Complaint Not Maintainable If Arbitration Award Is Passed Before Filing Consumer Case: Chhattisgarh State Consumer Commission - 2025-01-09

Reliable Legal Information.

Consumer Forums Cannot Hear Complaints After Arbitration Award, Rules Chhattisgarh State Commission

Raipur, Chhattisgarh – In a significant ruling clarifying the jurisdiction of consumer forums, the Chhattisgarh State Consumer Disputes Redressal Commission has held that a consumer complaint is not maintainable if an arbitration award concerning the same dispute has already been passed before the complaint was filed. The Commission set aside a District Forum order that had directed IndusInd Bank to issue a loan closure certificate to a borrower.

The bench, comprising President Justice Gautam Chourdiya and Member Pramod Kumar Verma , allowed an appeal filed by IndusInd Bank, stating that the District Commission had erred in entertaining the complaint as the matter had already been decided through arbitration.

Case Background

The case originated from a complaint filed by Mr. Vijendra Gupta, who had purchased a Tata truck in March 2016 with a ₹21 lakh loan from IndusInd Bank. The truck, insured by Cholamandalam MS General Insurance, was stolen in May 2016, just two months after its purchase.

Following the theft, a complex series of events unfolded. An initial police report led the insurance company to settle a partial claim with the bank. However, the truck was later recovered by the police, leading the bank to return the claim amount to the insurer. A prior consumer complaint resulted in an order for the insurance company to assess the damage to the recovered vehicle.

Dissatisfied with the subsequent proceedings, Mr. Gupta filed a fresh complaint in January 2020 before the District Consumer Commission, Sarguja. On July 18, 2023, the District Commission partially allowed his plea, directing the insurance company to pay ₹2,09,000 and, crucially, ordering IndusInd Bank to issue a "No Dues Certificate" to Mr. Gupta. Aggrieved by this direction, IndusInd Bank appealed to the State Commission.

Arguments Before the State Commission

IndusInd Bank (Appellant) argued that Mr. Gupta had defaulted on his loan payments after the first two installments. Consequently, the bank initiated arbitration proceedings as per the loan agreement. An arbitration award was passed against Mr. Gupta on July 6, 2018, well before he filed the consumer complaint in 2020. The bank further submitted that the truck was repossessed in November 2020 due to non-payment and sold at auction, with the proceeds adjusted against the outstanding loan of ₹17.60 lakh. Since the arbitration award was final and binding, and Mr. Gupta had not challenged it under Section 34 of the Arbitration and Conciliation Act, 1996, the consumer forum lacked jurisdiction to hear the matter.

Vijendra Gupta (Respondent) supported the District Commission's order, contending that the bank's actions constituted a deficiency in service and that the direction to issue a "No Dues Certificate" was justified.

Commission's Analysis and Precedents

The State Commission found the bank's arguments compelling. The pivotal fact was the timing of the arbitration award relative to the filing of the consumer complaint. The Commission noted that the arbitration award was passed in July 2018, whereas the complaint was filed in January 2020. Mr. Gupta had failed to disclose the existence of the arbitration proceedings in his complaint.

The Commission cited key precedents from the National Consumer Disputes Redressal Commission (NCDRC) to support its decision. It referred to Jitendra Kumar Dev (Since Dead) Through LRs. Vs. Mangma Finance Corporation Ltd. & Anr. , where the NCDRC held that a consumer complaint is not maintainable when an arbitration award has already been passed.

Similarly, in Mir Alam Vs. Magma Finance Corporation , the NCDRC had established that consumer protection authorities do not exercise supervisory or appellate powers over an arbitrator's award. The appropriate remedy for the complainant would have been to challenge the award under the Arbitration Act.

Final Judgment

Based on these principles, the State Commission concluded that the District Commission had acted without jurisdiction.

"In this case, the arbitrator passed the final award on 06-07-2018, after which the respondent No. 1/complainant instituted the present complaint before the concerned District Commission on 15-01-2020, which the Consumer Commission does not have the jurisdiction to hear. However, ignoring this fact, the concerned District Commission has passed an erroneous order which is not liable to be sustained."

The Commission allowed IndusInd Bank's appeal, setting aside the District Commission's order dated July 18, 2023, and consequently dismissing Mr. Gupta's original complaint. This judgment reinforces the legal principle that once a party has availed the remedy of arbitration and an award has been rendered, they cannot subsequently approach a consumer forum for relief on the same cause of action.