Arbitration Clause does not oust jurisdiction of Consumer Courts, Section 8 amendment notwithstanding, Supreme Court

Arbitration clause cannot oust the jurisdiction of consumer courts notwithstanding the amendments made to Section 8 of the Arbitration Act, the Supreme Court has held..In the review petition, a Bench of Justices UU Lalit and Ashok Bhushan stuck to its stand in its order of February 13, 2018 in Emaar MGF Land Limitd v. Aftab Singh, which had upheld the order of National Consumer Dispute Redressal Commission (NCDRC) in this regard..Senior advocates Fali Nariman appeared for the appellant while advocate Aditya Swarup and Dhruv Pall represented the respondents..Background.By way of background, there was a Buyers Agreement between the appellant Emaar MGF, a Real Estate Developer and the respondent Aftab Singh, a buyer..In the Buyer’s agreement, there was an arbitration clause providing for the settlement of disputes between parties through arbitration..When a dispute arose between the parties, the respondent approached NCDRC and filed a complaint. The appellant opposed the same and filed an application under Section 8 of the Arbitration Act for referring the matter to arbitration as per clause 43 of the Buyers Agreement..The matter initially came before a single member of the NCDRC who referred the matter to a larger Bench citing the vital importance and far-reaching consequence of the legal issues involved..A three-member Bench then heard the matter and held that disputes which are to be adjudicated and governed by statutory enactments, established for a specific public purpose to sub-serve a particular public policy are not arbitrable. Thus, an arbitration clause in a contract cannot circumscribe the jurisdiction of a Consumer Forum, notwithstanding the amendments made to Section 8 of the Arbitration Act, the NCDRC held. It, therefore, rejected the Section 8 application of the appellant and held that the NCDRC can proceed with the complaint filed by the respondent..Aggrieved, Emaar MGF challenged the same before Delhi High Court. The High Court held that the appeals filed by the appellant under Section 37(1)(a) of the 1996 Act have been wrongly brought before the High Court. It refused to entertain the appeals and returned it to be presented before the appropriate Appellate Court..The appellant then filed Civil Appeals in Supreme Court challenging the judgment of the NCDRC. The Civil Appeals were dismissed by the Supreme Court on February 13, 2018, by a two-line order which stated.“We do not find any ground to interfere with the impugned order(s). The appeals are accordingly dismissed.”.This order was assailed in the current review petition..Submissions by Parties.Senior Advocate Fali Nariman appearing for appellant Emaar MGF submitted that after the amendment of Section 8 of 1996 Act by the Arbitration and Conciliation (Amendment) Act, 2015, the Parliament had added the words “notwithstanding any judgment, decree or order of the Supreme Court or any Court”..The Parliamentary intent is that after the said amendment, the judicial authority is mandated to refer a dispute for arbitration if there is a valid arbitration agreement and parties apply not later than the date of submitting the first statement on the substance of the dispute. He submitted that the above words cannot be treated as redundant while interpreting the amended Section 8..It was argued by him that a Constitution Bench of the Supreme Court had already held that consumer fora are covered by the term “judicial authority” for the purposes of Section 8 of the 1996 Act, hence, it was obligatory for the NCDRC to refer the dispute to arbitration in view of the arbitration clause between the parties..Referring to Section 2(3) of the 1996 Act, it was submitted that it cannot be said that by reason of provision of Consumer Protection Act, consumer disputes cannot be submitted to arbitration. It was further submitted that far from the Consumer Protection Act, 1986, providing either expressly or by necessary implication that consumer disputes may not be submitted to arbitration, the law as explained in the National Seeds Corporation Limited and in Rosedale Developers Private Limited clearly showed that arbitration of consumer disputes is definitely envisaged and contemplated in the Consumer Protection Act, 1986..Advocate Aditya Swarup, appearing for the respondent contended that the Consumer Act, 1986 provides for an additional and beneficial remedy to the consumer to avail of the speedy, expeditious disposal of his or her dispute. The consequences of allowing the present petition and setting aside the impugned order would, inter alia, be that every consumer, no matter how small or big the dispute, would now be forced to adjudicate his dispute before an arbitral tribunal and not avail of the beneficial remedy provided to him or her under the 1986 Act..Accepting the interpretation placed by the appellant on the 1996 Act will mean collapsing of entire edifice of consumer jurisprudence but also jurisprudence relating to trusts, tenancy disputes, industrial disputes, telecom