SUPREME COURT HOLDS THAT AN ARBITRATION CLAUSE IN AN AGREEMENT DOES NOT RESTRICT JURISDICTION OF CONSUMER FORUMS

In the matter of M/S Emaar MGF Land Limited vs. Aftab Singh, the Supreme Court on Monday, 10^th December 2018 held that an arbitration clause in a builder-buyer agreement cannot circumscribe jurisdiction of a Consumer Forum notwithstanding amendment of Section 8 of the Arbitration and Conciliation Act, 1996.

Emaar MGF, the appellant in this case, hereinafter called the Appellant, a real estate developer purchased a land in Mohali, Punjab to develop an integrated township. Mr. Aftab Singh, buyer and respondent in this case, hereinafter called the Respondent, submitted an application for allotment in the same.

Consequently, a Buyers Agreement was formulated between the Appellant and the Respondent. In the Buyer’s agreement, there was an arbitration clause providing for the settlement of disputes between parties through arbitration.

When a dispute arose between the parties, the Respondent approached National Consumer Disputes Redressal Commission (NCDRC) and filed a complaint. The Appellant filed an application under Section 8 of the Arbitration Act and referred to clause 43 of the Buyers Agreement for referring the matter to arbitration.

A three-member Bench, rejected the Section 8 Application of the Appellant and held that the NCDRC can proceed with the complaint filed by the Respondent.

The Appellant challenged the Orders of NCDRC in the Delhi High Court. Further, the Delhi High Court held that the appeals filed by the Appellant under Section 37(1)(a) of the 1996 Act have been wrongly brought before the High Court. However, the Delhi High Court refused to entertain the appeals and returned it to be presented before the appropriate Appellate Court.

Thereafter, the Appellant then filed Civil Appeals in Supreme Court challenging the judgment of the NCDRC.

The two Judge Bench of the Supreme Court comprising of Justice Uday Umesh Lalit and Justice Ashok Bhushan, held the complaints filed under the Consumer Protection Act can also be proceeded with despite there being any arbitration agreement between the parties.

Further held that, “The remedy under Consumer Protection Act is a remedy provided to a consumer when there is a defect in any goods or services. The complaint means any allegation in writing made by a complainant has also been explained in Section 2(c) of the Act. The remedy under the Consumer Protection Act is confined to complaints by a consumer as defined under the Act for defect or deficiencies caused by a service provider, the cheap and a quick remedy has been provided to the consumer which is the object and purpose of the Act as noticed above.”

The Bench referred to the Arbitration and Conciliation (Amendment) Act, 2015 and held that, “The words “notwithstanding any judgment, decree or order of the Supreme Court or any Court” added by amendment in Section 8 were with intent to minimise the intervention of judicial authority in context of arbitration agreement. As per the amended Section 8(1), the judicial authority has only to consider the question whether the parties have a valid arbitration agreement? The Court cannot refuse to refer the parties to arbitration “unless it finds that prima facie no valid arbitration agreement exists”. The amended provision, thus, limits the intervention by judicial authority to only one aspect, i.e. refusal by judicial authority to refer is confined to only one aspect, i.e. refusal by judicial authority to refer is confined to only one aspect, when it finds that prima facie no valid arbitration agreement exists.”

Thus, the Supreme Court ruled that while carrying out amendment under Section 8(1) of Act, 1996, the statutes providing additional remedies/special remedies were not in question and concluded 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.”

Taruna Verma

Senior Associate