The Hon’ble Supreme Court on December 10, 2018, passed a judgement in the matter of Emaar Mgf Land Ltd. v. Aftab Singh holding that the arbitration clause does not oust the jurisdiction of the Consumer Court even after the amendment to Section 8 of the Arbitration Act.  

Facts of the case: 

The Appellant is a company which had acquired and purchased land in Mohali, Punjab with a view to set up and develop thereon an integrated township.  The Respondent submitted an application to the Appellant for allotment of villa in sector 6, Mohali.  The Appellant and the Respondent entered into a Buyer’s Agreement dated May 6, 2008.  The Agreement contained an arbitration clause providing for settlement of disputes between the parties under the Arbitration and Conciliation Act, 1996.  On account of failure of the Appellant to deliver the possession of the villa, the Respondent filed Compliant No. 701 of 2015 before the National Consumer Disputes Redressal Commission (“NCDRC”).  

The Appellant filed an application under Section 8 of the Act for referring the matter to arbitration.  After taking a view that the legal issue involved in deciding the application under Section 8 of the Arbitration Act, filed by the Appellant and various other parties in other matters, would have far reaching consequences, the Learned Single Member of NCDRC, on August 31, 2016, referred the matter to be decided by a larger bench consisting of at least 3 members. The 3 Member bench presided by the President of NCDRC, passed a judgement dated July 13, 2017 inter alia holding that the arbitration clause contained in the Agreement cannot circumscribe the jurisdiction of the Consumer Fora, notwithstanding the amendments made to Section 8 of the Arbitration Act.   

Pursuant to the reference having been answered by the 3 Member bench, Complaint No. 701 of 2015 along with other applications was taken up for hearing by a Single Judge of NCDRC.  By an Order dated August 28, 2017 the Application filed by the Appellant under Section 8 of the Arbitration Act was rejected.  The Appellant thereafter filed F.A.O. No. 395 of 2017 before the Delhi High Court challenging the judgement dated July 13, 2017 and the order dated August 28, 2017.  On November 7, 2017, the Delhi High Court refused to entertain the appeals on the ground that the same have been wrongly brought before the Delhi High Court and returned the same to be presented before the appropriate Appellate Court.  

Against the order of the Delhi High Court dated November 7, 2017 the Appellant filed Civil Appeal Nos. 23512-23513 of 2017 challenging the judgement dated July 13, 2017 and the order dated August 28, 2017.  The said appeals were dismissed by the Hon’ble Supreme Court on February 13, 2018. The Appellant thereafter, filed a review petition to review the judgement dated February 13, 2018 inter alia praying for setting aside the judgement dated July 13, 2017 and the order dated August 28, 2017. 

Questions which arose of consideration: 

After hearing the parties, the questions which arose for consideration before the Hon’ble Supreme Court were as follows: 

1. Whether NCDRC committed error in rejecting the application of the Appellant filed under Section 8 of 1996 Act, praying for reference to the Arbitrator as per the Arbitration clause in the Builders Agreement? 
2. Whether after the amendment made in Section 8 by the Arbitration and Conciliation (Amendment) Act, 2015 the Application filed under Section 8 by the Appellant could have been rejected in view of substantial changes brought in the statutory scheme by inserting the words “notwithstanding any judgement, decree or Order of the Supreme Court or any Court” in sub-section 1 of Section 8? 
3. Whether NCDRC as well as this court committed error in not adverting to the above statutory amendment which completely changed the legal position as was earlier existing prior to the aforesaid amendment? 
4. Whether by insertion of the words “notwithstanding any judgement, decree or Order of the Supreme Court or any Court” under Section 8 (1) by the (Amendment) Act, 2015 legislature intended to do away with the decision of judgements of Supreme Court laying down that Consumer Protection Act being special remedy can be initiated and continued despite there being any arbitration agreement between the parties?

Supreme Court’s observation and findings: 

After adverting to various sections of the Arbitration Act, pre and post amendment and the judgements passed by the Hon’ble Supreme Court including the judgements in National Seeds Corporation Limited vs. M. Madhusudan Reddy and anr., and Sukanya Holdings (P) Ltd. Vs. Jayesh H. Pandya and Anr., the Hon’ble Supreme Court in para 46 held as under:

“46.        The law as declared by this Court in the above cases was in existence when the Law Commission submitted its 246th Report and Parliament considered the Bill, 2015 for Amendment Act, 2016.  The Law Commission itself in its Report has referred to amendment in Section 8 in context of decision of this Court in Sukanya Holdings (P) Ltd. (supra), which was clearly noticed in the Note to Section 8 as extracted above.  The words “notwithstanding any judgement, decree or order of the Supreme Court or any Court” added by amendment in Section 8 were with intent to minimise the intervention of judicial authority in context of arbitration agreement.  As per the amended Section 8(1), the judicial authority has only to consider the question whether the parties have a valid arbitration agreement?  The Court cannot refuse to refer the parties to arbitration “unless it finds that prima facie no valid arbitration agreement exists”.  The amended provision, thus, limits the intervention by judicial authority to only one aspect, i.e. refusal by judicial authority to refer is confined to only one aspect, when it finds that prima facie no valid arbitration agreement exists.  Other several conditions, which were noticed by this court in various pronouncements made prior to amendment were not to be adhered to and the Legislative intendment was clear departure from fulfilling various conditions as noticed in the judgment of P. Anand Gajapathi Raju (supra) and Sukanya Holdings (P) Ltd. (supra).” 

Further, in para 49, the Hon’ble Supreme Court has observed that: 

“49.        This Court, thus, in the above cases has noticed that amendments are expressed to apply notwithstanding any prior judicial precedents, but the scope of amendment under Section 8(1) was confined to three categories as has been noted in Paragraph No. 29.  Amendments under Section 8, thus, were aimed to minimise the scope of judicial authority to refuse reference to arbitration and only ground on which reference could have been refused was that it prima facie finds that no valid arbitration agreement exists.  Notwithstanding any prior judicial precedents referred to under Section 8(1) relates to those judicial precedents, which explained the discretion and power of judicial authority to examine various aspects while exercising power under Section 8.” 

The Hon’ble Supreme Court also held that the amendment in Section 8 cannot be given such expansive meaning and intent so as to inundate entire regime of special legislation where such disputes were held to be non arbitrable. The words “notwithstanding any judgement, decree or order of the Supreme Court or any Court” were meant only to those precedents where it was laid down that the judicial authority while making reference under Section 8 shall entitle to look into various facets of the arbitration agreement, subject matter of the arbitration whether the claim is alive or dead, whether the arbitration agreement is null and void.  The words added in Section 8 cannot be meant for any other meaning. 

The Hon’ble Supreme Court has however clarified that in the event, a person is entitled to seek an additional special remedy provided under the statutes does not opt for the additional/special remedy and he is a party to an arbitration agreement, there is no inhibition in disputes being proceeded to arbitration. It is only the cases where specific/special remedies are provided for and which are opted by an aggrieved person that judicial authority can refuse to relegate the parties to arbitration. 

Accordingly, the Hon’ble Supreme Court has upheld the judgement passed by the NCDRC and dismissed the Review Petitions.