Builders Can't Force Buyers To Go For Arbitration

It is a well settled law that arbitration agreements do not bar the jurisdiction of the National Consumer Disputes Redressal Commission (‘NCDRC’) and other consumer forums. The issue was, however, reconsidered at length by a Full Bench of the NCDRC, in Aftab Singh v Emaar MGF Land Limited &Anr [Consumer Case No 701 of 2015] in view of the amendments to the Arbitration and Conciliation Act 1996 (‘the Amended Act’).

The Full Bench was constituted pursuant to a referral by the Single Bench on 31 August 2016. In its decision of 13 July 2017, the NCDRC has once again reiterated that since the Consumer Courts are special courts constituted to serve a social purpose, the Amended Act does not apply to them.

Facts:

The dispute before the NCDRC was between real estate buyers (‘Buyers’) and a property developer (‘Builder’). The grievance of the Buyers was that the Builder failed to deliver possession of the real estate within the time stipulated by the agreement between them.

The Buyers contended that the remedies provided by the Consumer Protection Act 1986 (‘Consumer Act‘) are in addition to and not in exclusion of other laws in force. Even under the Amended Act, the intent of the legislature is not to bar the jurisdiction of the Consumer Courts, where an arbitration clause exists. The existing interplay between the Consumer Act and the Amended Act remains unaffected. The decision of the Supreme Court in National Seeds Corporation Limited v M Madhusudhan Reddy [(2012) 2 SCC 506] where the court had ruled that consumer disputes cannot be referred to arbitration, continued to apply. It was also argued that the Consumer Act is a beneficial legislation and, therefore, the intention behind its enactment ought to be advanced.