The Chief Manager Central Bank Of India Vs. M/S. Ad Bureau Advertising Pvt Ltd
The Hon’ble Supreme Court of India, in a milestone ruling titled The Chief Manager, Central Bank of India & Ors. vs. M/s Ad Bureau Advertising Pvt. Ltd. has given vital clarification on the term ‘consumer’ under the Consumer Protection Act, 1986, holding that borrowers who avail loans for commercial purposes are not ‘consumers’ under the Act.
The case came up for consideration when M/s. Ad Bureau Advertising Pvt. Ltd., a company that had borrowed Rs. 10 crores from the Central Bank of India for the post-production of a film, defaulted on the repayment of the loan amount. The bank declared the loan account as a Non-Performing Asset (NPA) and reported the company as a defaulter to the Credit Information Bureau (CIBIL). It is the case of the borrower that although one-time settlement was reached between the parties and No-Dues certificate was issued by the bank, however, still the bank allegedly reported borrower as a defaulter, leading to financial losses for the company. The NCDRC granted relief to the company and ordered Rs.75,00,000/- as compensation, but the order was set aside by Hon’ble Supreme Court, holding that the loan was availed of for a commercial purpose and hence the borrower would not be covered under the definition of a ‘consumer’ under the Act.
The Court reemphasized that the Consumer Protection Act is aimed at safeguarding individuals who take services for personal consumption and not for business or profit-making pursuits. It held that credit taken for business growth, commercial enterprises, or other profit-generating purposes does not come within the purview of consumer protection. In addition, the Court emphasized that grievances related to banking facilities for commercial loans should be adjudicated under applicable financial and banking laws, rather than consumer forums. This ruling has significant implications for financial institutions and business houses in as much as it reaffirms the distinction between commercial transactions and consumer rights so that grievances arising out of commercial transactions are adjudicated under the appropriate legal regimes.
The judgment is also a reminder that the Consumer Protection Act is no magic wand for service-related grievances in general, but is specifically enacted to protect individual consumers in non-commercial transactions.