Purchasing Units for the purpose of Earning Rental Income are not ‘Consumers’ under CP Act 2019 held NCDRC

Case law:

Varun Ahuja & Ors Dw-40 Nirvana Country, Sector-50 Gurugram Haryana

Versus

M3m India Private Limited 41st Floor, Tower-1, M3m International Financial Center, Sector-66 Badshahpur Gurgaon Gurugram Haryana
Martial Buildcon Private Limited F-022, Lg, Sushant Arcade, Sushant Lok – 1, Guru Gram Gurugram Haryana
M-Worth Services Private Limited Shop No. 163, Upper Ground Floor, C-Block, Sushant Vyapar Kendra, Sushant Lok-Phase-I Gurgaon-122002 Gurugram Haryana

Consumer Case No. 139 OF 2023

Decided on 22.10.2024

Brief Facts:

A project named ‘M3M Urbana’, located in Gurgaon, Haryana was initiated by. ‘M3M India Pvt. Ltd.‘, ‘Martial Buildcon Pvt. Ltd.‘ and ‘M-Worth Services Pvt. Ltd.‘ (collectively referred to as “Builders”). It commenced in the year 2012 and comprised Nine Blocks Of Commercial Spaces like restaurants, retail units, office spaces, etc. The price range of the units ranged from Rs. 57 Lakh to Rs. 1.94 Crore.

The Complainants purchased units in the this project

Subsequently, the Complainants were informed that a new block would be formed on the land which was originally designated for parking purposes. Complainants’ consent was not taken before deciding to use the common space for the development of a new block.

The Complainants filed a consumer complaint in the National Consumer Disputes Redressal Commission (NCDRC), New Delhi alleging that the new construction would strain the existing facilities and amenities. It would increase the burden on common areas meant only for the original blocks.

In response, the Builders filed an Interlocutory Application and contended that the Complainants do not come under the definition of ‘consumer’ under the Consumer Protection Act, 2019. The units bought by the Complainants were solely for generating rental income by further leasing them.

Legal Issues :

Now the question before the commission were-

Whether the services availed by a homebuyer/allottee for construction of the particular unit from a builder fall under the definition of “service” as prescribed under the Consumer Protection Act, 2019
Will the subsequent use of the unit after taking possession(Rental income) and the nature of usage of the property sets free the builder from the liabilities arising out of the defects and deficiencies in the unit
Can Rental Income be called self- livelihood

Legal question -1

Dominant purpose to be seen for establishing commercial purpose

Supreme Court in Lilavati Kirtilal Mehta Medical Trust v. M/s. Unique Shanti Developers & Ors. (C.A./12322/2016) (Para 7) has to be taken into consideration whereby one has to see the “dominant purpose” for which the services were availed and not the “immediate purpose”.

Onus lies on OP to establish purpose for hiring services

The Opposite Party has to show that their services of construction which were availed by the Complainants were for commercial purposes and has to cross the threshold laid down by the Hon’ble Supreme Court in Shriram Chits (India) Private Limited Earlier Known as Shriram Chits (K) Pvt. Ltd. V. Raghachand Associates, SLP (C) No. 15290 of 2021 (Para 20), Lilavati (supra) (Para 7) and National Insurance Co. Ltd. vs Harsolia Motors and Ors. [Civil Appeal No(S).5352-5353 OF 2007] (Para 31-44), and the definition of “commercial purpose” has to be read and evaluated only on this parameter

Legal question-2

Does Rental income equate to commercial purpose:

Purchaser No 1 & 2 Varun Ahuja and Sameer Suneja:

Unit No SB/R/GL/09/001 FLY: leased out to First Love Yourself Lounge & Bar

Unit No SB/R/GL/01/011 Axis Bank Ltd.

Unit No SB/R/GL/01/010 Axis Bank Ltd

Purchaser No 3-7 Amarjit Singh, Late Mrs. Suveni Sapra Singh, Inayat Singh, Arman Singh and Antara Singh

Unit No SB/R/GL/03/004 leased out to Pizza hut

Purchaser No 8 Amarjit Singh, Late Mrs. Suveni Sapra Singh, Inayat Singh, Arman Singh and Antara Singh

Unit No SB/R/GL/03/004 .leased out to DebarshiWrap Caffe/Dakshini Zaika Lajawaab South India Café

Neeraj Bhagat AND Vandana Bhagat

unit no SB/R/GL/09/02 FLY: First Love Yourself Lounge & Bar

Nitin Ahuja AND Isha Aggarwal

unit no SB/R/1L/04/018 Palette by Km/Kritika Madan Label

He then submits that to treat rental income exclusively as a commercial purpose activity is incorrect. He submits that rental income is not profit and is not governed by the principles of commercial contracts as profits are always correlated with losses. Therefore the rental income per se is not a commercial purpose venture.

Reliance is being placed upon Rohit Chaudhary and Anr. V. Vipul Ltd. [2023 SCC Online SC 1131] (Para 5, 11 and 13).

This agreement did not convince the court because commercial purpose in Income Tax Act is not applicable in cases under consumer protection act as the concept is different.

The order passed in the case of Shivani Thakran have confirmed by the Apex court as well as the other judgments that where the investments are on a large scale in a mall is commercial purpose under Consumer Protection Act

Legal question -3

Does the case fall under self-livelihood, an exception to ‘commercial purpose” ?

At the outset, the NCDRC clarified that the dispute pertained to deficiencies in the construction of commercial units and not regarding any goods defined under the Consumer Protection Act, 2019.

In this regard, reliance was placed on Shri Ram Chits (India) Pvt. Ltd. vs Raghachand Associates [SLP (C) No. 15290 of 2021], wherein it was observed that the intention of the legislature differed under the Consumer Protection Amendment Act, 2002, and the 2019 Act. Under the 2019 Act, the exclusions for earning livelihood by self-employment applied only to goods, not services. Therefore, the explanation for services did not arise.

Provision re produced here under –

“consumer” means any person who-

(i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment, when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or

(ii) hires or avails of any service for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such service other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person, but does not include a person who avails of such service for any commercial purpose.

Explanation. – For the purposes of this clause,

(a) the expression “commercial purpose” does not include use by a person of goods bought and used by him exclusively for the purpose of earning his livelihood, by means of self-employment

(b) the expressions “buys any goods” and “hires or avails any services” includes offline or online transactions through electronic means or by teleshopping or direct selling or multi-level marketing

It is found ,dominant purpose was to earn income clearly established with cogent evidence i.e. lease agreements ‘that units were purchased for commercial purpose and exception self-livelihood not applicable in-service.

Consequently, for all the reasons stated hereinabove, we find that the complainants are not consumers as their entire acquisition of the property is for a commercial purpose as understood under the provisions of Consumer Protection Act 2019. The complaint is accordingly dismissed as not entertainable.