Case at a Glance
A couple booked a flat in ‘The Villas’ project in Sector 25, Gurgaon in 2005, took possession in January 2015 after delay, and later leased it out. The NCDRC dismissed their complaint alleging deficiency in service, holding that leasing the flat meant it was bought for a commercial purpose. The Supreme Court disagreed, holding that the builder bears the onus of proving commercial purpose and that the mere fact of leasing out a flat does not show that the dominant purpose of purchase was commercial. The NCDRC order of 11 May 2023 was set aside and the complaint restored for decision on merits.
The appellants paid ₹15 lakh as booking amount in March 2005 and were allotted a unit in Tower C. The flat buyer’s agreement of 12 June 2006 promised possession within 36 months plus a grace period. They alleged delay, a unilateral change in the layout plan, and further demands paid under protest. They took possession on 8 January 2015; the occupation certificate came on 14 August 2015. The builder said the flat was leased out in 2015, with a lease deed in 2016, and that delay compensation had been paid and accepted.
The appellants filed Consumer Complaint No. 74 of 2017 before the NCDRC seeking interest, compensation and refunds. The NCDRC dismissed it on the ground that, having leased the flat, they were not ‘consumers’ under Section 2(1)(d) of the Consumer Protection Act, 1986. The appellants said they bought the flat for their own use, to live near their parents.
The Key Question Before the Court
Does a homebuyer who leases out the purchased flat cease to be a ‘consumer’ because the flat was obtained for a ‘commercial purpose’, and who must prove that exclusion?
Dominant Purpose, and Who Must Prove It
The Court noted that the Act does not exhaustively define ‘commercial purpose’ and that “the dominant intention or dominant purpose of the transaction is determinative”. Following Laxmi Engineering Works v. P.S.G. Industrial Institute, (1995) 04 SC CK 0022, Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti Developers, (2019) 11 SC CK 0039 and Rohit Chaudhary v. Vipul Limited, (2023) 09 SC CK 0019, the purchase must have a close and direct nexus with a profit-generating activity, and the question is one of fact in each case.
On burden, the Court applied Shriram Chits (India) Pvt. Ltd. v. Raghachand Associates, (2024) 05 SC CK 0027: “The onus of proving that the person falls within the carve out must necessarily rest on the service provider”, and “a negative burden cannot be placed on the complainant.” Here, “the mere factum of leasing out the flat does not, by itself, demonstrate” that the dominant purpose of purchase was commercial, and even buying several units cannot by itself attract the exclusion. The builders placed no cogent material on record to establish such a nexus.
What the Court Actually Held
- Whether a purchase is for a ‘commercial purpose’ depends on the dominant purpose of the transaction, decided on the facts of each case.
- The burden of proving that a complainant falls within the commercial-purpose exclusion lies on the service provider, not the homebuyer.
- Leasing out a purchased flat does not, by itself, show that it was bought for a commercial purpose.
- The NCDRC judgment of 11 May 2023 was set aside and Consumer Complaint No. 74 of 2017 was restored for decision on merits.
Why This Judgment Matters
- Many homebuyers rent out flats after delayed possession; this protects their right to sue builders before consumer fora.
- It places the burden squarely on builders who raise the ‘commercial purpose’ objection.
- It consolidates the dominant-purpose test from Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti Developers.
What Should Advocates Take Away From the Judgment?
For Homebuyers
- Renting out your flat does not automatically disqualify your consumer complaint against the builder.
- Keep material showing why you bought the flat, such as personal or family use.
For Counsel
- When a builder pleads commercial purpose, insist that it proves a direct nexus with profit-making.
- Cite Shriram Chits (India) Pvt. Ltd. v. Raghachand Associates on the burden of proof.
Key Takeaways
- Leasing out a flat is not, by itself, a commercial purpose.
- Builders must prove the commercial-purpose exclusion.
- The dominant purpose of the purchase is the test.
- The homebuyers’ complaint goes back to the NCDRC on merits.
Frequently Asked Questions
If I rent out my flat, can I still file a consumer complaint against the builder?
Yes. The Court held that leasing out the flat does not, by itself, prove that it was bought for a commercial purpose.
Who has to prove that a purchase was for commercial purpose?
The builder or service provider who raises that objection. The complainant does not carry a negative burden.
Did the Court decide the delay compensation claim?
No. It restored the complaint to the NCDRC to be decided on merits.
Conclusion
The judgment closes a common escape route for builders who seek to throw out homebuyers’ complaints simply because the flat was let out.
Practical takeaway: Builders who allege commercial purpose must prove it with evidence; homebuyers should resist the objection by pointing to the dominant purpose of purchase.
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