The Consumer Protection Act stands as a beacon of consumer empowerment and protection in the modern era. In contrast to the Arbitration and Conciliation Act, which primarily addresses commercial disputes, the Consumer Protection Act places the well-being of individuals at the forefront by rolling the cog wheels of summary process while adjudicating on the veritable bedlam of "unfair trade practices" and "deficiency in services". Recently the Supreme Court yet again found itself at the interplay of these two legislations holding the consumer disputes to be non-arbitrable.
The Apex Court relying heavily on its landmark judgement titled M/s Emaar MGF Land Limited v Aftab Singh1, refused a reference to arbitration in a dispute between the builders and home buyer while dismissing the application under section 11 of the Arbitration Act, 1996 for appointment of arbitrator. Emphasizing that the home buyers fall under the category of consumers who cannot be forced into arbitration despite being a party to the valid arbitration agreements, the Court has catapulted the entire nexus between invocation of a judicial authority despite existence of an arbitration agreement into a "choice" of the consumer. Ousting the periphery of first approach by filing the application under Section 11 by the builder for appointment of arbitrator, it has been laid that the true question lies in the choice of the consumer between submitting before a private forum i.e., Arbitral Tribunal or the public fora i.e., filing a complaint before Consumer Courts and not which party approached the court first, effectively alienating the builders from the category of consumers.
The complainant/home buyer in the present dispute had booked residential villas in a township project being constructed by the builders and signed a builder-buyer agreement which contained an arbitration clause for settlement of disputes However, the home buyer initiated a consumer complaint against the homebuyers. The builders while terminating the agreement challenged the orders of Telangana High Court which refused to appoint an arbitrator on the ground that the dispute was pending before the District Consumer Disputes Redressal Forum. The builders meanwhile also moved an application under Section 8 of the Arbitration Act for referring the dispute to arbitration. The District Consumer Forum dismissed the application on the ground that the dispute was non-arbitrable. The builders challenged this in the High Court in a review application, which was also subsequently dismissed.
Jurisdiction And Non-Arbitrable Disputes
The judgment clearly specifies that a mere application by the builder under Section 11 of the Arbitration Act doesn't overthrow the jurisdiction of Consumer Courts. Moreover, the Court has laid down the determining factors for the jurisdiction of the court like nature of dispute, the public policy in the matter, the will of the legislature, the choice of the consumer amongst others. This is in addition to the restricted category of matters that do not fall under the purview of arbitration as envisaged by this Court in Booz Allen and Hamilton Inc. vs. SBI Home Finance Limited and others2 including i) criminal offences (ii) matrimonial disputes (iii) matters of guardianship (iv) insolvency and winding-up (v) eviction or (vi) tenancy matters (vii) patents/trademarks/competition laws and (viii) disputes relating to trust, trustees and beneficiaries arising out of trust deed. The Court has clarified that these seven classes of actions operate in rem, which is a right exercisable against the world in contrast to a right in personam which is an interest protected against specified individuals. Every dispute which relates to rights in personam are amenable to arbitration while right in rem are essentially adjudicated by courts at large and public tribunals.
A Social-Welfare Legislation
The Court reiterating the intention of legislature while enacting the Consumer Protection Act as enunciated by it in National Seeds Corporation Limited3 broke down Section 3 of the CPA which mentions that the provisions of the Act are in addition to and not in derogation of any other provisions of any other law for the time being in force. The purpose of the Act is clearly stipulated through the above stated scheme which seeks to protect the interest of the consumer by interpreting the provisions broadly, positively, and purposefully. Keeping this in mind the legislative intent of the CPA, according to the Supreme Court, was to provide consumers with an exceptional remedy, which is easier, expeditious and cost effective. The Court has held that arbitration is not the only remedy available to the consumer and they can seek either reference to arbitration or file a complaint under the CPA, however, a consumer can never be forced to opt a remedy exclusively under the Arbitration Act despite having a valid arbitration agreement as envisaged under the contract.
Limited Scope Of Arbitration Act
The judgement establishing both Section 8 and Section 11 of the Arbitration Act, 1996 as complementary provisions has elucidated upon their meaning, nature and implication. The amendment to both the sections was based on the 246th Law Commission Report which aimed to restrict the judicial intervention in arbitration by just determining the existence of a valid arbitration agreement. But acting as the stalwart of the consumer interests per se, the Court has held that existence of Section 8 and Section 11 does not mean to refer a dispute to arbitration where the matter is non arbitrable or is covered under a special legislation like CPA.
The Supreme Court through its judgement in the case of M. Hemalatha Devi & Ors V. B. Udayasri4 effectively strikes a delicate balance between two enactments by preserving the interests of home buyers from the malady of concentration of power in the hands of few. The judgement re-affirms the non-arbitral nature of certain classes of dispute which are amenable to other statutory enactments created to serve particular social legislative intention on the premise of a particular public policy. By refusing to intervene in the orders passed by the Telangana High Court in dismissing the application for appointment of arbitrator, the Court has rightly held that mere existence of arbitration agreement between the parties and invocation of the same under section11 of the Arbitration Act doesn't bar the consumer from initiating judicial proceedings under the Consumer Protection Act.
1. M/s Emaar MGF Land Limited v Aftab Singh decided on 10 December 2018 in Review Petition (C) Nos. 2629- 2630 of 2018.
2. (2011) 5 SCC 532.
3. Civil Appeal No.4519 of 2009
4. 2023 LiveLaw (SC) 902
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