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2023 Supreme(SC) 1132

SUPREME COURT OF INDIA
SANJAY KISHAN KAUL, SUDHANSHU DHULIA, JJ.
M. Hemalatha Devi and Others – Appellants
Versus
B. Udayasri – Respondent
Civil Appeal Nos. 6500-6501 of 2023, SLP (C) Nos. 4849-4850 of 2023
Decided On : 05-10-2023

Advocates appeared:
For the Petitioner(s): Mr. Kishore Rai, Sr. Adv. Mr. Roy Abraham, Adv. Ms. Reena Roy, Adv. Mr. Akhil Abraham, Adv. Mr. Yaduinder Lal, Adv. Mr. Himinder Lal, AOR
For the Respondent(s): Mr. Krishna Dev Jagarlamudi, Adv. Ms. Inderdeep Kaur Raina, Adv. Ms. Bhabna Das, AOR

Headnote:[ARBITRATION] - [CONSUMER PROTECTION] - [Arbitration and Conciliation Act, 1996: Sections 8, 11(4), 11(5), 11(6), 11(6A); Consumer Protection Act, 2019] - [The court examined the applicability of arbitration under the Arbitration and Conciliation Act, 1996 in the context of consumer disputes under the Consumer Protection Act, 2019. Key legal provisions include Section 8, which allows a judicial authority to refer parties to arbitration if there is an arbitration agreement, and Section 11, which pertains to the appointment of arbitrators. The court highlighted that not all disputes are arbitrable and that consumer disputes are typically assigned to public fora as a matter of public policy. The court also discussed the amendment to Section 11(6A), which limits the examination to the existence of an arbitration agreement, notwithstanding any judgment or order. The court's decision was influenced by the interpretation of these provisions and the recognition of the Consumer Protection Act as a special legislation providing additional remedies to consumers.]

Fact of the Case:

The appellants (builders) failed to deliver a constructed villa to the respondent (buyer/consumer) within the stipulated time, leading to the consumer filing a complaint with the District Consumer Forum. The builders sought arbitration under the Arbitration Act, 1996, but the High Court and the District Consumer Forum dismissed their applications, citing the non-arbitrability of consumer disputes under the Consumer Protection Act, 2019.

Finding of the Court:

The court found that the High Court correctly dismissed the application for arbitration, as consumer disputes are non-arbitrable and are to be addressed by consumer forums as per the Consumer Protection Act, 2019. The court observed that the amendments to the Arbitration Act do not change the nature of consumer disputes as non-arbitrable.

Ratio Decidendi:

The court held that the existence of an arbitration clause does not bar the jurisdiction of consumer forums, and consumer disputes are non-arbitrable as they are assigned to public fora by legislation. The court also noted that the amendments to the Arbitration Act, specifically Section 11(6A), do not mandate referral to arbitration in cases where the dispute is non-arbitrable. [FINAL DECISION] The appeals were dismissed, upholding the orders of the High Court and the District Consumer Forum.

Judgement Key Points

Key Points: - Consumer disputes are non-arbitrable and must be addressed by consumer forums as per the Consumer Protection Act, 2019 (!) (!) . - The existence of an arbitration clause does not bar the jurisdiction of consumer forums when a consumer opts for the public remedy (!) (!) . - Amendments to Section 11(6A) and Section 8(1) of the Arbitration Act do not mandate referral to arbitration for non-arbitrable disputes (!) (!) . - Consumer protection legislation provides additional remedies that cannot be ousted by an arbitration agreement if the consumer chooses the public forum (!) (!) . - Consumer disputes are assigned to public fora as a matter of public policy, excluding them from private arbitration tribunals (!) . - The High Court correctly dismissed the application for arbitration as the dispute was pending before a Judicial Authority (District Consumer Forum) (!) (!) . - A consumer has the option to choose between arbitration or the Consumer Forum, but cannot be forced into arbitration once they avail the public remedy (!) (!) . - The remedies under the Consumer Protection Act are in addition to and not in derogation of other laws for the time being in force (!) .

What are the rights of a consumer regarding the choice between arbitration and public forums under the Consumer Protection Act?

What is the arbitrability of consumer disputes under the Arbitration and Conciliation Act, 1996 post-2016 amendments?

How to determine if a dispute falls under non-arbitrable categories reserved for public fora?


JUDGMENT :

SUDHANSHU DHULIA, J.

1. Leave granted.

2. The appellants before this Court have challenged two orders of the Telangana High Court. The first is the order dated 19.05.2022, dismissing the application of the appellants filed for the appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 (for short ‘Arbitration Act 1996’). It was dismissed by the High Court on the ground that the dispute was pending before a Judicial Authority, which is the District Consumer Disputes Redressal Forum (for short ‘District Consumer Forum’), where a complaint has been filed by the other party to the agreement, who is a consumer and therefore the appellants have the option to move an application under Section 8 of the Arbitration Act, 1996 for reference before Arbitration. Consequently, the appellants moved an application for referring the dispute for arbitration. The District Consumer Forum dismissed this application on the ground that the complainant has invoked a public law remedy before a “Judicial Authority” under a beneficial legislation for consumers, which is the Consumer Protection Act, 2019 (hereinafter referred to as ‘The 2019 Act”) and therefore under the facts and circumstances of this case, the dispute is non-arbitrable. Consequent to the dismissal of their application under Section 8 of the Arbitration Act, 1996, the appellants filed a Review Application before the High Court for review of its earlier order dated 19.05.2022. This Review Application was dismissed vide the second order of the High Court dated 25.11.2022, (which is again impugned before this Court), on the ground that the appellants had already acted upon the order dated 19.05.2022 and therefore is now estopped from seeking review of the order dated 19.05.2022. It is these two orders which are under challenge before this Court.

3. The facts as they stand today are that the complaint filed by the consumer (the sole respondent before this Court), has already been allowed by the District Consumer Forum and the builders (i.e. the appellants before this Court), have been directed to handover the possession of the plot along with the constructed villa and pay a compensation of Rs. 15,00,000/- (Rupees Fifteen Lakh Only) and a cost of Rs.1,00,000/- (Rupees One Lakh Only) with default stipulation. The findings given by the District Consumer Forum disclose the reasons as to why the builder backed out of its promise and made a default:

    “.......the opposite party no. 3 had chosen to send the termination notices and sought for execution of cancellation deed knowing that the value of the plot had escalated to more than 10 times from the date of agreement and the opposite parties wanted to take the benefit of such rise in price value. The opposite party no. 3 did not fix any reasonable time for performance of his obligation though time for handing over the possession was agreed by the opposite party no. 3 in the agreement of sale. The opposite party no. 3 had issued termination notice in the year 2020 though he failed to keep his promise of handing over the possession of the Villa by March, 2017.

    The failure of the developer, who is also the land owner in the present case, to hand over the possession of the residential property to the complainant-purchaser within the contractually stipulated time count as a deficiency. There exists fault, shortcoming or inadequacy in the nature and manner of the action which has been undertaken to be executed in the implementation of the contract with regard to the service to be provided by the opposite parties. The terms of the agreement of sale have been drafted keeping in mind the interest of the developer (opposite party no. 3). The trade practice which tends to bring about restrictive trade practice, manipulation of price or its conditions of delivery or to affect now of supplies in the market relating t

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