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Arbitration cannot put fetters on the King: “Consumer”

January 10, 2019

 “A Legislation cannot be given such expansive meaning and intent as to inundate entire regime of special legislations in scenarios where disputes are not arbitrable.”[1]

The Hon’ble Supreme Court in its recent judgment in the case of M/s Emaar MGF Land Limited v Aftab Singh[2] has held that any dispute which is to be adjudicated and governed by statutory enactments, established for specific public purpose to sub-serve a particular public policy would stand non- arbitral.

The decision was based on the premise that consumer disputes are of a public nature and consequently, the remedies under the Arbitration and Conciliation Act, 1996 are barred by implication. The Hon’ble Supreme Court further held that there are vast domains of the legal universe which are non-arbitral and kept at a distance from private dispute resolution.

Brief facts of the case

The above-mentioned judgment deals with a dispute arising out of a builder- buyer agreement wherein, the complainant (Aftab Singh) filed a complaint alleging delay in delivery of possession by the respondent (Emaar MGF Land Limited) before the National Consumer Dispute Redressal Commission (NCDRC), further praying to direct the respondent(s) to deliver the possession of the said villa.

Consequently, NCDRC unhesitatingly held that an Arbitration Clause in the aforesaid kind of Agreements between the Complainants and the Builder cannot circumscribe the jurisdiction of a Consumer Fora, notwithstanding the amendments made to Section 8 of the Arbitration Act. The respondent (Appellant herein) preferred connected appeals before the Delhi High Court against the impugned judgment passed by the NCDRC, however, High Court did not entertain the appeals as they were barred by jurisdiction. Further, the Appellant preferred Civil Appeals before the Supreme Court which were dismissed because the Court found no grounds to interfere with the impugned order of the NCDRC. Consequently, preferred review petitions against Supreme Court order dismissing the appeal.

Issues involved

After hearing both the parties at a length and reviewing the submissions of the learned counsels   the Hon’ble Supreme Court framed the following issues which arose for consideration out of the review petitions:

  • Whether NCDRC committed error in rejecting the application of the appellant filed under Section 8 of Arbitration Act, 1996?
  • The Interpretation of “notwithstanding any judgment, decree or order of the Supreme Court or any court”? [3]
  • Whether by the insertion of words “notwithstanding any judgment, decree or order of the Supreme Court or any Court” Under Section 8(1) of the Arbitration and Conciliation Act, 2015 legislature intended to do away with the decision of judgments of Supreme Court laying down that Consumer Protection Act being special remedy can be initiated and continued despite there being any arbitration agreement between the parties?

Analysis of the Decision:

The Hon’ble Supreme Court thoroughly analyzed and scrutinized Section 8 of the Arbitration and Conciliation Act after taking into consideration the report of the Law Commission and Hon’ble Supreme Court’s interpretation of Section 8 of the Act prior to the amendment.

The Hon’ble Court proceeded by examining the 246th Law Commission Report to understand the purpose behind amendment of Section 8 of the Amended Act. The Law Commission in its Report explained the proposed amendment to Section 8 and that the intent was to minimize the intervention of judicial authority in context of arbitration agreement and simultaneously, the statutes providing additional remedies/special remedies were not in contemplation.

The Hon’ble Court further relied upon its decision in a landmark judgment[4] wherein the object and scope of the Consumer Protection Legislation was examined and it was consequently held that it is a beneficial legislation which provides prompt, expeditious and meteoric remedies to aggrieved consumers (buyer in this case).The full bench of the NCDRC in its judgment categorically relied upon Hon’ble Supreme Court Judgement Booz Allen Hamilton Inc v SBI Home Finance Ltd [5] wherein the Supreme Court had laid down 7 categories of non-arbitral disputes.

The Hon’ble Court further laid down that in the event a person entitled to seek an additional special remedy, as provided under the statute, does not opt for the additional/special remedy and he is a party to Arbitration Agreement, then there is no inhibition in disputes being referred to arbitration.

 

[1]  Review Petition (C) 2629-2630 of 2018 dated 10.12.2018

[2] Review Petition (C) Nos 2629-2630 of 2018 in Civil Appeal Nos 23512-23513 of 2017

[3]National Seeds Corporation Limited v. M. Madhusudhan Reddy and Anr : (2012) 2 SCC 506

[4] (1994) 1 SCC 243)

[5] [(2011) 5 SCC 532]

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