Consumers Cannot be Compelled to Arbitrate Disputes

[Guest post by Ajar Rab, Partner, Rab & Rab Associates LLP, Dehradun]


Earlier this year, in an article titled Redressal Mechanism under the Real Estate (Regulation and Development) Act 2016: Ouster of the Arbitration Tribunal?, I had argued that even after the amendment to section 8 of the Arbitration & Conciliation Act, 1996 (“Arbitration Act”), the parties can continue to choose remedies available under specific statutes such as the Consumer Protection Act, 1986 (“COPRA”) or the Real Estate (Regulation & Development) Act, 2016 (“RERA”) and that the courts shall not be bound to refer the parties to arbitration.

After an analysis of the arbitrability of disputes, the article concluded that the view taken by the Supreme Court in Natraj Studios (P) Ltd. v. Navrang Studios[1] with respect to ouster of arbitration proceedings in the presence of specific statutes enacted for social welfare and with a public policy objective was the more pragmatic view. The underlying rationale was that one should not be permitted to contract out of a statute, especially when the legislation has been enacted to serve certain social objectives.

NCDRC Decision

In a recent decision in Aftab Singh v. Emaar MGF Land Limited & Anr. (issued on 13 July 2017), following the amendment to section 8 of the Arbitration Act, the National Consumer Disputes Redressal Commission (“NCDRC”) has reaffirmed the same view and has held that the jurisdiction of consumer forums and commissions is not barred by the presence of an arbitration clause. The NCDRC stated:

In view of the afore-going discussion, we arrive at the following conclusions: (i) the disputes which are to be adjudicated and governed by statutory enactments, established for specific public purpose to sub-serve a particular public policy are not arbitrable; (ii) there are vast domains of the legal universe that are non-arbitrable and kept at a distance from private dispute resolution; (iii) the subject amendment was meant for a completely different purpose, leaving status quo ante unaltered and subsequently reaffirmed and restated by the Hon’ble Supreme Court; (iv) Section 2(3) of the Arbitration Act recognizes schemes under other legislations that make disputes non-arbitrable and (iv) in light of the overall architecture of the Consumer Act and Court-evolved jurisprudence, amended sub-section (1) of Section 8 cannot be construed as a mandate to the Consumer Forums, constituted under the Act, to refer the parties to Arbitration in terms of the Arbitration Agreement.


Though the judgment may be challenged before the Supreme Court, it is argued that the view is based on sound reasoning. If parties are permitted to contract out of statutory remedies, especially in cases where legislation has been enacted to remedy a specific social problem, it would defeat the purpose of such legislation. Furthermore, in cases where the bargaining power between parties is uneven, such as consumer disputes, real estate disputes, etc., forcing the parties to go to arbitration may not only add substantial litigation costs in some cases and leave the consumers further disadvantaged, but may also serve as a deterrent to seek redressal of their grievances. In addition, there are provisions for time bound dispute resolution and some specific provisions such as refund of the payment along with interest in 45 days from the date of claim under the RERA, which may be incapable of being provided by the arbitration tribunal.

While the view of the NCDRC is restricted to consumer disputes under the COPRA, the reasoning may well be extended to special legislations such as the RERA as well. Though it may be a while before the jurisprudence on the RERA develops, this judgment will certainly benefit consumers and help establish a settled position of law with respect to non-arbitrability of disputes in the presence of specific dispute resolution mechanisms under various legislations.    

– Ajar Rab

[1] Natraj Studios (P) Ltd. v. Navrang Studios, (1981) 1 SCC 523: (1981) 2 SCR 466.

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1 comment

  • OFFHAND The title head of the write-up, prima facie, does not, -pending a closer look through, – seem to be readily reconcilable with the view- points based on case law as discussed. Further, it appears worthwhile to test those views and cited case law, in comparison with one’s own line of thoughts as shared in the related previous Posts.More so, having in focus the field reality that , in framing the Rules many of the states have blatantly failed to duly reflect /reciprocate the laudable objective of the central RERA legislation and the model rules, specimen documentation such as, ‘Agreement to Sell’ , etc., as envisaged therein.

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