On March 20, 2025, the Supreme Court of India delivered a significant judgment clarifying the scope of the term ‘consumer’ under the Consumer Protection Act. The Court held that unless there is a direct contractual relationship between parties, one cannot claim consumer rights under the Act.
Case Background
The dispute arose when the respondent, Snehasis Nanda, purchased a flat with a home loan of Rs. 17,64,644 from ICICI Bank. Later, one Mubarak Vahid Patel expressed interest in buying the flat for Rs. 32,00,000. To finance this purchase, Patel secured a loan of Rs. 23,40,000 from Citicorp Finance (India) Ltd. Since the flat was already mortgaged with ICICI Bank, Patel requested Citicorp to transfer Rs. 17,80,000 directly to ICICI Bank to clear the outstanding loan.
Nanda, however, alleged that there was a tripartite agreement among himself, Patel, and Citicorp, under which Citicorp was supposed to pay the full sale consideration. Claiming non-receipt of Rs. 13,20,000, Nanda filed a complaint with the National Consumer Disputes Redressal Commission (NCDRC), demanding compensation.
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The NCDRC ruled in favor of Nanda, ordering Citicorp to refund Rs. 13,20,000 with 12% interest per annum and an additional Rs. 1,00,000 as litigation costs.
Challenging this ruling, Citicorp Finance approached the Supreme Court.
After reviewing the case, a bench comprising Justices Sudhanshu Dhulia and Ahsanuddin Amanullah overturned the NCDRC ruling. The Court emphasized that there was no privity of contract between Citicorp and Nanda, which is an essential criterion for recognizing consumer rights under the Consumer Protection Act.
Key Observations by the Supreme Court:
- No Direct Contractual Relationship: "The respondent, having no privity of contract with the appellant, cannot be termed a ‘consumer’ under the Act. This alone was sufficient to dismiss the complaint."
- Loan Agreement Was With the Buyer, Not the Seller: The Court noted that Citicorp’s home loan agreement was with Patel (the buyer) and not with Nanda (the seller). As per legal principles, a consumer relationship arises only between the service provider and the person who directly avails the service.
- NCDRC’s Overreach in Awarding Compensation: The Court highlighted that the loan sanctioned to Patel was Rs. 23,40,000, and Citicorp had already paid Rs. 17,80,000 to ICICI Bank for loan foreclosure. Hence, there was no basis for ordering Citicorp to pay the entire Rs. 31,00,000 sale consideration.
Quote from the Judgment:
"The NCDRC erred in directing the appellant to pay Rs. 31,00,000 to both ICICI Bank and the complainant, who was not a party to the home loan agreement."
Unverified Tripartite Agreement: Nanda had relied on a tripartite agreement to establish Citicorp’s liability, but the Court noted that no signed and authenticated copy of this agreement was produced. Without this crucial evidence, the claim lacked legal standing.
Violation of Limitation Period: The Court observed that Nanda filed the complaint in 2018, nearly ten years after the cause of action arose in 2008. As per the Consumer Protection Act, complaints must be filed within two years unless there is a justified reason for delay. However, NCDRC failed to provide any valid reasoning for condoning the delay.
Non-Joinder of the Borrower (Patel): Patel, the key party who had taken the loan and was directly liable, was not made a party to the case. The Court found this omission crucial, stating that the entire transaction revolved around him.
Considering all these factors, the Supreme Court allowed Citicorp Finance’s appeal and set aside the NCDRC’s ruling.
Case Title: M/S CITICORP FINANCE (INDIA) LIMITED VERSUS SNEHASIS NANDA
