The dominant purpose of transaction determines the theory of Commercial Purpose
The Chief Manager Central Bank of India v. Ad Bureau Advertising Pvt Limited (SC)
Decided on 28 February, 2025
Facts:
- The Central Bank had advanced a loan of ₹10 crore to Ad Bureau for the post-production of the Rajinikanth film Kochadaiyan in 2014, The loan became irregular, leading to litigation before the DRT.
- Ultimately, a One Time Case 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.
- Chief Manager, Central Bank of India and has filed the appeal under Section 23of the Act, assailing the finding arrived at by the NCDRC holding that there was a deficiency in service on part of the appellant and thus, it is liable to pay compensation to the respondent No. 1, which is M/s Ad Bureau Pvt. Ltd., (a company engaged in the business of branding, consulting & advertising).
- 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.”
Head Notes :Final verdict
- A company availing a project loan for the post-production of a movie, with the dominant intention of generating profits, does not fall within the definition of “Consumer” under Section 2(1)(d)(ii) of the Consumer Protection Act, 1986.
- The transaction constitutes a business-to-business transaction for a commercial purpose, and the explanation to Section 2(1)(d) regarding self-employment does not apply.
‘Dominant intention’ – The dominant intention behind the transaction determines whether it is for a commercial purpose. Dominant purpose test is crucial in determining whether a person availing services qualifies as a ‘consumer.’
Referred Case Law
- Shrikant G. Mantri vs. Punjab National Bank 2022 (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.
- National Insurance Company Limited vs. Harsolia Motors & Ors. 2023 .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 dominant purpose of the, is ultimately profit generation. The NCDRC lacks jurisdiction in such cases.
By Dr Prem Lata
