Should Consumer Forums Refer Parties To Arbitration In Terms Of Valid Arbitration Agreement: SC To Examine [Read Order]

NCDRF 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 Supreme Court will examine an important question whether the amended section 8(1) of the Arbitration and Conciliation Act mandates the consumer forums to refer parties to arbitration in terms of valid Arbitration Agreement.

A bench of Justice AK Goel and Justice UU Lalit 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, and observed: “Shri Fali S Nariman learned senior counsel has invited our attention to the amended Section 8(1) of the Arbitration and Conciliation Act 1996. Issue notice…”

Staying the judgment of the NCDRC, the bench has posted the case in February for final disposal.

Consumer Forum needs not refer parties to arbitration, even if valid Arbitration clause exists

A single member bench of the National Consumer Dispute Redressal Commission had referred the following question to the 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.

A 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 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.