India: Consumer Rights And Arbitration Agreements - A Balancing Act

Last Updated: 6 February 2018
Article by Ajit Warrier

A Division Bench of the Supreme Court of India has decided to examine the correctness of a judgment of the National Consumer Disputes Redressal Commission, New Delhi ("NCDRC") in Aftab Singh and others vs. Emaar MGF Land Limited and others1, which has inter alia held that consumer disputes are not capable of being settled by arbitration.

The batch of matters is expected to be taken up for final disposal on February 7, 2018. This article explores whether the line of reasoning preferred by the NCDRC is likely to invite a more critical scrutiny by the Supreme Court.

The matters arose out of certain complaints filed before the NCDRC by individual allottees of villas/flats/plots in a residential project in Gurugram/Mohali. The complainants alleged that the Builder (the appellant before the Supreme Court) had failed to deliver possession of the villas/flats/plots by the dates committed in the Flat Buyers Agreement and had sought delivery of possession, or in lieu thereof, refund of the amounts deposited by them along with compensation. The Builder, in response, referred to the existence of an arbitration agreement in the Flat Buyers Agreements with the individual allottees and sought reference to arbitration, relying upon the amended sub-Section (1) of Section 8 of the Arbitration and Conciliation Act, 1996 ("the Arbitration Act")2.

The batch matters were referred by a Single Member of the NCDRC to a three member Bench. The larger Bench framed the issue for adjudication as under:

"Whether the Arbitration Act mandates Consumer Forums, constituted under the Consumer Protection Act, 1986 ("the Consumer Act"), to refer parties to arbitration in terms of a valid arbitration agreement, notwithstanding other provisions of the Arbitration Act and the Consumer Act?"

Answering the reference, the larger Bench held that

  1. the Consumer Act is a special social legislation enacted to protect consumer rights, which establishes a level-playing field between unequal players, i.e. consumers and large Corporations, and is quite unlike other legislations that create dispute resolution mechanisms between level players3.
  2. by virtue of Section 2(3) thereof, the Arbitration Act itself excludes from its purview certain disputes which fall within the public law regime and with respect to which statutory remedies are put into place to subserve a public policy. Since consumer disputes would fall within the umbrella of the said provision, they were not intended to be covered by the amendment to Section 8 of the Arbitration Act.
  3. the jurisdiction of the Consumer Forums to adjudicate upon consumer disputes is not affected by either Section 8 (as amended) of the Arbitration Act or by any other provision thereof.
  4. to accept the plea of the Builder would be to set at naught the entire purpose and object of the Consumer Act, viz. to ensure speedy, just and expeditious resolution and disposal of consumer disputes.

Although the conclusions reached by the NCDRC appear, at face value, to be justified, the author believes that the Supreme Court will likely examine the reasoning of the NCDRC critically for the following reasons.

Firstly, as has been noted by a two Judges Bench of the Supreme Court in A. Ayyasamy vs. A. Paramasivam and others4, the Arbitration Act does not make any specific provision excluding any category of disputes treating them as non-arbitrable. In fact, Justice (Dr.) A.K. Sikri notes, in his pithy judgment in the said case, that even while Sections 34(2)(b) and 48(2) of the Arbitration Act, inter alia, provide that an arbitral award may be set aside if the Court finds that the "subject matter of the dispute is not capable of settlement by arbitration under the law for the time being in force", the necessary pre-requisite is that there should be a law which makes subject matter of a dispute incapable of settlement by arbitration. It is difficult to point to any provision in the Consumer Act which would suggest a legislative intention that every consumer dispute5 is incapable of settlement by arbitration.

This view also finds support from Section 2(3) of the Arbitration Act, which states that 'This Part (referring to Part I) shall not affect any other law for the time being in force by virtue of which certain disputes may not be referred to arbitration'. While the NCDRC has dealt with, and indeed drawn support from, the said provision in its judgment to hold that consumer disputes are inherently non-arbitrable, it is difficult to reconcile such a conclusion with the mandate of Section 3 of the Consumer Act which states that the provisions of the said Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force. Even the Supreme Court had held in umpteen judgments that the import of this provision in the Consumer Act is only to provide a remedy for certain classes of consumer actions in addition to the conventional courts6.

