Smt. M. Hemalatha Devi & Ors. ("Appellants") filed an Appeal1 before the Hon'ble Supreme Court of India ("Supreme Court") challenging the impugned orders dated May 19, 2022 and November 25, 2022 passed by the Telangana High Court ("High Court") which dismissed the application of the Appellants to appoint an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 ("Act").
a. Smt. B. Udayasri ("Respondent") being a home buyer, had entered into an Agreement for Sale dated August 27, 2013 ("Agreement") with the Appellants who were the owners/builders. Pursuant to the Agreement, the Appellants had agreed to construct a residential house/ villa for the Respondent on or before February 27, 2017. However, in 2020, the Appellants sent a termination notice to the Respondent on the ground that the Respondent had not signed the "Construction Agreement". After sending the termination notice, the Appellant moved an application under Section 11 of the Act for the appointment of the arbitrator.
b. Meanwhile, the Respondent filed a consumer complaint before the District Consumer Forum. Further, before the Hon'ble High Court, the Respondent submitted that she had moved a complaint before judicial authority i.e. District Consumer Forum where the Appellants can file an application under Section 8 of the Act for appointment of arbitrator. Vide impugned order dated May 19, 2022, the application under Section 11 of the Appellants was dismissed and they were granted liberty to file a Section 8 application before the District Consumer Forum.
c. On filing the Section 8 application before the District Consumer Forum, the Hon'ble forum dismissed the same on the ground that although there is an arbitration clause between the parties, the same shall not oust itself from the jurisdiction of a consumer court.
d. On such dismissal, the Appellant filed a Review Petition before the Hon'ble High Court against the impugned order dated May 19, 2022 which was rejected vide order dated November 25, 2022 on the ground that the Appellant already acted upon the order dated May 19, 2022.
e. Being aggrieved by the impugned orders dated May 19, 2022 and November 25, 2022 passed by the Hon'ble High Court, the Appellant filed an Appeal before the Apex Court.
The Hon'ble Supreme Court observed as follows:
a. A consumer i.e. the Respondent has a choice under the law to either avail a remedy under the Consumer Protection Act or to go for arbitration under the Act. However, this option is not available to the builder i.e. Appellants as they are not a "Consumer" under the Consumer Protection Act, 2019. Further, the nature of the dispute will decide the forum for its redressal.
b. Even though the Appellants approached the Hon'ble High Court first for appointment of the arbitrator, the jurisdiction cannot be determined on which party approached the which court first. It is the consumer who gets to elect their choice of jurisdiction to adjudicate the dispute.
c. On relying on the judgment passed in the matter of National Seeds Corporation Limited v M. Madhusudhan Reddy and Anr.2 and Rosedale Developers Private Limited v Aghore Bhattacharya and Ors.3, the Hon'ble Supreme Court observed that the remedies provided under the Consumer Protection Act are special remedies and a consumer cannot be deprived of seeking such remedies in spite of there being an arbitration agreement between the parties.
d. As held in the matter of Emaar MGF Land Ltd. v Aftab Singh4, the Apex Court after dealing with the issue in detail held that an arbitration clause in an agreement does not bar the jurisdiction of the consumer forum to entertain a consumer complaint.
e. Even though the legislative intent for the amendment of the Act in 2019 in relation to Section 8 of the Act was to limit the judicial intervention by referring the matter to arbitration if there was a valid arbitration agreement. However, this would not cover the matters which are governed by special beneficial legislation such as the Consumer Protection Act. The provisions of the said Act were in addition to and not derogation to, any other law for the time being in force.
The Hon'ble Apex Court held the consumer had elected the District Consumer Forum for adjudication of the dispute and thus, the dispute could not be referred to arbitration on filing of Section 8 application. The Hon'ble Apex Court uphold the impugned orders dated May 19, 2022 and November 25, 2022 passed by the Hon'ble High Court.
1. Civil Appeal Nos. 6500 - 6501 of 2023
2. (2012) 2 SCC 506
3. (2018) 11 SCC 337
4. (2019) 12 SCC 751
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