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In a Boost for Home Buyers, Supreme Court Says Arbitration Clause Won't Curtail Consumer Rights

The apex court’s disinclination to dilute the jurisdiction of the consumer fora wards off severe consequences upon consumers, who often are parties to standard form contracts or where the stipulations of the agreement are in fine print and not brought to their notice.

Utkarsh Anand | CNN-News18

Updated:March 1, 2018, 9:44 PM IST
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In a Boost for Home Buyers, Supreme Court Says Arbitration Clause Won't Curtail Consumer Rights
Labourers work at the construction site of a residential complex in Noida. (Reuters)
New Delhi: In a positive development for consumers in India, especially the home buyers, the Supreme Court has affirmed a ruling that arbitration agreements cannot oust the jurisdiction of consumer fora.

The top court order, in particular, will benefit the home buyers who usually have an arbitration clause in their agreements with the real estate companies. Such clauses lay down that in cases of disputes, aggrieved consumers will have to resort to arbitration and then the civil courts.

While consumer fora provide for speedy disposal of disputes without too much emphasis on technicalities, arbitration and civil court procedures would have compelled the consumers to submit to expensive, lengthy and cumbersome process and thus a blow for consumer rights in India.

Emphasising upon the consumer rights, a bench of Justices Adarsh K Goel and Uday U Lalit has upheld the National Consumer Commission’s judgment, which had maintained that despite an arbitration clause in the agreements, consumer could still knock on the doors of the consumer fora to seek quick redressal.

“In terms of the signed order, the appeals are dismissed. Pending applications, if any, shall also stand disposed of,” stated a recent Court order while dismissing a batch of appeals filed by Emaar MGF Land Ltd.

Emaar had challenged the Commission’s full bench verdict of July 2017 wherein the apex consumer forum ruled that 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.

Emphasising that Consumer Act continues to be a social welfare legislation, designed to protect the interests of consumers, the Commission had further noted that to deprive consumers of this remedy would set at naught the entire purpose and object of this law, “viz. to ensure speedy, just and expeditious resolution and disposal of consumer disputes".

Emaar had appealed against this order in the apex court, and placed reliance on the amended Section 8(1) of the Arbitration and Conciliation Act 1996 which require the parties to resort to arbitration.

On December 15, 2017, the Supreme Court had stayed the Commission’s order but when the matter was taken up for a final hearing recently, the bench was convinced that the judgment was in line with the purpose and objective of the Consumer Protection Act.

It said that no substantial ground was made out to entertain the appeal any further and that Emaar and all other entities were bound by the judgment of the Commission.

The apex court’s disinclination to dilute the jurisdiction of the consumer fora wards off severe consequences upon consumers, who often are parties to standard form contracts or where the stipulations of the agreement are in fine print and not brought to their notice. Moreover, many such terms and conditions tend to restrict or exclude liability under the contract, besides attempting to take away jurisdiction of various fora.

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| Edited by: Tarun Bhardwaj
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