Dominant Purpose of Transaction is Key to Determine Commercial Activity Under Consumer Protection Act
The Supreme Court observed that the dominant purpose of a transaction is crucial in determining whether it is linked to commercial activities or not.
Consumer Protection ActCommercial ActivityReal EstateNational Consumer Disputes Redressal CommissionDominant PurposeReal EstateAug 24, 2024
In a recent judgment, the Court held that merely because a purchaser is a real estate company, it does not necessarily mean that the flat was purchased for commercial purposes or resale to earn profits. The Court was hearing a statutory appeal under Section 67 of the Consumer Protection Act, 2019, which challenged the judgment and order passed by the National Consumer Disputes Redressal Commission.
The National Consumer Disputes Redressal Commission had partly allowed the complaint of the respondent and directed the appellant to refund Rs.7.16 Cr along with delay compensation @ 6% per annum. The bench of Justice Pamidighantam Sri Narasimha and Justice Pankaj Mithal observed that the dominant intention or the dominant purpose of the transaction is to be looked into to find out if it had any nexus with some kind of profit generation as part of commercial activities.
The respondent, a real estate development company, had booked a flat in the appellant's project for one of its directors. The flat was allotted, and possession was set for December 2018. However, in March 2017, the appellant advanced the possession date and demanded the remaining balance. The respondent was unable to arrange the funds and discovered that the flat was also allotted to another person.
The respondent refused to take the flat, and the appellant cancelled the booking and forfeited the payments. The Appellant contested the respondent's plea before NCDRC and argued that the respondent was not a
Frequently Asked Questions
What is the dominant purpose of a transaction under the Consumer Protection Act?
The dominant purpose of a transaction is to be looked into to determine whether it has any nexus with profit generation as part of commercial activities.
Can a real estate company be considered a consumer under the Consumer Protection Act?
Yes, a real estate company can be considered a consumer under the Consumer Protection Act if it purchases a flat for personal use and not for commercial purposes.
What is the burden of proof in cases involving commercial activity under the Consumer Protection Act?
The burden lies heavily upon the appellant to lead evidence to prove that the respondent in purchasing the flat in question is indulging in the real estate business.
What is the role of the National Consumer Disputes Redressal Commission in consumer disputes?
The National Consumer Disputes Redressal Commission is a quasi-judicial commission that deals with consumer disputes and complaints.
What is the significance of the Consumer Protection Act, 2019?
The Consumer Protection Act, 2019, is a legislation that aims to protect the rights of consumers in India and provides for the establishment of consumer courts and the redressal of consumer complaints.
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