The Supreme Court has ruled that merely leasing out a residential flat does not, by itself, take a homebuyer outside the definition of a “consumer” under the Consumer Protection Act, 1986. Setting aside an order of the National Consumer Disputes Redressal Commission (NCDRC), the Court held that the dominant purpose behind the purchase of the property must be examined before branding the transaction as “commercial”.
The Bench of Justice Prashant Kumar Mishra and Justice N.V. Anjaria disagreed with the NCDRC’s approach, observing that the act of leasing out a residential property cannot automatically be equated with a commercial transaction.
The the apex court restored a consumer complaint filed by homebuyers against a real estate developer, which had earlier been dismissed by the NCDRC on the ground that the buyers were not “consumers” since the flat had been leased out
The dispute arose from a housing project titled “The Villas” in Sector 25, Gurgaon, launched in 2005. The appellants had booked a residential unit and entered into a Flat Buyer’s Agreement in June 2006, which promised possession within 36 months, subject to a grace period.
Alleging delayed possession, unilateral changes in layout, excess demands under various heads such as infrastructure charges and service tax, and failure to provide promised fixtures, the buyers approached the NCDRC in 2017 seeking compensation and refund of excess amounts.
However, the NCDRC dismissed the complaint, holding that the buyers were not “consumers” because they had leased out the flat after taking possession, treating the transaction as one for commercial purposes.
The Court reiterated that under Section 2(1)(d) of the Consumer Protection Act, 1986, a buyer is excluded from the definition of “consumer” only if goods or services are obtained for a commercial purpose. Whether a transaction is commercial depends on the dominant intention behind the purchase.
The Court emphasized that the burden of proof lies on the service provider, not the consumer, to establish that the transaction was undertaken for commercial gain. In the present case, the developer failed to demonstrate a close and direct nexus between the purchase of the flat and any profit-oriented commercial activity.
Rejecting the developer’s argument, the Court held that leasing out the flat after possession does not conclusively prove that the property was purchased with a profit motive. The judges noted that residential properties are often temporarily leased for various personal reasons, and such conduct cannot, by itself, strip buyers of consumer protection remedies.
The Court also relied on earlier precedents to underline that what matters is not the subsequent use alone, but the purpose at the time of purchase.
Finding fault with the NCDRC’s reasoning, the Supreme Court set aside its May 11, 2023 order and restored the consumer complaint to its original number. The NCDRC has been directed to decide the matter afresh on merits, in accordance with law.
Allowing the appeal, the Court clarified that homebuyers cannot be denied access to consumer fora unless there is clear evidence that the property was acquired primarily for commercial exploitation.
Case Details
Case Title: Vinit Bahri And Another Versus M/S Mgf Developers Ltd.
Case No.: Civil Appeal No.6588 Of 2023
Date: 04/02/2026
