Consumer Protection Act: The Game of Arbitration Clause By CS Shubham Budhiraja

The Consumer Protection Act, 1986 (hereinafter CPA) is social legislation and cannot be interpreted in a technical manner as to take away its basic fundamental roots. On this note, I am obliged to share this landmark verdict decided by Hon’ble Federal court in the matter of  Emaar MGF Land Limited v.Aftab Singh Review Petition (C) Nos. 2629-2630 of 2018 in Civil Appeal Nos. 23512-23513 of 2017.  

The Brief facts of this case are that the Complainant had entered into a buyers agreement dated 06.05.2018 with the (Builder) Opposite Party whereas the agreement contains one arbitration clause according to which all disputes must bring before arbitration. Further, the cause of action arising on 27th July 2015, when the complainant filed the complaint before National commission praying the possession of said flat for which he agreed into the buyers' agreement. The Opposite Party seeks extra time and filed its written statement.

However, in the meantime, the Opposite Party invoked the arbitration clause and filed the application under section 8 of the arbitration and conciliation act, 1996. Under section 8 of the arbitration act, the Opposite Party place its reliance on section 7(2) meaning thereby the arbitration clause has the same importance as that of an arbitration agreement. i.e. Deemed Arbitration Agreement. Thus, the single member National commission referred this question before a Larger bench. The larger bench held that the arbitration clause cannot be invoked when the consumer opts to file a consumer complaint in the contrary.

Thereafter, the Builder moves before Delhi High court under section 37(1)(a) of arbitration act,1986 to set aside the order of National commission rejecting Section 8 Application. The Delhi HC rejected the said application for want of proper jurisdiction. Further, the Hon’ble Supreme court both in Civil appeal as well as Review Petition has agreed to the observations made by the larger bench, National Commission. The Ratio of this Judgment is very Important to understand for future litigations. Here the Hon’ble Supreme court Widely construe the Provisions of CPA, Provisions of Arbitration and Conciliation Act, 1996 and Arbitration and  Conciliation (Amendment) Act, 2015 in togetherness with law commission 246th Report and various Judicial Precedents.

The Court construes Section 3(2) of the Arbitration Act which recognizes the non-arbitral schemes under other legislation. The court Find Present case under the purview of this scheme only. Thereafter the court looks into the extent of Judicial Intervention under section 5. The Court also gave the example of a cheque bounce case where despite having the arbitration agreement, the dispute can only be adjudicated by a criminal court. Thus, the court finds out that the mandate of section 8 of the arbitration act is not justified in light of section 2(3) reorganization of non-arbitrable matters. The court also looks into the 246th law commission Report and Provisions of Section 8 before 2015 amendment and after 2015 amendment.
There is one matter of National Seeds Corporation Limited v. M. Madhusudhan Reddy and Anr. MANU/SC/0038/2012 : (2012) 2 SCC 506 where the Supreme court finds out that the remedy of arbitration is not the only remedy available to a grower. Rather, it is an optional remedy. He can either seek reference to an arbitrator or file a complaint under the Consumer Protection Act. If the grower opts for the remedy of arbitration, then it may be possible to say that he cannot, subsequently, file complaint under the Consumer Protection Act. However, if he chooses to file a complaint in the first instance before the competent Consumer Forum, then he cannot be denied relief by invoking Section of the Arbitration and Conciliation Act, 1996.

Moreover, the plain language of Section 
of the Consumer Protection Act makes it clear that the remedy available in that Act is in addition to and not in derogation of the provisions of any other law for the time being in force. The Court in Present case briefly explained the Right in rem and Right in persona in connection with Complaints under the Consumer Protection Act. The Court without setting aside the ratio of previous Judicial Precedents , decided a new ratio that - in the event a person entitled to seek an additional special remedy provided under the statutes does not opt for the additional/special remedy and he is a party to an arbitration agreement, there is no inhibition in disputes being proceeded in arbitration. It is only the case where specific/special remedies are provided for and which are opted by an aggrieved person that judicial authority can refuse to relegate the parties to the arbitration. 

Thus, it all depends upon the discretion of a complainant whether he opted for complaint under the consumer protection act or refer the matter to arbitration. But once he opted either of remedy, he is not allowed to take himself back and he is bound by estoppel.

Click here to read the disclaimer

Write a Comment