Leasing Out Flat Does Not by Itself Make Purchase Commercial, Builder Must Prove Exclusion: Supreme Court in Vinit Bahri v. MGF Developers Ltd. [2026 INSC 114]

In Vinit Bahri & Anr. v. M/s MGF Developers Ltd. & Anr. (2026 INSC 114), the Supreme Court held that the onus of proving that a complainant falls within the "commercial purpose" exclusion in Section 2(1)(d) of the Consumer Protection Act, 1986 rests on the service provider, and the mere factum of leasing out the flat does not, by itself, show that it was purchased with the dominant purpose of commercial activity (paras 16–17). A Bench of Justice Prashant Kumar Mishra and Justice N.V. Anjaria set aside the NCDRC judgment that had held the buyers not to be consumers and restored their complaint (paras 18–19).

Status: NCDRC judgment dated 11.05.2023 in Consumer Complaint No. 74/2017 set aside; complaint restored to its original number for decision on merits; appeal allowed (paras 18–19).

Headnote: Leased Flat and the Commercial Purpose Exclusion

Consumer Protection Act, 1986 – Section 2(1)(d) – Definition of "consumer" – Exclusion for goods or services obtained for "commercial purpose" – Explanation for self-employment – Purchase of residential flat – Flat let out after possession – Dominant intention or dominant purpose test – Close and direct nexus with profit-generating activity – Onus of proof on service provider – Preponderance of probabilities – Evidence Act, 1872 – Sections 101 and 102.

Held: (i) The dominant intention or dominant purpose of the transaction determines whether the purchaser falls within the "commercial purpose" exclusion in Section 2(1)(d) (para 12).

(ii) What constitutes "commercial purpose" is a question of fact in each case; it is not the value of the goods but the purpose to which they are put that matters (paras 13, 17).

(iii) For the exclusion to apply, the purchase must have a close and direct nexus with a profit-generating activity (paras 14, 17).

(iv) Following Shriram Chits, the onus of proving that the complainant falls within the exclusion lies on the service provider, to be discharged on a preponderance of probabilities; only then does the onus shift to the complainant to bring the case within the self-employment Explanation (paras 16–17).

(v) The mere factum of leasing out the flat does not, by itself, show that it was purchased with the dominant purpose of engaging in commercial activity (para 17).

(vi) The mere purchase of immovable property, even multiple units, does not ipso facto attract the exclusion unless the dominant purpose is proved to be commercial (para 17).

(paras 12–18)

Case Details: Vinit Bahri v. MGF Developers Ltd. (2026 INSC 114)

Final Outcome: Appeal allowed; NCDRC judgment dismissing the consumer complaint set aside; Consumer Complaint No. 74/2017 restored for decision on merits.

Case: Vinit Bahri and Another v. M/s MGF Developers Ltd. and Another

Neutral Citation: 2026 INSC 114

Case No.: Civil Appeal No. 6588 of 2023

Court: Supreme Court of India (Civil Appellate Jurisdiction) – Reportable

Date of Decision: 4 February 2026

Bench: Justice Prashant Kumar Mishra (author) and Justice N.V. Anjaria

Relevant Acts & Sections: Consumer Protection Act, 1986 – Section 2(1)(d) and Explanation; Evidence Act, 1872 – Sections 101 and 102 (as referred to in Shriram Chits)

Impugned Order: Judgment dated 11.05.2023 of the National Consumer Disputes Redressal Commission, New Delhi in Consumer Complaint No. 74/2017, dismissing the complaint on the ground that the appellants were not consumers (paras 1, 7)

Source: Supreme Court of India

Key Holdings of the Supreme Court

• The NCDRC erred in dismissing the complaint on the ground that the appellants were not consumers (para 17).
• The onus of proving the "commercial purpose" exclusion rests on the builder, and the respondents failed to discharge it on a preponderance of probabilities (paras 16–17).
• The respondents placed no cogent material to show a close and direct nexus between the purchase and a profit-generating activity (para 17).
• Leasing out the flat after possession does not, by itself, prove a commercial purpose for the purchase (para 17).
• Purchase of immovable property, even multiple units, does not ipso facto attract the exclusion without proof of a commercial dominant purpose (para 17).
• The complaint needs consideration on merits by the NCDRC (para 18).

