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Informist, Friday, Feb. 28, 2025

 

NEW DELHI – The Supreme Court on Friday set aside an order by the National Consumer Disputes Redressal Commission, New Delhi, which held that there was deficiency in service on part of Central Bank of India under Consumer Protection Act, and it was liable to pay compensation and costs to Ad Bureau Pvt. Ltd. of INR 7.52 million. The apex court was considering an issue of whether the borrower of a project loan fell under the definition of "consumers" under the Consumer Protection Act, 1986. 

 

"We are cognisant of the fact that respondent No.1 (Ad Bureau) would not be excluded from the definition of consumer merely on account of the fact that it is a commercial entity/enterprise," said the court. However, Ad Bureau can't be said to be a "consumer" because the transaction in question, which was obtaining a project loan, did have a close nexus with a profit generating activity and in fact, the dominant purpose for getting this loan sanctioned was to generate profits upon successful post­production of the movie titled "Kochadaiyaan".

 

"...it is quite clear that what is to be seen here is that whether the dominant intention or dominant purpose for the transaction was to facilitate some kind of profit generation for the person who has availed the service," said the court. Therefore, Ad Bureau was not a "consumer" in terms of Section 2(1)(d)(ii) of the 1986 Act.

 

In 2014, Central Bank of India had granted a project loan of INR 100 million to Ad Bureau, a company carrying on advertising business. The purpose behind availing this loan was that Ad Bureau was to engage in the post production of the movie. A property was also given as collateral for the loan. 

 

However, Ad Bureau defaulted in repayment and its account was classified as a non-performing asset in 2015. Consequently, the bank took possession of the property given as collateral and filed an application before the Debts Recovery Tribunal, Chennai to recover the money. This application was allowed and the bank was held to be entitled to recover INR 46.54 million with 12% interest per annum from Ad Bureau. Thereafter, Ad Bureau offered a one-time settlement of INR 35.6 million and it was accepted by the bank. After the amount was paid, no dues certificate was issued by the bank in 2017.

 

Ad Bureau said that the bank, despite issuing a no ­dues certificate and filing a full satisfaction memo before the tribunal, incorrectly reported its name to RBI as a defaulter with a total outstanding amount of INR 41.7 billion. This incorrect reporting by the bank not only led to a significant loss of goodwill and reputation, but also resulted in it losing an exclusive advertising tender by the Airports Authority of India, said Ad Bureau. Ad Bureau moved the commission saying that the bank was grossly negligent and deficient in providing banking services to respondent it and had consequently caused monetary damages and a loss of reputation to it. After the commission ruled in favour of Ad Bureau, the bank moved the top court.  

 

On Friday, the shares of Central Bank of India closed 3.0% lower at INR 43.98 on the National Stock Exchange.  End

 

Reported by Surya Tripathi

Edited by Deepshikha Bhardwaj

 

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