The Supreme Court observed that mere leasing or renting of a residential flat does not automatically exclude the owner from the definition of “consumer” under the Consumer Protection Act, 1986, unless it is proved that the dominant intention at the time of flat purchase was commercial.
The Court clarified that the burden lies on the builder or service provider to prove that the dominant intention behind the purchase was commercial
Case Title Vinit Bahri And Another Versus M/S MGF Developers Ltd. And Another
Decided on 5 Feb 2026
A bench delivered the judgment.
“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 question of what constitutes ‘commercial purpose’ is a question of fact to be decided in the circumstances of each case based on the purpose to which the goods/properties were purchased”,
“The onus of proving that the appellants fall within the exclusion clause of Section 2(1)(d) of the 1986 Act rests upon the respondents, and the respondents have failed to discharge this onus on a preponderance of probabilities. The determinative question is whether the dominant intention or dominant purpose behind purchasing the flat was to facilitate profit generation through commercial activity, and whether there exists a close and direct nexus between the purchase and such profit-generating activity”
Facts leading to dispute :
The appeal arose from a consumer complaint filed by Vinit Bahri and another against MGF Developers Ltd., relating to a residential project titled “The Villas” in Gurgaon.
As per claims, the respondent (builder) unilaterally changed the layout plan and later demanded payments from the appellants. In 2017, the appellants filed a consumer complaint against MGF Developers Ltd alleging deficiency in service and unfair trade practice. In its response, the respondent argued inter-alia that the appellants purchased the unit for commercial purpose and after taking possession of it, the unit had been leased out by them
Issue
Whether the NCDRC was right in dismissing the complaint filed by the appellants on the premise that they do not fall under the definition of ‘consumer’ for leasing out the subject property for commercial purposes, falling within the exclusion clause of Section 2(1)(d) of the Consumer Protection Act, 19864.
Court Observations
Perusing Section 2(1)(d) of the Consumer Protection Act, the Court noted that the term ‘consumer’ encompasses any person who buys goods or avails services for consideration, but excludes a person who obtains such goods for resale or for any commercial purpose.
“While the 1986 Act does not exhaustively define ‘commercial purpose’, though the Explanation to Section 2(1)(d) carves out an exception for self-employment and earning livelihood, the dominant intention or dominant purpose of the transaction is determinative of whether the purchaser falls within the exclusion clause.”
Referring to judicial precedents on the subject, like Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti Developers and Shriram Chits (India) Private Limited v. Raghachand Associates, the Court concluded that the onus of proving appellants’ exclusion from the ambit of “consumer” was on the respondent, but it failed to discharge the same.
The respondent failed to produce any cogent material showing nexus between the appellants’ purchase of the unit and profit generating activity, the Court said.
Accordingly, deeming a decision on merits necessary, the Court set aside the NCDRC order and restored the matter for fresh consideration.
By Dr Prem Lata
