SC: Borrowers taking loans for profit not protected under consumer law | India News

NEW DELHI: The Supreme Court has dominated {that a} borrower can’t be categorised as a “consumer” under the Consumer Protection Act if the mortgage was taken for a profit-generating train. The verdict got here as the highest courtroom put aside an order by the National Consumer Disputes Redressal Commission (NCDRC), which had directed the Central Bank of India to compensate an organization for alleged incorrect reporting to the Credit Information Bureau of India Limited (CIBIL).
A bench comprising Justices Sudhanshu Dhulia and Prashant Kumar Mishra was listening to an attraction filed by the Central Bank of India in opposition to the NCDRC’s resolution in favour of Ad Bureau Advertising Pvt Ltd. The case stemmed from a mortgage dispute involving the financing of post-production work for the Rajinikanth-starrer “Kochadaiyan”.
The Central Bank had sanctioned a Rs 10 crore mortgage to Ad Bureau, which later defaulted on funds. The matter was finally settled by means of a one-time cost of Rs 3.56 crore after litigation earlier than the Debts Recovery Tribunal. However, Ad Bureau alleged that regardless of the settlement, the financial institution reported it as a defaulter to CIBIL, inflicting reputational and enterprise losses.
The NCDRC, ruling within the firm’s favour, ordered the financial institution to pay Rs 75 lakh in compensation and challenge a certificates confirming that the mortgage account was settled with no excellent dues. Challenging this, the financial institution approached the Supreme Court.
The apex courtroom, in its ruling, emphasised that whereas industrial entities are not mechanically excluded from being “consumers,” the aim of the mortgage performs a vital position. Since Ad Bureau’s mortgage was immediately linked to a profit-making exercise, it may not declare consumer safety.
“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. But what has weighed with us… is the fact that the transaction in question—obtaining a project loan—had a close nexus with a profit-generating activity,” the highest courtroom noticed.