Thirdly, the conclusion drawn by the NCDRC with respect to consumer disputes being non-arbitrable is beset with serious difficulty. In fact, in its seminal judgment in Booz Allen and Hamilton Inc. vs. SBI Home Finance Limited and others7, the Supreme Court observed that every civil or commercial dispute, either contractual or non-contractual, which can be decided by a court, is in principle capable of being adjudicated and resolved by arbitration unless the jurisdiction of the Arbitral Tribunals is excluded either expressly or by necessary implication. The Supreme Court further observed that adjudication of certain categories of proceedings are reserved by the legislature exclusively for public fora as a matter of public policy. It was further observed that certain other categories of cases though not expressly reserved for adjudication by public fora (courts and tribunals) may, by necessary implication, stand excluded from the purview of private fora. Clarifying further, it listed certain examples of non-arbitrable disputes, namely

  • disputes relating to rights and liabilities which give rise to or arise out of criminal offences,
  • matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody,
  • Guardianship matters,
  • Insolvency and winding-up matters,
  • Testamentary matters (grant of probate, letters of administration and succession certificate), and
  • Eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes.

To this category of non-arbitrable disputes, the Supreme Court, in Vimal Kishor Shah and others vs. Jayesh Dinesh Shah and others8, added a seventh category of cases, namely cases arising out of trust deeds and the Trusts Act, 1882 which cannot be decided by an Arbitrator. More recently, in A. Ayyasamy9, the Supreme Court held that where serious and complicated allegations of fraud are raised, the matter cannot be referred to arbitration.

The broad reasoning provided by the Supreme Court for carving out these exceptions was that these relate to actions in rem, which refer to actions determining the right to property and the rights of the parties, not merely among themselves but also against all persons at any time claiming an interest in that property. In contrast, an action in personam refers to actions determining the rights and interests of the parties themselves in the subject matter of the case (as distinguished from a judgment against a thing, right or status). It was further held that generally and traditionally, all disputes relating to rights in personam are considered to be amenable to arbitration, whereas all disputes relating to rights in rem are required to be adjudicated by courts and public tribunals, being unsuited for private arbitration.

A scrutiny of the Consumer Act reveals that two broad categories of cases are envisaged thereunder. The first category of cases are complaints filed under Section 12(1)(a) by a consumer in relation to any goods sold or delivered or agreed to be sold or delivered or any service provided or agreed to be provided. It would be rather difficult to propound a sweeping proposition that even in such cases brought by an individual consumer the matter would necessarily involve determination of a right in rem.

On the other hand, Section 12(1)(c) envisages the filing of a complaint by one or more consumers, with the permission of the District Forum, as a representative of numerous consumers having the same interest. Similarly Section 12(1)(d) empowers the Central Government or the State Government to inter alia file a complaint as a representative of interests of the consumers in general. Arguably, in this second category of cases, issues could arise for adjudication involving rights in rem.

In the author's opinion, the Supreme Court should attempt to reconcile the seemingly divergent mandates of the two statutes by requiring the Consumer Forum to examine, in light of principles as may be laid down, whether a given consumer dispute brought before it ought to be referred to arbitration10 when an application under Section 8(1) of the Arbitration Act is moved seeking reference to arbitration. In other words, while determining whether a consumer dispute ought to be referred to arbitration, the Consumer Forum would have to focus on the nature of dispute brought before it, as opposed to the mere circumstance of filing of a consumer complaint before it. That will, to a great extent, obviate the difficulties presented by the conclusion of the NCDRC that a consumer dispute is not capable of settlement by arbitration.

Such a harmonious construction will also help ensure that a fine balancing act is achieved between the legislative philosophy and social objective behind the enactment of such a special law for consumers and the legislative mandate of the law governing arbitrations.

Originally published by Bar & Bench.


[1] Reported as MANU/CF/0480/2017, decided on 13 July 2017.

[2] As amended by the Arbitration & Conciliation (Amendment) Act, 2015, with effect from 23 October 2015.

[3] Reliance was placed by the NCDRC on the Supreme Court judgment in Lucknow Development Authority vs. M.K. Gupta, (1994) 1 SCC 243.

[4] (2016) 10 SCC 386

[5]The term 'consumer dispute' is defined under Section 2(e) of the Consumer Act to mean a dispute where the person, against whom a complaint (alleging commission of certain objectionable practices as outlined in Section 2(c) thereof) has been made, denies or disputes the allegations in the complaint.

[6] Fair Air Engineers Pvt. Ltd. and another vs. N.K. Modi (1996) 6 SCC 385; CCI Chambers Coop. HSG. Society Ltd. vs Development Credit Bank Ltd. (2003) 7 SCC 233

[7] (2011) 5 SCC 532

[8] (2016) 8 SCC 788.

[9] Supra.

[10] Mustill and Boyd in their Law and Practice of Commercial Arbitration in England (2nd Edn., 1989), cited in Booz Allen & Hamilton Inc. (supra).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Practice Guides
by Mondaq Advice Centres
Relevancy Powered by MondaqAI
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions