A) ABSTRACT / HEADNOTE

The Chief Manager, Central Bank of India & Ors. v. M/s Ad Bureau Advertising Pvt. Ltd & Anr., [2025] 2 S.C.R. 1445 : 2025 INSC 288 considers whether a corporate borrower who obtained a project loan for post-production of a film falls within the statutory definition of “consumer” in Section 2(1)(d)(ii) of the Consumer Protection Act, 1986. The respondent company obtained a Rs. 10 crore project loan, defaulted, entered into a One-Time Settlement (OTS), paid the agreed sums and obtained No-Dues Certificates and a full-satisfaction memo filed before the DRT.

Despite settlement, the bank reported the borrower as a defaulter to RBI/CIBIL under the Master Circular on Wilful Defaulters, causing loss of reputation and the forfeiture of an Airports Authority advertising licence. The NCDRC found deficiency in service and awarded ₹75,00,000. The Supreme Court evaluated whether the loan transaction was for a commercial purpose and whether the borrower therefore falls outside the definition of consumer.

Applying this Court’s tests from Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti Developers, Shrikant G. Mantri v. PNB and National Insurance Co. Ltd. v. Harsolia Motors, the Court held that the dominant purpose of the project loan was profit generation through a commercial activity (film post-production and brand enhancement inseparable from revenue motives). Consequently, the relationship was business-to-business and the respondent was not a consumer under Section 2(1)(d)(ii). The NCDRC order was set aside for want of jurisdiction though the Court expressly refrained from adjudicating merits.

Keywords: Consumer; Project loan; Commercial purpose; One-Time Settlement; No-Dues Certificate; Wilful defaulter reporting; Deficiency in service; Business-to-business; Dominant intention.

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

This dispute arises at the intersection of consumer protection and commercial banking. A private advertising company (M/s Ad Bureau) availed a project loan from Central Bank of India to finance post-production of a film and related branding activities. After classification as NPA and recovery proceedings under SARFAESI and RDDBFI, the parties settled by OTS. The borrower paid the negotiated sum together with computed delayed interest. The bank issued No-Dues Certificates and filed a full-satisfaction memo before the DRT.

Notwithstanding formal settlement, the bank reportedly continued to classify and transmit the borrower’s name to regulatory/credit agencies as a defaulter with an outstanding liability. This, the borrower alleged, caused direct commercial injury: refusal of a required bank guarantee by HDFC Bank and consequent loss of an exclusive Airports Authority advertising licence. The borrower invoked the Consumer Protection Act alleging deficiency in service and unfair trade practice. NCDRC accepted the complaint and awarded substantial compensation.

The Supreme Court was called upon not to re-examine damages but to determine whether, on the admitted facts, the NCDRC had jurisdiction because the borrower qualified as a consumer under Section 2(1)(d)(ii). The central legal question thus became whether a project loan used in a commercial venture for profit generation excludes the borrower from consumer forum protection, even if the activity includes brand building or “self-use” elements.

D) FACTS OF THE CASE

On 28.04.2014, the Central Bank of India sanctioned a project loan of Rs. 10 crores to M/s Ad Bureau for post-production of the film “Kochadaiiyaan”. Security included the promoter’s Chennai property. The borrower defaulted and the account was declared an NPA on 04.02.2015. The bank issued demand and possession notices and invoked statutory recovery measures. On 05.12.2016 the DRT allowed the bank’s Section 19 application and quantified recovery at Rs. 4,65,39,715 with interest. The borrower offered an OTS of Rs. 3.56 crores, which the bank accepted.

The bank also demanded delayed period interest of Rs. 14.43 lacs, which the borrower paid. Consequent No-Dues Certificates were issued on 13.01.2017 and 20.03.2017 and a full-satisfaction memo was filed in the DRT. Despite these records, the bank reported the borrower as a defaulter to RBI/CIBIL showing an outstanding of Rs. 4.17 crores. As an outcome, HDFC Bank refused to issue a required Bank Guarantee and an Airports Authority advertising tender that had been initially awarded to the borrower was cancelled. Aggrieved, the borrower filed a consumer complaint alleging negligence and deficiency in service.

NCDRC found the bank liable and awarded ₹75,00,000 plus costs. The bank appealed to the Supreme Court arguing absence of jurisdiction because the borrower did not fall within the statutory definition of consumer since the loan was for commercial purposes and dominantly intended for profit generation.

E) LEGAL ISSUES RAISED

1. Whether a borrower who avails a project loan for post-production of a film falls within the definition of “consumer” under Section 2(1)(d)(ii) of the Consumer Protection Act, 1986?

2. Whether a loan availed by a corporate entity for branding/self-promotion can be treated as “self-use” within the Explanation to Section 2(1)(d) so as to attract consumer forum jurisdiction?

3. Whether wrongful reporting of settled loan details to RBI/CIBIL by a bank constitutes deficiency in service for which consumer forum jurisdiction exists when the underlying transaction is commercial?

F) PETITIONER / APPELLANT’S ARGUMENTS

The bank contended that the NCDRC overlooked threshold jurisdictional fact. The service availed was sanction of a project loan used for a commercial activity. The transaction was business-to-business between commercial entities. The dominant purpose was profit generation. The Explanation to Section 2(1)(d) excludes persons availing services for commercial purposes; the self-employment carve-out is inapplicable. Reliance was placed on this Court’s precedents in Lilavati and Harsolia Motors establishing tests for commercial purpose. The bank maintained that the borrower’s claim of mere brand-building was a cloak for a profit oriented venture and could not convert the dominant commercial motive into self-use.

