Homebuyer still a consumer even if flat leased, rules Supreme Court
The Supreme Court set aside an order of the National Consumer Disputes Redressal Commission (NCDRC), which had dismissed a complaint filed by a man who bought a flat in Gurgaon in 2005 and later leased it out. The NCDRC had rejected the complaint on the ground that the flat was rented and therefore being used for "commercial purpose."
The Supreme Court has held that a homebuyer cannot be denied protection under consumer law merely because the property purchased was later given out on rent, clarifying that leasing a flat does not automatically make the purchase a “commercial purpose.”
In a recent verdict dated February 4, a bench of Justices P.K. Mishra and N.V. Anjaria ruled that a buyer retains the status of a “consumer” under the Consumer Protection Act, 1986 even if the property is not used for personal residence, unless it is proven that the dominant purpose of the purchase was commercial.
The court set aside an order of the National Consumer Disputes Redressal Commission (NCDRC), which had dismissed a complaint filed by a man who bought a flat in Gurgaon in 2005 and later leased it out. The buyer had alleged unfair trade practices by the builder, including delays, changes in the layout and increased charges. The NCDRC had rejected the complaint on the ground that the flat was rented and therefore being used for “commercial purpose.”
Reversing this, the apex court said the NCDRC could not have dismissed the complaint without examining evidence to determine whether the purchase was genuinely for commercial use. It emphasised that the burden lies on the builder to prove that the buyer intended to use the property commercially.
“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 bench observed, noting that no cogent material had been placed on record by the builder to establish such a nexus.
The court further clarified that the question of what constitutes a “commercial purpose” must be decided on the facts of each case. Even the purchase of multiple residential units, it said, cannot automatically be treated as a commercial activity unless there is clear proof that the primary intent was to generate commercial profit.
In the absence of such evidence, the buyer cannot be excluded from the definition of a “consumer” under the law, the court held.
The Supreme Court has now remitted the matter back to the NCDRC, directing it to hear the complaint on merits and examine whether the alleged delays, layout changes and cost escalation amount to a violation of the Consumer Protection Act.
The Supreme Court has held that a homebuyer cannot be denied protection under consumer law merely because the property purchased was later given out on rent, clarifying that leasing a flat does not automatically make the purchase a “commercial purpose.”
In a recent verdict dated February 4, a bench of Justices P.K. Mishra and N.V. Anjaria ruled that a buyer retains the status of a “consumer” under the Consumer Protection Act, 1986 even if the property is not used for personal residence, unless it is proven that the dominant purpose of the purchase was commercial.
The court set aside an order of the National Consumer Disputes Redressal Commission (NCDRC), which had dismissed a complaint filed by a man who bought a flat in Gurgaon in 2005 and later leased it out. The buyer had alleged unfair trade practices by the builder, including delays, changes in the layout and increased charges. The NCDRC had rejected the complaint on the ground that the flat was rented and therefore being used for “commercial purpose.”
Reversing this, the apex court said the NCDRC could not have dismissed the complaint without examining evidence to determine whether the purchase was genuinely for commercial use. It emphasised that the burden lies on the builder to prove that the buyer intended to use the property commercially.
“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 bench observed, noting that no cogent material had been placed on record by the builder to establish such a nexus.
The court further clarified that the question of what constitutes a “commercial purpose” must be decided on the facts of each case. Even the purchase of multiple residential units, it said, cannot automatically be treated as a commercial activity unless there is clear proof that the primary intent was to generate commercial profit.
In the absence of such evidence, the buyer cannot be excluded from the definition of a “consumer” under the law, the court held.
The Supreme Court has now remitted the matter back to the NCDRC, directing it to hear the complaint on merits and examine whether the alleged delays, layout changes and cost escalation amount to a violation of the Consumer Protection Act.