Arbitrability of Consumer Disputes
The Supreme Court in the case M/S Emaar MGF Land Limited & Anr. v. Aftab Singh (Review Petition (C) Nos 2629-2630 of 2018 in Civil Appeal Nos 23512-23513 of 2017) case deals with the issue that whether an arbitration clause in a Buyer’s Agreement ousted the jurisdiction of Consumer Forum under the amendment of Section 8 of Arbitration and Conciliation Act, 1996.
Emaar MGF, the appellant in this case, hereinafter called the Appellant purchased land in Mohali, Punjab to develop an integrated township. Mr. Aftab Singh, the respondent in this case, hereinafter called the Respondent, filed an application with the Appellant for the allotment of a Villa. The Respondent and the Appellant entered into a Buyer’s Agreement. An arbitration clause was mentioned in the agreement providing the parties to settle all disputes under the 1996 Act of Arbitration and Conciliation.
When a dispute arose between the parties, the Respondent filed a complaint with the National Consumer Disputes Redressal Commission (hereinafter, referred to as the NCDRC). The Appellant filed an application under the amended Section 8 of Arbitration and Conciliation Act, and also referred to clause 43 of the Buyer’s Agreement which was the Arbitration clause of the Agreement. The Single Judge Bench of the NCDRC referred the dispute to a three-member Bench of the NCDRC because it was of the opinion that the dispute posed a significant question of law regarding the arbitrability of consumer disputes.
The three-member Bench rejected the application of the Appellant and concluded that “The disputes which are to be adjudicated and governed by statutory enactments, established for a specific public purpose to sub-serve a particular public policy are not arbitrable.” The NCDRC held that an agreement between the parties cannot oust the jurisdiction of Consumer Fora, notwithstanding the amendment in Section 8 of the Arbitration Act.”
Subsequently, the Appellant filed an appeal before the Delhi High Court. The Delhi High Court rejected the appeal for want of jurisdiction. Thereafter, the Appellant filed civil appeals before the Supreme Court which were also refused to be entertained. Therefore, the Appellant filed a Review Petition before the Supreme Court stating that the dispute posed a significant question of law.
Amendment of Section 8 of Arbitration and Conciliation Act
The amended section 8(1) of the Arbitration and Conciliation Act, states that a judicial authority shall refer the parties to arbitration if the matter is subject to an arbitration agreement. The judicial authority has to refer the parties to arbitration, notwithstanding any judgment, decree, or order of the Supreme Court or any Court. The Amendment of 2015 restricts the power of judicial authority to refuse to refer a dispute to arbitration.
View of the Supreme Court:
Prior to the 2015 Amendment, it was upheld several times that even if a dispute is subject to an arbitration clause, the clause’s existence will not prevent an individual to exercise it’s right to file a complaint under the Consumer Protection Act. The rationale of these judgments was that Section 3 of the Consumer Protection Act states that the provisions of the Consumer Protection Act are "in addition to, and not in derogation of any other law for the time being in force."
The two-Judge Bench comprising of Justice Uday Umesh Lalit and Justice Ashok Bhushan was of the opinion that the Consumer Fora, created under the Consumer Protection Act, are at liberty to proceed with the matters, relating to the dispute, in accordance with the provisions of the Act, rather than referring the dispute to an arbitration proceeding pursuant to a contract entered into between parties. The reason is that the Act intends to relieve the consumers of the cumbersome arbitration proceedings or civil action unless the forums on their own and on the peculiar facts and circumstances of a particular case, come to the conclusion that the appropriate forum for adjudication of the disputes would be otherwise those given in the Act.
Thus, it was held that the NCDRC was right in rejecting the company’s application under Section 8 of Arbitration Act because Consumer Protection Act is special legislation and special legislation are formed for the purpose of the speedy trial. If consumer disputes are declared non- arbitrable, then it would inundate the purpose of the special legislation.