An interesting question which has emanated from some recent judgments, is the quandary of the arbitration clause in an arbitration agreement and the remedy of consumer complaints under the Consumer Protection Act. Numerous judgments have vehemently held that consumer disputes are non-arbitrable in nature and consumers cannot be compelled into arbitration. Per contra, the courts have also held that the presence of an Arbitration Clause does not bar the jurisdiction of the consumer fora. Now, the question that emerges from the various judgments is when should an arbitration clause be invoked by the parties, should it be invoked before approaching the consumer fora, or will the presence of the arbitration clause not restrain the parties from knocking the door of the consumer fora? This article will try to discuss this interesting proposition of law as to whether the arbitration clause bars the jurisdiction of the consumer fora or, whether the consumer fora retains the power to handle consumer complaints, notwithstanding the arbitration clause.
In the case of Emaar MGF Land Ltd. v. Aftab Singh, Review Petition (C) Nos. 2629-2630 of 2018, the Supreme Court of India issued a ruling that clarified the relationship between arbitration clauses in contracts and the authority of the consumer forum. It was held that the arbitration clause in an agreement does not prevent the consumer forum from using its authority to hear consumer complaints. The court upheld the consumer’s ability to seek remedies from the consumer forum, even in cases where a contract contained an arbitration clause. The purpose of the Consumer Protection Act is to spare customers from onerous arbitration procedures or civil suits. Consumer forums are empowered to decide cases under the Consumer Protection Act unless they determine that another forum would be more appropriate in a given situation. Arbitration may proceed without obstruction, if a party to an arbitration agreement who is eligible to file a consumer complaint chooses not to do so.
The judgment in Emaar MGF Land Ltd. (supra) has also been relied upon by the Hon’ble NCDRC in a catena of judgments such as Dr. Satpal Kaur Nalwa & Anr. v. M/s Emaar MGF Land Limited & Anr., Consumer Case No. 854 of 2016 as well as in Dharamvir Singh & Anr. v. Jai Prakash Associates Limited & Anr., Consumer Case No. 675 of 2016, wherein it was held that an arbitration clause in an agreement does not bar the jurisdiction of the consumer fora to entertain the complaint.
These judgments are categorical in their findings that an arbitration clause will not drive out the authority of the consumer fora in entertaining consumer disputes. The remedies under the Consumer Protection Act and the arbitration act are different and the proceedings can continue simultaneously.
In another case of Smt. M. Hemalatha Devi & Ors. v. B. Udayasri, Civil Appeal Nos. 6500 6501 of 2023, the Supreme Court held that the Consumer Protection Act offers specific remedies to consumers that are not negated by an arbitration agreement between the parties because it is a specialized and beneficial piece of legislation. It was observed that it was not possible to waive the consumer’s inalienable right to seek redress through the Consumer Forum, particularly in cases of defective goods or services, by consenting to arbitration. It was stressed that even in cases containing an arbitration agreement, the Consumer Protection Act proceedings are distinct and have no bearing on the presence of an arbitration clause. Moreover, the 1996 amendment to Sections 8 and 11 of the Arbitration Act were primarily intended by the legislature to limit the amount of judicial intervention. This does not, however, imply that non-arbitrable matters such as those covered by special laws like the Consumer Protection Act must be referred to arbitration. Essentially, the courts have emphasized that, even though legitimate arbitration agreements are valid, the general rule still stands that disputes that are not amenable to arbitration, particularly those which are governed by specialized laws, should not be compelled for redressal through arbitration.
The Supreme Court, however, in the case of Imperia Structures Ltd. v. Anil Patni, Civil Appeal No. 3581-3590 of 2020, held that the nature of remedies under the Consumer Protection Act are in addition to those offered by special statutes. The court emphasized that the remedies provided by any special legislation pertaining to the matter are not exclusive and are instead supplemented by those available through the Consumer Protection Act. Again, in National Seeds Corporation Limited v M Madhusudhan Reddy, Civil Appeal No. 7543 of 2004, the Supreme Court held that despite the arbitration clause in the contract, the consumer is not required to seek a remedy solely under the Arbitration Act, 1996, instead, they may file a complaint under the Consumer Protection Act or request a reference to arbitration.
The Judgments in Imperia Structures (supra) as well as in Smt. M. Hemalatha Devi & Ors (supra) have taken the view that arbitration in consumer disputes are non-arbitrable in nature and parties cannot be compelled into arbitration just because they are a signatory to an arbitration agreement.
From a recapitulation of the aforementioned judgments, it can be concluded that there is no conflict between the Consumer Protection Act and the Arbitration Act. An arbitration clause does not oust the jurisdiction of the consumer fora and the consumers can approach the consumer fora even without invoking the arbitration clause in their agreement. If a consumer dispute is non-arbitrable, then the parties must approach the consumer fora instead of seeking remedies under the arbitration act. It has to be borne in mind that the Consumer Protection Act is an enactment, enacted for the general welfare of the public and to protect consumer rights. Therefore, it is sine qua non that the parties to a dispute choose arbitration of their own free will instead of taking recourse to the remedies under the Consumer Protection Act otherwise the consumer disputes will fall into the category of disputes which are non-arbitrable and cannot be adjudicated by an arbitrator. It needs to be seen whether the parties who are signatories to an arbitration agreement can be forced into an arbitration when the disputes can be redressed through the Consumer Protection Act or whether such disputes are non-arbitrable? The apex court needs to throw some light on the aspect of arbitration clauses that are mutually consented to by the parties and their fate especially when there are consumer disputes between the parties as the presence of an arbitration clause cannot be done away with, just because the parties have entered the arena of consumer law.
The above discussion also throws another very important question open and that is with regard to international disputes involving buyers and sellers across borders wherein their agreements have the presence of an arbitration clause and the nature of their redressal. In such a scenario, the writer poses a question to herself and that is what will be the destiny of such an international dispute which cannot be taken to a consumer forum governed by the Consumer Protection Act and whether the Supreme Court’s reasoning that the consumer disputes are non-arbitrable, will apply in such a situation, where there is absolutely no role of the act and all that the parties have at their disposal, is the invocation of the arbitrable clause, though it is a consumer dispute. Will the arbitration clause become redundant or will it beat the ambit and sweep of the Arbitration Act i.e. amicable settlement of disputes without court intervention?