No Privity, No Liability: Supreme Court Sets Aside ₹13.2 Lakh Compensation Award by NCDRC, Says Complainant Not a 'Consumer'

Unsigned, Unstamped, and Partly Blank Document Cannot Prove a Tripartite Agreement — Supreme Court of India, in a significant decision in M/s Citicorp Finance (India) Ltd. vs. Snehasis Nanda, reversed the findings of the National Consumer Disputes Redressal Commission (NCDRC), which had directed Citicorp to pay ₹13.2 lakhs with interest to the complainant. The Court held that in the absence of any contractual relationship, the complainant was not a "consumer" under the Consumer Protection Act, 1986, and thus could not invoke consumer jurisdiction.

“The Respondent Had No Privity of Contract With the Appellant”—Court Finds No Basis for Consumer Claim

The genesis of the dispute lay in a real estate sale transaction where Snehasis Nanda, the respondent, had agreed to sell his flat to one Mubarak Vahid Patel. The buyer arranged a housing loan from Citicorp Finance. Of the agreed ₹32 lakhs sale price, ₹17.8 lakhs was paid directly to ICICI Bank by Citicorp to foreclose Nanda’s existing mortgage. The remaining ₹13.2 lakhs was never paid to Nanda, prompting him to file a complaint under the Consumer Protection Act, alleging deficiency of service by Citicorp.

The Court categorically rejected this plea, holding: “In the specific factual setting, 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.”

It held that Nanda was neither a party to the home loan agreement nor did he hire any services from Citicorp. Thus, there existed no legal relationship warranting compensation under consumer law.

“Consumer Forum Cannot Assume Existence of Tripartite Agreement Without Proof”—Court Rebukes Presumption Without Evidence

The respondent's primary argument was based on the alleged existence of a Tripartite Agreement dated 09.02.2008 between himself, the borrower, and Citicorp Finance, which supposedly obliged the financier to disburse the remaining sale consideration directly to him.

The Supreme Court found this argument to be without evidentiary support: “The complainant produced before the NCDRC an unsigned, unstamped and partly blank document, which he asserts is the Tripartite Agreement.”

“Non-production of the (complete) Tripartite Agreement, if at all there was one, would lead to an adverse inference… and under normal circumstances, as also in the present case, against the complainant-respondent, and not against the appellant.”

The Court noted that the NCDRC erroneously shifted the burden of proof onto Citicorp, when in law it squarely lay upon the person asserting the existence of the agreement.

“Loan Was Sanctioned to the Buyer, Not to the Seller”—Court Holds That Citicorp Could Not Be Saddled With Liability to Pay Sale Consideration

The Court further clarified that Citicorp Finance had entered into a loan agreement only with the buyer, Patel, and the sanctioned loan amount was ₹23.4 lakhs, not ₹31 lakhs as claimed.

Citicorp had disbursed ₹17.8 lakhs to ICICI Bank to foreclose the seller’s mortgage and issued a cheque for ₹5.09 lakhs to the borrower. The cheque was never encashed, and the borrower closed the loan account. In such a scenario, the Court held:

“Even taking the respondent’s case at the highest, the appellant could not have been saddled with having to pay more than what was envisaged under the Home Loan Agreement.”

“The NCDRC could not have, under any circumstance, taken a view that the appellant was liable to pay ₹31 lakhs both to ICICI Bank as well as to the complainant-respondent.”

“The Respondent Is Not a ‘Consumer’ Under the Act”—Court Clarifies That Consumer Jurisdiction Cannot Be Stretched Beyond Contractual Framework

The respondent had earlier relied on an interim order passed by the Supreme Court in 2019, which had remanded the case to the NCDRC, stating that he “prima facie” appeared to be a consumer. The Court clarified that this was not a final determination, and that the burden remained on the complainant to prove his consumer status.

“A bare glance at the Order dated 06.09.2019 makes it clear that this Court had nowhere conclusively held that the respondent-complainant was a ‘consumer’ under the Act.”

“The NCDRC in the Impugned Order has offered no reasoning on how the respondent was a ‘consumer’ under the Act.”

The Court relied on precedents including Indian Oil Corporation v. Consumer Protection Council, Kerala and Janpriya Buildestate v. Amit Soni, reiterating that a complaint under the Act can only succeed where there is a “deficiency of service” based on contractual obligation.

“Complaint Barred by Limitation—No Order Condoning Delay Was Passed”: Court Points Out Fatal Jurisdictional Lapse

The consumer complaint was filed 10 years after the cause of action, without any formal application or order seeking condonation of delay. This, the Court held, was a fundamental jurisdictional error: “Despite the appellant raising the issue of limitation, the Impugned Order is silent on the said score.”

“The NCDRC ought to have passed a reasoned order condoning the delay or refusing to condone the delay.”

“Borrower Was a Necessary Party—His Absence Vitiates the Proceedings”: Supreme Court Flags Non-Joinder of Vital Party

The Supreme Court also found procedural fault with the non-joinder of the borrower, who was at the center of all agreements and was the only link between the complainant and Citicorp Finance.

“The borrower would be a necessary party in the complaint.”

“If the borrower had been arrayed as an Opposite Party in the NCDRC, the question of whether a Tripartite Agreement was duly executed and existed or not, could perhaps have been answered.”

The Court held that no order could be passed effectively in his absence, and this omission was fatal to the complaint’s maintainability.

“Consumer Forum Jurisdiction Cannot Override Arbitration—But Only the Consumer Has the Choice”: Arbitration Clause Cannot Rescue Claim of Non-Consumer

Though the respondent relied on a Tripartite Agreement that allegedly included an arbitration clause, the Court held that consumer disputes can override arbitration only if the complainant is a genuine 'consumer', which was not the case here.

“As the appellant is not a ‘consumer’ in terms of the Act and the existence of the Tripartite Agreement is doubtful, we need not dwell further hereon.”

Supreme Court Sets Aside NCDRC Order, Restores Legal Discipline in Consumer Law Jurisdiction

In conclusion, the Supreme Court allowed the appeal and set aside the NCDRC’s order in entirety, holding that the complaint was not maintainable, barred by limitation, and vitiated by absence of contractual relationship and non-joinder of necessary parties.

“On an overall circumspection of the facts and circumstances of the case coupled with a survey of the precedents, we find that the Impugned Order cannot be sustained.”

The appeal was allowed without costs, and the Court clarified that the respondent is free to seek civil remedies against the borrower if advised, but not under the Consumer Protection Act.

Date of Decision: March 20, 2025