Arbitration clause won’t curtail consumer rights: Supreme Court

NEW DELHI: Keeping in mind the interest of consumers, especially home buyers, the Supreme Court has affirmed a ruling that arbitration agreements cannot curtail the jurisdiction of the consumer forum. A bench of Justices Adarsh K Goel and Uday U Lalit has upheld the National Consumer Disputes Redressal Commission’s judgment, which stated that despite an arbitration clause in the homebuyers’ agreements with real estate firms, consumers could still knock on the doors of consumer fora to seek quick redressal.

The order will benefit home buyers, who usually have an arbitration clause in their agreements, which mandates that in case of a dispute, they will have to resort to arbitration and then the civil courts. While a consumer forum provides for speedy disposal of disputes without too much emphasis on technicalities, arbitration and civil court procedures could compel the consumers to submit to expensive, lengthy and cumbersome process and thus violates consumer rights in India.

The SC order came on a batch of appeals filed by Emaar MGF Land Ltd, which had challenged the Commission’s full bench verdict of July 2017. The apex consumer forum had ruled that the authority and jurisdiction of consumer fora could not be circumscribed by an arbitration clause. According to the Commission, consumer disputes are not capable of being settled by arbitration and that the jurisdiction of the consumer fora to adjudicate upon consumer disputes is not affected by Section 8 (as amended) of the Arbitration and Conciliation Act, 1996, that mandates reference to arbitration.