Borrower not 'consumer' under Consumer Protection Act if loan taken for profit: SC

New Delhi: A borrower cannot be called a "consumer" under the Consumer Protection Act if the loan was taken from the bank for a profit-generating exercise, the Supreme Court has said. A bench of Justices Sudhanshu Dhulia and Prashant Kumar Mishra was hearing an appeal filed by the Central Bank of India against an order of the National Consumer Disputes Redressal Commission (NCDRC). The NCDRC had directed the bank to pay a compensation of Rs 75 lakh along with litigation cost to the Ad Bureau Advertising Pvt Limited for the alleged incorrect reporting of the borrower as a defaulter to the Credit Information Bureau of India Limited (CIBIL).

In this case, the Central Bank had sanctioned a loan of Rs 10 crore to the Ad Bureau for the post-production of the Rajinikanth-starrer Kochadaiyan. After the bureau defaulted on payments, a litigation was initiated before the Debts Recovery Tribunal and the matter was finalised by one-time payment of Rs 3.56 crore. The Ad Bureau contended that despite paying the amount as per the one-time settlement, the bank marked it as a defaulter to the CIBIL, which resulted in its reputational damage and business loss. The company then approached the NCDRC alleging deficiency of service on the part of the bank. The NCDRC allowed the Ad Bureau's petition (Consumer Complaint) and directed the bank to pay a compensation of Rs 75 lakh and issue a certificate stating that the loan account was settled and no outstanding dues remained.

The top court said, "We are cognisant of the fact that respondent No. 1 (company) would not be excluded from the definition of consumer merely on account of the fact that it is a commercial entity/enterprise. "But what has weighed with us in coming to the conclusion that in the instant case, respondent No. 1 cannot be said to be a 'consumer' is the fact that the transaction in question i.e. obtaining a project loan did have a close nexus with a profit-generating activity and in fact, the dominant purpose for getting this loan sanctioned was to generate profits upon successful post-production of the movie titled 'Kochadaiyaan," the bench said.