Supreme Court Clarifies Definition of Consumer in Project Loan Disputes: Central Bank of India vs. AD Bureau Advertising (2025)

Introduction

Date of the Judgment: February 28, 2025
Judges: Justices Sudhanshu Dhulia and Prashant Kumar Mishra
Citation: 2025 INSC 288

When a business takes a loan for a project, can it be considered a “consumer” if something goes wrong with the bank’s service? The Supreme Court of India recently addressed this important question. This case revolves around whether a company that borrowed money for a film project can claim consumer rights when the bank allegedly mishandled their account. Justices Sudhanshu Dhulia and Prashant Kumar Mishra presided over the case, providing clarity on the scope of the Consumer Protection Act, 1986.

Case Background

On April 28, 2014, Central Bank of India sanctioned a project loan of ₹10 crore to M/s AD Bureau Advertising Pvt. Ltd., a company involved in branding and advertising. The loan was intended to finance the post-production of a movie. As collateral, a property owned by the Chairman and Managing Director of AD Bureau was pledged.

However, AD Bureau defaulted on the loan, and the account was classified as a Non-Performing Asset (NPA) on February 4, 2015. Despite the bank issuing a demand notice, the company failed to repay the amount. Consequently, the bank issued a possession notice on May 21, 2015, taking symbolic possession of the collateral property under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).

Timeline:

Course of Proceedings

On October 9, 2015, the bank filed an application with the Debts Recovery Tribunal (DRT), Chennai, under Section 19(1) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act), seeking to recover ₹4,65,39,715. The DRT allowed the application on December 5, 2016, entitling the bank to recover the amount with 12% interest per annum until realization, along with costs.

Subsequently, AD Bureau offered a One-Time Settlement (OTS) of ₹3.56 Crores, which the bank accepted. The bank then requested AD Bureau to pay an additional ₹14.43 lacs as ‘delayed period interest,’ which the company also paid. Following this, the bank issued a ‘No-Dues Certificate’ on January 13, 2017, and March 20, 2017, and filed a ‘full-satisfaction memo’ before the DRT, acknowledging the payment of the OTS amount and delayed interest.

Despite these actions, AD Bureau claimed that the bank incorrectly reported them to the Reserve Bank of India (RBI) as a defaulter with an outstanding amount of ₹4.17 Crores. This allegedly led to the loss of an advertising tender with the Airports Authority of India, as HDFC Bank refused to issue a bank guarantee due to the defaulter listing. Aggrieved, AD Bureau filed a consumer complaint before the National Consumer Disputes Redressal Commission (NCDRC), which partly allowed the complaint and directed the bank to pay ₹75,00,000 in compensation and ₹20,000 in litigation costs.

Legal Framework

The core of this case hinges on interpreting Section 2(1)(d)(ii) of the Consumer Protection Act, 1986, which defines who qualifies as a “consumer.” This section excludes individuals or entities that avail services for any commercial purpose, with an exception for those using the services for self-employment to earn a livelihood. The court needed to determine whether AD Bureau’s loan fell under the “commercial purpose” exclusion.

(d) “consumer” means any person who—
(ii) hires or avails of any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who ‘hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person but does not include a person who avails of such services for any commercial purposes;
Explanation.— For the purposes of this clause, “commercial purpose” does not include use by a person of goods bought and used by him and services availed by him exclusively for the purposes of earning his livelihood by means of self-employment;

The explanation to Section 2(1)(d) clarifies that if a person uses goods or services exclusively to earn a livelihood through self-employment, they are still considered a consumer under the Act. This provision is crucial in distinguishing between commercial activities and genuine self-employment.

Arguments

The Central Bank of India argued that AD Bureau did not fall under the definition of “consumer” because the project loan was purely for a commercial purpose. They contended that it was a business-to-business transaction aimed at generating profits, citing the “dominant intention” of AD Bureau to increase revenue. The bank relied on the following arguments:

• ✓ The loan was sanctioned for the post-production of a movie, a commercial venture.
• ✓ The “dominant intention” behind the loan was to generate profits, thus disqualifying AD Bureau as a consumer.
• ✓ The transaction was a business-to-business dealing rather than a business-to-consumer one.

AD Bureau countered that the loan was for “self-use,” specifically to enhance its brand image through the movie project. They argued that this fell under the exception in Section 2(1)(d) of the Act, as it was intended to earn a livelihood rather than directly generate profits. Their arguments included:

• ✓ The loan was used for self-branding, with the aim of displaying the company’s name in the movie’s title and advertisements.
• ✓ The primary purpose was to build a brand name to earn a livelihood, not to generate immediate profits.
• ✓ The company’s intention was self-promotion to attract more business opportunities.

