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Consumer Protection Act: The Game of Arbitration Clause

The Consumer Protection act, 1986 (hereinafter CPA) is a social legislation and cannot be interpreted in as 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 matter of Emaar MGF Land Limited v/s 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 contain one arbitration clause according to which all disputes must bring before arbitration. Further the cause of action arise 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 arbitration and conciliation act, 1996. Under section 8 of 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 Larger bench. The larger bench held that the arbitration clause cannot be invoked when the consumer opt to file consumer complaint in 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 have 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 construe Section 3(2) of arbitration act which recognize the non arbitral schemes under other legislation. The court Find Present case under purview of this scheme only. Thereafter the court look into extent of Judicial Intervention under section 5. The Court also gave the example of a cheque bounce case where despite of having the arbitration agreement , the dispute can only be adjudicated by criminal court. Thus, the court find out that the mandate of section 8 of arbitration act is not justified in light of section 2(3) reorganization of non-arbitarble matters. The court also look into 246th law commission Repot 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 find out that the remedy of arbitration is not the only remedy available to a grower. Rather, it is an optional remedy. He caneither 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 8 of the Arbitration and Conciliation Act, 1996.

Moreover, the plain language of Section 3 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 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 discretion of a complainant whether he opted for complaint under 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.

Written By: Shubham Budhiraja, The author is company secretary by qualification and is undergoing its management trainee with a reputed corporate law firm. Further, he is First Year Law student at faculty of law, University of Delhi. He is also enrolled as Para Legal volunteer with Delhi State Legal Service authority and also active Participant in Moot Court.
Ph no: +919654055315
Email: [email protected], [email protected]

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