Case Update: Chief Manager, Central Bank of India & Ors. v. M/s Ad Bureau Advertising Pvt. Ltd. & Anr.
In a significant ruling, the Supreme Court of India, in Chief Manager, Central Bank of India & Ors. v. M/s Ad Bureau Advertising Pvt. Ltd. & Anr., adjudicated upon the maintainability of a consumer complaint filed by a corporate entity that had availed a project loan for commercial purposes. The core issue before the Court was whether a borrower of a project loan for commercial activities qualifies as a “consumer” under Section 2(1)(d)(ii) of the Consumer Protection Act, 1986.
The Supreme Court, vide judgment dated February 28, 2025, held that a company availing a project loan with the dominant intention of generating profits does not fall within the definition of a “consumer” and, therefore, cannot seek relief under the Consumer Protection Act, 1986. The ruling effectively set aside the decision of the National Consumer Disputes Redressal Commission (NCDRC), which had earlier awarded compensation to the borrower for wrongful reporting to CIBIL (Credit Information Bureau of India Limited).
Factual Background
The dispute arose when M/s Ad Bureau Advertising Pvt. Ltd. (Respondent No. 1), a company engaged in branding, consulting, and advertising, availed of a project loan of ₹10 crores from the Central Bank of India on April 28, 2014. The stated purpose of the loan was to finance the post-production of a movie titled “Kochadaiiyaan.” As security for the loan, a property located at Old D.No. 61, New D.No. 194, St. Mary’s Road, Abhiramapuram, Chennai, owned by the Chairman and Managing Director of the Respondent company, was pledged as collateral security.
However, the respondent defaulted in repayment, leading the Central Bank of India to classify the account as a Non-Performing Asset (NPA) on February 4, 2015. Despite the issuance of a demand notice, the respondent failed to repay the outstanding dues. Consequently, the appellant bank initiated proceedings under the SARFAESI Act, 2002, and took symbolic possession of the pledged property through a Possession Notice dated May 21, 2015.
Additionally, the bank filed an application under Section 19(1) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act) before the Debts Recovery Tribunal (DRT), Chennai, seeking recovery of ₹4,65,39,715/- (₹4.65 crores). The DRT, Chennai, on December 5, 2016, ruled in favor of the bank, allowing it to recover the outstanding amount along with 12% interest per annum.
One-Time Settlement and Alleged Wrongful Reporting
Subsequently, the respondent company proposed a One-Time Settlement (OTS) of ₹3.56 crores, which was accepted by the bank. Following this, the bank demanded an additional ₹14.43 lakhs as ‘delayed period interest,’ which the respondent also paid. Upon full settlement, the bank issued No-Dues Certificates on January 13, 2017, and March 20, 2017. Furthermore, the bank filed a ‘full-satisfaction memo’ before the DRT, Chennai, acknowledging that the OTS amount and delayed interest were fully paid.
However, despite the settlement, the Central Bank of India allegedly reported the respondent as a defaulter to CIBIL and the Reserve Bank of India (RBI), citing an outstanding amount of ₹4.17 crores.
The respondent claimed that this erroneous reporting caused severe financial and reputational damage, including the loss of an exclusive advertising contract from the Airports Authority of India (AAI). The tender was initially awarded to the respondent but was later revoked because it could not secure a Bank Guarantee from HDFC Bank, which refused due to the respondent’s name being listed as a defaulter in CIBIL records.
NCDRC’s Decision
Aggrieved by the wrongful reporting, the respondent filed Consumer Complaint No. 23 of 2021 before the NCDRC, alleging deficiency in service and unfair trade practices by the bank.
The NCDRC, vide order dated August 30, 2023, ruled in favour of the respondent, holding that the bank was liable for:
- Deficiency in service and unfair trade practice.
- Wrongful reporting of the respondent as a defaulter, despite the loan account being settled.
- Causing financial and reputational loss to the respondent.
The NCDRC awarded compensation of ₹75,00,000/- (₹75 lakhs) and litigation costs of ₹20,000/- to the respondent. Additionally, the bank was directed to issue a certificate confirming that the respondent’s loan account was settled and that the wrongful defaulter reporting was incorrect.
Supreme Court’s Observations and Ruling
The Supreme Court, upon examining the case, held that the respondent was not a ‘consumer’ under Section 2(1)(d)(ii) of the Consumer Protection Act, 1986. The Court reasoned that:
- The project loan was availed for a commercial purpose, with the dominant intention of profit generation.
- Business-to-business transactions, such as project loans, are excluded from the purview of the Consumer Protection Act.
- Even if the loan was partly used for brand-building, its dominant purpose remained commercial in nature.
- The NCDRC lacked jurisdiction to entertain the complaint.
Relying on precedents such as National Insurance Co. v. Harsolia Motors, (2023) 8 SCC 362[1] and Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti Developers, (2020) 2 SCC 265[2], the Supreme Court reaffirmed that a close nexus with profit-generating activities precludes an entity from being classified as a consumer.
Accordingly, the Supreme Court set aside the NCDRC’s order, allowing the appeal filed by the Central Bank of India. However, the Court clarified that its ruling was limited to the issue of maintainability and that the respondent was free to pursue appropriate remedies under other legal provisions.
Conclusion
The Supreme Court’s decision reinforces the principle that borrowers availing loans for profit-driven commercial activities do not qualify as consumers under the Consumer Protection Act, 1986. This ruling provides clarity on the jurisdictional limits of consumer forums in matters involving business-to-business financial transactions.
1. https://indiankanoon.org/doc/19498549/
2. https://digiscr.sci.gov.in/view_judgment?id=MTk1MjY=
