Existence Of Arbitration Clause Doesn’t Limit Jurisdiction Of Consumer Forums Even After 2015 Amendment, Reiterates SC [Read Judgment]

“The amendment in Section 8 cannot be given such expansive meaning and intent so as to inundate entire regime of special legislations where such disputes were held to be not arbitrable”

The Supreme Court has upheld the National Consumer Dispute Redressal Commission (NCDRC) order rejecting a plea seeking reference to the arbitrator in a consumer complaint despite there being arbitration clause in the agreement entered between buyer and the builder.

On Tuesday, the bench comprising Justice Uday Umesh Lalit and Justice Ashok Bhushan dismissed the review petition filed by EMAAR MGF LAND LIMITED.

In March, the apex court, dismissing the appeals filed by builders, had upheld the NCDRC order that held that arbitration clause in the agreements cannot circumscribe the jurisdiction of consumer fora, notwithstanding the amendments made to Section 8 of the Arbitration Act.  The appeals were dismissed without stating any reasons.

The crux of the submission made on behalf of the builder, by Senior Advocate Fali S. Nariman, was that, with the enactment of the Arbitration and Conciliation (Amendment) Act, 2015, the judicial authority which includes a consumer fora 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 his first statement on the substance of the dispute.

Addressing this contention, the bench initially reproduced observations made in many judgments to the effect that the complaints filed under the Consumer Protection Act can also be proceeded with despite there being any arbitration agreement between the parties.

The bench then referred to the Amendment Act and observed: “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 context of 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.”

The court said that the legislative intent and object were confined to only above aspects and was not on those aspects, where certain disputes were not required to be referred to arbitration.

“Can it be said that after amendment under Section 8(1), the law laid down by this Court in reference to Section 2(3), where large number of categories have been held to be non-arbitrable has been reversed or set at naught. Neither any such Legislature intendment was there nor any such consequence was contemplated that law laid down by this Court in context of Section 2(3) has to be ignored or reversed,” the court said.

The court, rejecting the contention raised in review petition, said that the words “notwithstanding any judgment, decree or order of the Supreme Court or any Court” were meant only to those precedents where it was laid down that the judicial authority while making reference under Section 8 shall entitle to look into various facets of the arbitration agreement, subject matter of the arbitration whether the claim is alive or dead, whether the arbitration agreement is null and void.

While dismissing the review, the court clarified: “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.”