December 12,2018:

Supreme Court has expounded that,"Arbitration clause cannot oust jurisdiction of consumer courts notwithstanding the amendments made to Section 8 of the Arbitration Act".

Apex Court Bench comprising of Justice UU Lalit and Justice Ashok Bhushan while hearing a review petition refused to amend their order in which Bench had upheld order of National Consumer Dispute Redressal Commission (NCDRC) in this regard.

In the Buyers Agreement between the appellant Emaar MGF, a Real Estate Developer and the respondent Aftab Singh, a buyer, there was an arbitration clause providing for settlement of disputes between parties through arbitration. When a dispute arose between the parties, the respondent approached NCDRC and filed a complaint. Appellant opposed the same and filed an application under Section 8 of the Arbitration Act for referring the matter to arbitration as per clause 43 of the Buyers Agreement.

Three-member Bench of NCDRC enunciated that 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. Thus, an arbitration clause in a contract cannot circumscribe the jurisdiction of a Consumer Forum, notwithstanding the amendments made to Section 8 of the Arbitration Act, the NCDRC held.

Commission rejected Section 8 application of the appellant and added that NCDRC can proceed with the complaint filed by the respondent.

Emaar MGF challenged the order before Delhi High Court, who refused to entertain Appeals and returned it to be presented before appropriate Appellate Court.

Emaar then filed Civil Appeals in Supreme Court challenging the judgment of the NCDRC which was dismissed by the Supreme Court.

Apex Court Bench stated that prior judgments of SC which have taken into consideration provisions of Consumer Protection Act, 1986 as well as Arbitration Act, 1996 and have laid down that complaint under Consumer Protection Act is a special remedy. Thus, proceedings before Consumer Forum have to go on despite there being an arbitration agreement.

The SC Bench in its judgment had stated that,“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.”

SC Bench while relied on Booz Allen and Hamilton Inc. vs. SBI Home Finance Limited and others which had held that Supreme Court that disputes within the trust, trustees and beneficiaries are not capable of being decided by the arbitrator despite the existence of arbitration clause to that effect between the parties.

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Supreme Court Judgment on Arbitration Clause and Consumer Protection Act (Download PDF)

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