Brief Facts of the Case

The respondents launched a group housing project, 'The Villas', in Sector-25, Gurgaon in 2005. The appellants paid Rs. 15,00,000 as booking amount in March 2005 and were allotted a ground-floor unit in Tower-C on 02.09.2005 (para 3).

The Flat Buyer's Agreement dated 12.06.2006 provided for possession within 36 months, with a 90-day grace period. The appellants alleged that possession fell due on 11.09.2009, that the layout of Tower-C was changed unilaterally, and that they paid several demands under protest. They took possession on 08.01.2015, and the occupation certificate was issued on 14.08.2015 (para 4).

On 10.01.2017, the appellants filed a complaint before the NCDRC alleging deficiency in service and unfair trade practice, seeking 18% interest, compensation and refund of excess charges (paras 2, 5).

Respondent No. 1 pleaded that delay compensation of Rs. 12,10,237 had been paid or adjusted, that the area had increased, and that the flat had been let out since March 2015 under a lease deed dated 03.03.2016, so the appellants were not consumers. Respondent No. 2 pleaded that the project had been handed over to respondent No. 1 (para 6).

The NCDRC held that the appellants were not consumers, as leasing the flat was a commercial purpose, and dismissed the complaint (paras 1, 7).

Issues Before the Supreme Court

1. Whether the NCDRC was right in holding that the appellants were not consumers because they had leased out the flat, bringing them within the exclusion in Section 2(1)(d) of the 1986 Act (para 10).
2. On whom lies the burden of proving that a purchase falls within the "commercial purpose" exclusion (para 16).

Court's Findings and Reasoning

Parties' submissions (paras 8–9): The appellants argued that the unit was bought purely for personal use, to live closer to their parents, relying on IREO Private Ltd. v. Aloke Anand and Synco Textiles. The respondents supported the NCDRC judgment.

Scope of "consumer" (paras 11–12): Section 2(1)(d) excludes a person who obtains goods for resale or any commercial purpose, while the Explanation saves use exclusively for earning a livelihood by self-employment. As "commercial purpose" is not exhaustively defined, the dominant intention or purpose of the transaction is determinative.

Meaning of "commercial purpose" (paras 13–15): Relying on Laxmi Engineering Works, Lilavati Kirtilal Mehta Medical Trust and Rohit Chaudhary v. Vipul Ltd., the Court held that the purchase must have a close and direct nexus with a large-scale or profit-generating activity, and that the question is one of fact depending on the purpose to which the goods are put.

Burden of proof (para 16): Under Shriram Chits, the complainant must prove the purchase for consideration, but the service provider that invokes the exclusion must prove it on a preponderance of probabilities; only then does the onus shift back to the complainant under the self-employment Explanation.

Application to the facts (para 17): The respondents placed no cogent material to establish a nexus between the purchase and profit generation. The mere factum of leasing out the flat did not show a commercial dominant purpose, so the appellants could not be excluded from the definition of consumer.

Final Outcome and Directions

• NCDRC judgment dated 11.05.2023 set aside (para 18).
• Consumer Complaint No. 74/2017 restored to its original number on the file of the NCDRC (para 18).
• The NCDRC shall decide the complaint on merits and in accordance with law (para 18).
• Appeal allowed (para 19).

Legal Principle Laid Down

Whether a purchase is for a "commercial purpose" under Section 2(1)(d) of the Consumer Protection Act, 1986 depends on the dominant intention or purpose of the transaction and requires a close and direct nexus with profit generation. The onus lies on the service provider to prove the exclusion on a preponderance of probabilities. Letting out a flat after possession, or buying immovable property, even multiple units, does not by itself prove that the purchase was for a commercial purpose (paras 12, 16–17).