Submissions Table

Issues Framed by the Supreme Court

1. Whether the borrower of a project loan falls within the definition of ‘Consumer’ under the provisions of the Consumer Protection Act, 1986.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The court considered the following authorities and legal provisions:

• ✓ Section 2(1)(d)(ii) of the Consumer Protection Act, 1986: This section defines the term “consumer” and excludes those who avail services for commercial purposes, except when used for self-employment to earn a livelihood.
• ✓ Lilavati Kirtilal Mehta Medical Trust vs. Unique Shanti Developers, (2020) 2 SCC 265: This case provided principles for determining whether a transaction is for a commercial purpose, emphasizing the need to consider the facts and circumstances of each case.
• ✓ Shrikant G. Mantri vs. Punjab National Bank (2022) 5 SCC 42: This case clarified that availing an overdraft facility to expand business profits constitutes a commercial purpose, thus excluding the appellant from being considered a consumer.
• ✓ National Insurance Company Limited vs. Harsolia Motors & Ors. (2023) 8 SCC 362: This case laid down determining factors for considering whether a service is availed for a commercial purpose, focusing on whether the goods or services are used in an activity directly intended to generate profit.

Authority Treatment Table

Judgment

The Supreme Court allowed the appeal by the Central Bank of India, setting aside the order of the NCDRC. The court held that AD Bureau Advertising could not be considered a “consumer” under Section 2(1)(d)(ii) of the Consumer Protection Act, 1986, because the project loan was for a commercial purpose aimed at generating profits. However, the court clarified that its decision was based solely on the lack of jurisdiction of the NCDRC and did not express any opinion on the merits of the dispute. The court also stated that AD Bureau could pursue other legal remedies.

Treatment of Submissions

How each submission made by the Parties was treated by the Court?

Authority Views

How each authority was viewed by the Court?

• ✓ National Insurance Company Limited vs. Harsolia Motors & Ors. (2023) 8 SCC 362: The court cited this authority to emphasize that the key factor is whether the goods purchased or services hired are used in an activity directly intended to generate profit.
• ✓ Lilavati Kirtilal Mehta Medical Trust vs. Unique Shanti Developers, (2020) 2 SCC 265: This case was used to establish that the dominant intention or purpose of the transaction should be to facilitate some kind of profit generation for the purchaser or their beneficiary.
• ✓ Shrikant G. Mantri vs. Punjab National Bank (2022) 5 SCC 42: The court relied on this case to support its conclusion that availing financial facilities to expand business profits is a commercial purpose, thus excluding the appellant from being considered a consumer.

What Weighed in the Mind of the Court?

The Supreme Court’s decision was primarily influenced by the intention behind availing the loan. The court emphasized that the dominant purpose of the loan was to generate profits through the post-production of a movie, which constitutes a commercial activity. This intention outweighed AD Bureau’s argument that the loan was for self-branding and enhancing their livelihood.

Sentiment analysis reveals that the court focused on the commercial nature of the transaction, the intention to generate profit, and the business-to-business relationship between the parties. The court gave less weight to the argument that the loan was for self-branding and enhancing livelihood.

Sentiment Analysis Ranking

Create table ranked based on percentage to show the ranking of sentiment analysis of reasons given by the Supreme Court as to what weighed in the mind of the court to come to the conclusion with the various points emphasised in the reasoning portion.

Fact:Law Ratio

Fact:Law Ratio: Create ratio table for showing the sentiment analysis of the Supreme Court to show the ratio of fact:law percentage that influenced the court to decide. Fact is defined as “percentage of the consideration of the factual aspects of the case” and Law is defined as “percentage of legal considerations”.

Key Takeaways

• ✓ Borrowers taking project loans for commercial purposes are generally not considered “consumers” under the Consumer Protection Act, 1986.
• ✓ The “dominant intention” behind availing a service is crucial in determining whether it is for a commercial purpose.
• ✓ Companies cannot claim consumer rights if the primary aim of a financial transaction is to generate profits.
• ✓ This judgment clarifies the scope of consumer protection in business-to-business transactions, potentially affecting future disputes involving project loans.

Development of Law

The ratio decidendi of this case is that a borrower of a project loan, where the dominant intention is to generate profits, does not fall within the definition of ‘consumer’ under the Consumer Protection Act, 1986. This clarifies the application of the Act in cases involving commercial loans and reinforces the principle that the primary purpose of the transaction determines consumer status.

Conclusion

In summary, the Supreme Court held that AD Bureau Advertising, having taken a project loan for commercial purposes, could not claim consumer rights under the Consumer Protection Act, 1986. The court emphasized that the dominant intention behind the loan was to generate profits, thus excluding AD Bureau from the definition of “consumer.” This decision clarifies the scope of consumer protection in business-to-business transactions involving project loans.