Introduction:

The Supreme Court of India, in Vinit Bahri and Another v. M/s MGF Developers Ltd. and Another, reported as 2026 LiveLaw (SC) 117, delivered a crucial judgment clarifying the scope of the term “consumer” under Section 2(1)(d) of the Consumer Protection Act, 1986, particularly in cases where residential flats are leased or rented out by purchasers. The Bench comprising Justice Prashant Kumar Mishra and Justice N.V. Anjaria examined whether the mere act of leasing a residential unit automatically disentitles a homebuyer from invoking the remedies under consumer law on the ground of “commercial purpose.” The appeal arose from a consumer dispute between homebuyers Vinit Bahri and another, and the builder MGF Developers Ltd., concerning a residential project titled “The Villas” in Gurgaon. The appellants had approached the consumer forum alleging deficiency in service and unfair trade practices after the builder allegedly unilaterally altered the layout plan and raised additional financial demands. However, their complaint was dismissed by the National Consumer Disputes Redressal Commission on the reasoning that since the flat had been leased out after possession, the appellants were not “consumers” but persons engaging in commercial activity. Aggrieved by this exclusionary interpretation, the appellants approached the Supreme Court, contending that leasing a residential flat does not, by itself, convert a homebuyer into a commercial investor. The case thus presented the Supreme Court with an important opportunity to re-examine the “dominant purpose” test under consumer law and to delineate the burden of proof when a builder alleges that a purchaser falls outside the statutory definition of a consumer.

Arguments on Behalf of the Appellants:

On behalf of the appellants, it was argued that the National Commission had adopted an unduly narrow and legally erroneous understanding of the term “consumer” by equating leasing of a residential flat with commercial exploitation. Counsel for the appellants submitted that the Consumer Protection Act, 1986, is a beneficial legislation intended to protect individuals from unfair practices of powerful service providers such as real estate developers, and its provisions must therefore receive a liberal interpretation. It was contended that Section 2(1)(d) excludes only those purchases made for resale or for a commercial purpose, and that judicial precedents have consistently held that the determinative factor is the dominant intention at the time of purchase, not the subsequent use of the property. The appellants emphasized that the flat in question was purchased as a residential unit and that there was no material on record to demonstrate that, at the time of purchase, the dominant intention was to engage in profit-oriented commercial activity. It was further argued that leasing a residential flat is often a matter of necessity or prudent asset management and cannot be equated with running a business or trade. The appellants pointed out that the respondent-builder had failed to produce any cogent evidence establishing a close and direct nexus between the purchase of the flat and any systematic profit-generating commercial enterprise. Reliance was placed on settled jurisprudence, including decisions where the Supreme Court had held that even purchase of multiple units does not automatically amount to a commercial purpose unless supported by proof of dominant commercial intent. The appellants also argued that the burden of proving exclusion from the definition of “consumer” squarely lay on the builder, and mere assertions without evidence could not justify denial of consumer remedies. On these grounds, it was submitted that the NCDRC had erred in dismissing the complaint at the threshold without examining the allegations of deficiency in service on merits.

Arguments on Behalf of the Respondents:

The respondent-builder, represented by senior counsel, defended the order of the National Consumer Disputes Redressal Commission and contended that the appellants had purchased the unit with an investment-oriented mindset rather than for personal residential use. It was argued that the act of leasing out the flat after taking possession clearly indicated a profit motive, bringing the transaction within the exclusionary clause of Section 2(1)(d) of the 1986 Act. The respondent submitted that consumer fora are meant to address grievances of end-users and not investors who treat real estate as a commercial asset. Emphasis was laid on the fact that the appellants were not residing in the unit but had rented it out, which, according to the respondent, demonstrated a commercial orientation. The builder contended that allowing such purchasers to invoke consumer jurisdiction would open the floodgates for speculative investors to seek consumer remedies, thereby diluting the legislative intent. It was also argued that the Explanation to Section 2(1)(d), which carves out an exception for self-employment and earning livelihood, would not apply to leasing of residential property for rental income. The respondent thus urged the Court to uphold the NCDRC’s reasoning and to affirm that leasing a flat constitutes a commercial purpose disentitling the appellants from being treated as consumers under the Act.

Court’s Judgment:

After carefully considering the rival submissions and examining the statutory framework and precedents, the Supreme Court decisively rejected the approach adopted by the National Consumer Disputes Redressal Commission and reaffirmed the “dominant intention” test as the controlling principle under consumer law. The Court observed that Section 2(1)(d) of the Consumer Protection Act, 1986, while excluding purchases made for resale or commercial purposes, does not define “commercial purpose” exhaustively, thereby requiring courts to interpret the term in light of the facts of each case. The Bench emphasized that the mere act of leasing or renting out a residential flat does not, by itself, establish that the dominant intention behind the purchase was commercial. The Court categorically held that the burden of proving that a purchaser falls within the exclusionary clause rests on the builder or service provider who asserts such exclusion. In the present case, the respondent had failed to discharge this burden even on a preponderance of probabilities, as no material was produced to show that the appellants purchased the flat with the dominant purpose of facilitating profit generation through commercial activity. The Court underscored that there must be a close and direct nexus between the purchase and a systematic profit-oriented enterprise to attract the exclusion clause, and such nexus was conspicuously absent in the facts before it. Referring to earlier decisions such as Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti Developers and Shriram Chits (India) Private Limited v. Raghachand Associates, the Court reiterated that even the purchase of multiple units does not ipso facto amount to a commercial purpose unless supported by clear evidence of dominant commercial intent. The Supreme Court further observed that the National Commission had erred in treating the subsequent act of leasing as conclusive proof of commercial purpose without examining the intention at the time of purchase. Holding that the appellants could not be excluded from the definition of “consumer” in the absence of proof of dominant commercial purpose, the Court set aside the NCDRC’s order and restored the consumer complaint for fresh consideration on merits. In doing so, the Court reaffirmed the protective ethos of consumer legislation and cautioned against interpretations that unduly narrow access to consumer remedies.