Precedents Relied Upon

• Laxmi Engineering Works v. P.S.G. Industrial Institute, (1995) 3 SCC 583 – Relied upon – meaning of "commercial"; question of fact; purpose, not value, matters. Discussed at para 13.
• Synco Textiles Pvt. Ltd. v. Greaves Cotton and Company Ltd., 1990 SCC OnLine NCDRC 3 – Approved in Laxmi Engineering Works – close nexus with large-scale profit activity required. Discussed at paras 8, 13.
• Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti Developers, (2020) 2 SCC 265 – Relied upon – broad principles for "commercial purpose", including the dominant purpose test. Discussed at para 14.
• Rohit Chaudhary v. Vipul Ltd., (2024) 1 SCC 8 – Relied upon – profit motive must be evident from the record. Discussed at para 15.
• Shriram Chits (India) Pvt. Ltd. v. Raghachand Associates, (2024) 9 SCC 509 – Relied upon – onus of proving the exclusion lies on the service provider. Discussed at para 16.
• IREO Private Ltd. v. Aloke Anand, (2022) 9 SCC 412 – Cited by the appellants. Discussed at para 8.

Important Paragraphs of the Judgment

Verbatim extracts from the judgment. For the full text, refer to the judgment PDF below.

Para 12: "... the dominant intention or dominant purpose of the transaction is determinative of whether the purchaser falls within the exclusion clause."

Para 17: "The onus of proving that the appellants fall within the exclusion clause of Section 2(1)(d) of the 1986 Act rests upon the respondents, and the respondents have failed to discharge this onus on a preponderance of probabilities."

Para 17: "The respondents have not placed any cogent material on record to establish such nexus. The mere factum of leasing out the flat does not, by itself, demonstrate that the appellants purchased the property with the dominant purpose of engaging in commercial activity."

Para 17: "It must be emphasized that the mere act of purchasing immovable property, even multiple units, cannot ipso facto attract the exclusion clause of Section 2(1)(d) of the 1986 Act unless and until it is proved that the dominant purpose behind such purchase was commercial in nature."

Para 17: "In absence of such proof, the appellants cannot be excluded from the definition of ‘consumer’ under the 1986 Act."

Para 18: "In our view, the Complaint Case needs consideration on merits by the NCDRC."

Practical Impact of the Ruling

• For homebuyers: Letting out a flat after possession does not by itself shut the door of consumer fora; the buyer remains a consumer unless a commercial dominant purpose is proved (para 17).
• For builders and developers: A builder pleading the "commercial purpose" exclusion must place cogent material showing a close and direct nexus between the purchase and profit generation (paras 16–17).
• For consumer commissions: Complaints cannot be dismissed at the threshold on the bare fact of a lease; the dominant purpose test and the burden of proof must be applied (paras 12, 16–17).
• For investors in multiple units: Buying more than one property does not automatically make the purchase commercial, though the builder may still prove a commercial dominant purpose on facts (para 17).

FAQs on Leased Flats and the Consumer Definition

1. What did the Supreme Court decide in Vinit Bahri v. MGF Developers Ltd.?

It held that the flat buyers could not be excluded from the definition of consumer merely because they leased out the flat, set aside the NCDRC judgment and restored their complaint (paras 17–18).

2. Does renting out a flat make the purchase a "commercial purpose"?

Not by itself. The mere factum of leasing out the flat does not show that it was bought with the dominant purpose of commercial activity (para 17).

3. Who must prove that the purchase was for a commercial purpose?

The service provider who pleads the exclusion, on a preponderance of probabilities; a negative burden cannot be placed on the complainant (paras 16–17).

4. What test decides whether a purchase is commercial?

The dominant intention or dominant purpose of the transaction, and whether there is a close and direct nexus with a profit-generating activity, judged on the facts of each case (paras 12–14, 17).

5. What happens to the complaint now?

Consumer Complaint No. 74/2017 is restored to the NCDRC, which will decide it on merits in accordance with law (para 18).

Keywords: 2026 INSC 114, Vinit Bahri v. MGF Developers Ltd., Section 2(1)(d) Consumer Protection Act 1986, commercial purpose exclusion, flat let out on lease, homebuyer consumer, dominant purpose test, onus of proof on builder, preponderance of probabilities, Shriram Chits, Lilavati Kirtilal Mehta Medical Trust, Laxmi Engineering Works, NCDRC, delayed possession, Justice Prashant Kumar Mishra, Justice N.V. Anjaria, Supreme Court judgment

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Download Judgment PDF – Vinit Bahri v. MGF Developers Ltd.

Judgment PDF: 2026 INSC 114 – Vinit Bahri & Anr. v. M/s MGF Developers Ltd. & Anr. (Civil Appeal No. 6588 of 2023) – Download Judgment PDF

Source: Supreme Court of India (official website).