(1)(d) of the 1986 Act rests on the respondent (builder) who has failed to discharge this burden due to a preponderance of probabilities.
“The decisive question is whether the predominant intention or purpose behind the purchase of the flat was to facilitate generation of profit through commercial activities and whether there is a close and direct link between the purchase and such profit generating activities. The respondents have not filed any cogent material to establish such link,” the court said while quashing the NCDRC order and reinstating the complaint.
It instructed the committee to decide on the consumer complaint substantively and in accordance with the law.
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