Consumer Forums Needn’t Refer Parties To Arbitration In Terms Of Valid Arbitration Agreement: SC Upholds NCDRC Order [Read Order]

Dismissing the appeals filed by builders, the Supreme Court has upheld the National Consumer Dispute Redressal Commission (NCDRC) order that held that arbitration clause in the agreements cannot circumscribe the jurisdiction of a consumer fora, notwithstanding the amendments made to Section 8 of the Arbitration Act.

The bench of Justice AK Goel and Justice UU Lalit had earlier issued notice on a Special Leave Petition against the order of National Consumer Dispute Redressal Commission in Aftab Singh vs. M/S EMAAR MGF Land Ltd.

The bench heard the appeals on 13 February 2018, and dismissed them observing that it does not find any ground to interfere with the NCDRC order.

Consumer Forum need not refer parties to arbitration, even if valid Arbitration clause exist

A single-member bench of the NCDRC had referred the following question to full bench: “Whether the newly inserted Sub-Section (1) of Section 8 of the Arbitration Act mandates Consumer Forums, constituted under the Consumer Act, to refer parties to Arbitration in terms of valid Arbitration Agreement, notwithstanding other provisions of the Arbitration Act and the provisions of the Consumer Act?”

The single bench had also observed that the arbitration clauses are generally contained in the buyers’ agreement between the builders and the purchasers of the plot and flats, and also in incorporation in the insurance policies and several other agreements which later on become the subject matter of the consumer disputes. Therefore, the decision of this commission on these applications is likely to impact a large number of consumer disputes, the bench had said while referring the issue to full bench.

The three-member bench of the NCDRF presided by its president Justice DK Jain, answering the reference had held that arbitration clause in the agreements cannot circumscribe the jurisdiction of a consumer fora, notwithstanding the amendments made to Section 8 of the Arbitration Act. The bench had made the following observations:

• The disputes which are to be adjudicated and governed by statutory enactments, established for specific public purpose to sub-serve a particular public policy are not arbitrable;


• There are vast domains of the legal universe that are non-arbitrable and kept at a distance from private dispute resolution;


• The subject amendment was meant for a completely different purpose, leaving status quo ante unaltered and subsequently reaffirmed and restated by the Hon’ble Supreme Court;


• Section 2(3) of the Arbitration Act recognizes schemes under other legislations that make disputes non-arbitrable.


• In light of the overall architecture of the Consumer Act and Court-evolved jurisprudence, amended sub-section (1) of Section 8 cannot be construed as a mandate to the consumer forums, constituted under the Act, to refer the parties to Arbitration in terms of the Arbitration Agreement.