G) RESPONDENT’S ARGUMENTS

The respondent argued that loan proceeds were for self-branding and enhancement of professional livelihood, thereby falling within the Explanation to Section 2(1)(d). It relied on the narrow reading that if services are availed exclusively for earning livelihood by self-employment the borrower remains a consumer. The respondent emphasized the tangible reputational loss and loss of tender caused by wrongful reporting despite satisfaction of dues and the filing of the full-satisfaction memo. It urged that consumer jurisdiction was proper to remedy bank’s negligent reporting.

H) RELATED LEGAL PROVISIONS 

i. Section 2(1)(d)(ii), Consumer Protection Act, 1986 — definition of consumer and exclusion for commercial purposes with an Explanation for self-employment.
ii. SARFAESI Act — statutory measures for enforcement and possession.
iii. RDDBFI Act, Section 19 — DRT recovery jurisdiction and consequent satisfaction filings.
iv. RBI Master Circular on Wilful Defaulters (DBOD No. … dated 23.04.1994) — reporting obligations.

I) JUDGEMENT

The Supreme Court confined its enquiry to jurisdiction under the Consumer Act. It examined the statutory text and judicial gloss on “commercial purpose” and the Explanation to Section 2(1)(d)(ii). The Court reiterated that the primary touchstone is the dominant intention of the transaction: whether the service/goods have a close and direct nexus to profit generation. Authorities including Lilavati set out non-exhaustive principles: no straitjacket formula, evaluate facts, look for direct nexus to profit. In Shrikant G. Mantri this Court rejected the claim of self-employment where the overdraft was used for business activity.

Similarly in National Insurance v. Harsolia Motors the test emphasized whether goods/services are used in activity intended to generate profit. Applying these yardsticks, the Court found the instant loan closely connected to the commercial venture of film production and post-production whose natural and dominant purpose is revenue generation. Even brand-building was held to be instrumental to attracting customers and increasing revenue. The Court therefore concluded that the respondent did not fall within consumer definition and the NCDRC lacked jurisdiction. Consequently the NCDRC order was set aside.

The Court explicitly left open the substantive merits, clarifying that respondent could pursue appropriate remedies elsewhere. The connected appeal by the respondent challenging quantum of compensation was dismissed as there was no scope to interfere. The result: appeals allowed in part; NCDRC order vacated for want of jurisdiction.

a. RATIO DECIDENDI

The decisive ratio is that when the dominant purpose of availing a service (here a project loan) is commercial profit-generation and the transaction bears a close, direct nexus to profit-oriented activity, the availing party cannot be treated as a consumer under Section 2(1)(d)(ii). The Explanation’s self-employment carve-out does not encompass corporate branding exercises which are instrumental to business revenue. Precedents like Lilavati, Shrikant Mantri and National Insurance v. Harsolia Motors inform the test of dominant intention and direct nexus.

b. OBITER DICTA

The Court observed in passing that wrongful reporting of settled accounts may give rise to remedies but the appropriate forum would depend on the nature of the underlying transaction. The Court refrained from any finding on merits or on tortious liability for reputational loss leaving the respondent free to seek redress in alternate fora.

c. GUIDELINES

The judgment clarifies the analytical steps for tribunals deciding consumer jurisdiction over financial services:

(i) Identify the precise service availed;

(ii) Ascertain the dominant purpose or intention behind availing service;

(iii) Apply the direct nexus test is the service so used as to directly enable profit generation;

(iv) Apply precedents to determine whether the self-employment exception is engaged;

(v) If dominant purpose commercial, decline consumer forum jurisdiction and indicate alternate remedies.

J) CONCLUSION & COMMENTS

This judgment reinforces the territorial limits of consumer fora in commercial banking disputes. It underscores that corporate borrowers who obtain credit facilities for ventures inherently tied to profit generation will ordinarily fall outside the Consumer Protection Act, 1986. The decision promotes doctrinal consistency by applying the dominant intention and direct nexus tests. Practically, it alerts borrowers and banks that settlement formalities (No-Dues Certificates, full-satisfaction memos) do not ipso facto create consumer jurisdiction where the underlying transaction is commercial.

The Court’s refusal to decide merits preserves procedural propriety while signalling that reputational injury from wrongful reporting remains a cognizable grievance in an appropriate forum such as civil courts or other regulatory remedies. For practitioners, the judgment is a caution that consumer remedies are limited against banks when the service availed is a business-to-business credit facility.

K) REFERENCES

a. Important Cases Referred

1. The Chief Manager, Central Bank of India & Ors. v. M/s Ad Bureau Advertising Pvt. Ltd & Anr., [2025] 2 S.C.R. 1445 : 2025 INSC 288.

2. National Insurance Co. Ltd. v. Harsolia Motors & Ors., (2023) 8 SCC 362.

3. Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti Developers, (2020) 2 SCC 265.

4. Shrikant G. Mantri v. Punjab National Bank, (2022) 5 SCC 42.

b. Important Statutes Referred

1. Consumer Protection Act, 1986, Section 2(1)(d)(ii).

2. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).

3. Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act).

4. RBI Master Circular on Wilful Defaulters (DBOD No. BC/CIS/47/20.16.002/94 dated 23.04.1994).