NCDRC: The Presence Of An Arbitration Clause In The Agreement Does Not Bar The Jurisdiction Of The Consumer Fora

Smita Singh

4 May 2023 3:15 PM GMT

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  • NCDRC: The Presence Of An Arbitration Clause In The Agreement Does Not Bar The Jurisdiction Of The Consumer Fora
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    The National Consumer Dispute Redressal Commission (NCDRC) recently addressed a case involving allegations of non-delivery of possession of a villa, despite payment of instalments. The bench, comprising presiding member Justice R.K. Agarwal, held that the consumer court retains the power to handle complaints, even if there is an arbitration clause in the agreement. Additionally,...

    The National Consumer Dispute Redressal Commission (NCDRC) recently addressed a case involving allegations of non-delivery of possession of a villa, despite payment of instalments. The bench, comprising presiding member Justice R.K. Agarwal, held that the consumer court retains the power to handle complaints, even if there is an arbitration clause in the agreement. Additionally, the commission clarified that the burden of proof lies with the opposite party when arguing that the complainant does not qualify as a 'consumer' under the Consumer Protection Act, 2019.

    Brief Facts:

    The Opposite Party, M/S Emaar MGF Land Limited (“Developer”) advertised a residential colony called 'The Villas' with facilities such as car parking spaces, recreational facilities, and landscaped gardens. Based on the advertisement, the Complainants booked a villa and paid a deposit of ₹11,00,000/-. The Buyer's Agreement was signed in 2008, and possession was supposed to be given by 2010. However, the Developer kept delaying possession, and no construction work had progressed for three years when the Complainants checked the site in 2015. As a result, the Complainants had to stay in a rented accommodation. The Complainants asked for a refund with interest and compensation in 2015, but nothing happened. Therefore, the Complainants filed a Complaint in the NCDRC alleging deficiency of service and unfair trade practice on the part of the developer, praying for a refund of the money they paid with interest, compensation for harassment, mental agony, and litigation expenses.

    On the other hand, the Developer argued that disputes should be resolved through arbitration according to the Buyer’s Agreement. They also argued that the Arbitration and Conciliation Act, of 1996 has an overriding effect over the Consumer Protection Act which makes it mandatory for the Commission to refer the matter to arbitration. Further, the Developer argued that the Complainants cannot be considered as 'consumers' under Section 2(1)(d)(ii) of the Act because they booked the Villa for investment purposes and not for personal use. They also argued that the Complaint should be dismissed because the Complainants were not seeking possession of the Villa, and they had failed to make timely payments.

    Observations by the Commission:

    The Commission referred to the Supreme Court case called M/s Emaar MGF Land Limited vs. Aftab Singh - I (2019) CPJ 5 (SC) where the court held that the existence of an Arbitration clause in the Agreement does not bar the jurisdiction of the Consumer Forums to entertain the Complaint. The Commission rejected the Developer's argument that the arbitration clause prevented the consumer court from hearing the case. Thus, the Developer's request to refer the case to arbitration was dismissed.

    Regarding whether the Complainants were 'consumers' under the definition of the Consumer Protection Act, the Commission answered in the affirmative, relying on the NCDRC judgment in Kavita Ahuja vs. Shipra Estates I (2016) CPJ 31, wherein it was enumerated that the burden of proof that the Complainant was dealing in real estate for profit lies with the Opposite Party. The developer failed to provide any evidence to support his claim. Therefore, the Complainants were considered consumers under Section 2 (1)(d) of the Act, and the Complaint was found to fall under the jurisdiction of the Commission.

    Case: Dr. Satpal Kaur Nalwa & Anr. v. M/S. Emaar Mgf Land Limited & Anr.

    Case No.: Consumer Case No. 854 Of 2016

    Counsel for the Complainant: Ms Rarannum Cheema and Mr Akash Singh

    Counsel for the Opposite Party: Mr Aditya Narain and Mr Mishra Raj Shekhar

    Click Here To Read/Download Order

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