disputes, intellectual property disputes and other non-arbitral disputes..Section 2(3) of the Arbitration Act expressly states that Part I of the Arbitration Act “shall not affect any other law for the time being in force by virtue of which certain disputes may not be referred to arbitration”. Under this Section, if any law provides, either expressly or by necessary implication that specified disputes may not be submitted to arbitration, then, in spite of the non-obstante provision in Section 5 of the Arbitration Act, the law will be saved by Section 2(3) of the Arbitration Act..Section 2(3) of the Arbitration Act restricts the overriding effect apparent in Section 5 of the Arbitration Act. The Consumer Act being a beneficial legislation enacted to give an additional remedy for the settlement of disputes, the same cannot be taken away by Section 8 of the 1996 Act, Swarup argued..Regarding, the amendment to Section 8(1) of the Arbitration Act, Swarup submitted that it was never intended to interfere with the jurisdiction of Consumer Forum to decide consumer disputes..Judgment.The Supreme Court at the outset made it clear that in a series of judgments which had considered the provisions of Consumer Protection Act, 1986 as well as Arbitration Act, 1996, the Supreme Court had laid down that complaint under Consumer Protection Act is a special remedy. Thus, proceedings before Consumer Forum have to go on despite there being an arbitration agreement..On the reasons for not interjecting proceedings under the Consumer Protection Act on the strength of an arbitration agreement, the Court stated:.“The remedy under Consumer Protection Act is a remedy provided to a consumer when there is a defect in any goods or services. The complaint means any allegation in writing made by a complainant has also been explained in Section 2(c) of the Act. The remedy under the Consumer Protection Act is confined to complaints by a consumer as defined under the Act for defect or deficiencies caused by a service provider, the cheap and a quick remedy has been provided to the consumer which is the object and purpose of the Act as noticed above.”.Besides the proceedings of Consumer Protection Act, 1986, there are a large number of other fields where an arbitration agreement can neither stop nor stultify the proceedings. For example, any action of a party, omission or commission of a person which amounts to an offence has to be examined by a criminal court and no amount of agreement between the parties shall be relevant for the said case, the Court noted..However, the Court also proceeded to consider in detail the effect and consequences of the above-stated position of law consequent to the amendments to Section 8..It first noted the legislative intent behind the amendment. The amendment was brought about by the Parliament after taking into consideration the 246th Law Commission Report..The Commission in its Report had observed that “judicial intervention in arbitration proceedings adds significantly to the delays in the arbitration process and ultimately negates the benefits of arbitration”..After taking into consideration the Report of the Law Commission, a Bill namely “The Arbitration and Conciliation (Amendment) Bill, 2015” was submitted and the amendments were made to Section 8..The Court noted that the words “notwithstanding any judgment, decree or order of the Supreme Court or any Court” added by amendment in Section 8 were with intent to minimise the intervention of judicial authority in the context of an arbitration agreement..“As per the amended Section 8(1), the judicial authority has only to consider the question whether the parties have a valid arbitration agreement? The Court cannot refuse to refer the parties to arbitration “unless it finds that prima facie no valid arbitration agreement exists”. The amended provision, thus, limits the intervention by judicial authority to only one aspect, i.e. refusal by judicial authority to refer is confined to only one aspect, when it finds that prima facie no valid arbitration agreement exists.”.Thus, it ruled that while carrying out amendment under Section 8(1) of Act, 1996, the statutes providing additional remedies/special remedies were not in contemplation. That the amendment was also aimed to do away with special or additional remedies is not decipherable from any material, the Court stated..The Court placed heavy reliance on Booz Allen and Hamilton Inc. vs. SBI Home Finance Limited and others wherein it had been held by the Supreme Court that disputes within the trust, trustees and beneficiaries are not capable of being decided by the arbitrator despite the existence of arbitration clause to that effect between the parties..“This Court held that the remedy provided under the Arbitration Act for deciding such disputes is barred by implication. The ratio laid down in the above case is fully applicable with regard to disputes raised in consumer fora.”.The Court, however, made it clear 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..It, therefore, dismissed the review petition..Read the judgment below.