Supreme Court: Renting out an apartment doesn't exclude a homebuyer from consumer protection

The Supreme Court has clarified that renting out a residential apartment does not exempt a homebuyer from consumer protection rights

The Supreme Court has held that merely renting out a residential apartment does not automatically exclude a homebuyer from the definition of a “consumer” under the Consumer Protection Act, 1986.

The Supreme Court has held that merely renting out a residential apartment does not automatically exclude a homebuyer from the definition of a “consumer” under the Consumer Protection Act, 1986. (ANI)

Setting aside an order of the National Consumer Disputes Redressal Commission (NCDRC), the Court ruled that a buyer can be treated as a consumer unless it is proven that the dominant purpose behind purchasing the property was commercial profit-making, Bar and Bench reported.

“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 Court held.

The Court clarified that the burden of proving commercial purpose lies on the service provider, not the consumer. Since it was the developer who pleaded that the flat was purchased for commercial use, the onus was on it to establish this.

“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 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 court said.

It said that the mere act of buying an immovable property, even multiple units, cannot ipso facto attract the exclusion clause of section 2(1)(d) of the 1986 Act unless and until it is proved that the dominant purpose behind such purchase was commercial in nature, Bar and Bench reported.

"In the absence of such proof, the appellant cannot be excluded from the definition of 'consumer' under the 1986 Act," the court said.

The case

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) that dismissed his complaint for delayed possession of a flat on the ground that he did not fall under the definition of "consumer" as he had leased out the flat, and the said act was considered a commercial purpose, a report by PTI said.

The case pertains to real estate group MGF Developers Limited, which had launched a group housing project in the name of ‘The Villas’ in Sahraul village, Sector-25, Gurugram, in 2005, the report said.

In March 2005, Bahri deposited ₹15 lakh as the booking amount and was allotted a unit on the ground floor of Tower-C, with a super-built area of 3,590 square feet, on September 2, 2005, it said.

Later, the layout plan was changed, and Bahri alleged that the developer had raised demands for additional funds on multiple occasions, and he had paid the amount, though under protest. He had said the flat was taken on January 8, 2015, the PTI report said.

The buyer then approached the NCDRC for a direction to the builder to pay compensation for the delayed possession and the excess amount, along with other costs. The builder had alleged that Bahri had purchased the flat for commercial purposes and had let it out to another person in March 2015, the report said.

The builder had claimed that Bahri was not a consumer under the law and that his complaint should be dismissed, the PTI report said.