Consumer VOICE

Builders can’t force buyers to go for arbitration or mediation

Here is some good news for buyers of real estate property. India’s Apex Court has ruled that real estate players cannot force buyers to settle their disputes through arbitration by stopping them from approaching consumer forums.  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. However, this issue was 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 Act and Conciliation Act 1996 ('the Amended Act').

Real estate buyers can now make a choice between arbitration and consumer forum like NCDRC

Case of Aftab Singh v Emaar MGF Land Limited & Anr

In the case of Aftab Singh v Emaar MGF Land Limited & Anr [Consumer Case No 701 of 2015] , 30 individual cases were filed against a Builder Emaar MGF Land Limited and one case against another builder where the Complainants had booked residential villas or flats or plots in the project of the builders. Every agreement contained an arbitration clause in it. 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 and thus filed complaints before the Single Member of the NCDRC, seeking directions to the builders for delivery and possession of the villas, etc. and/or, in alternative, refund the amounts deposited by them, along with compensation. On the other hand, the Builders filed an application under Section 8 of Arbitration Act praying for reference to arbitration as the agreement contained a valid arbitration clause.

Judgement

While delivering the judgment of Aftab Singh v Emaar MGF Land Limited & Anr [Consumer Case No 701 of 2015], Commission relied on Booz Allen Hamilton Inc v SBI Home Finance Ltd [(2011) 5 SCC 532], where the SC said that the Arbitral Tribunals are private forum chosen voluntarily by the parties to the dispute, to adjudicate their disputes in place of courts and tribunals which are public forum constituted under the laws of the country.

The bench further observed, "the disputes which are to be adjudicated and governed by statutory enactments, established for specific purpose to sub-serve a particular public policy, are not arbitrable."

The NCDRC finally held that in light of the overall architecture of the Consumer Protection Act and Court-evolved jurisprudence, amended sub-section (1) of Section 8 cannot be construed as a mandate to the Consumer Forum, constituted under the CPA, to refer the parties to arbitration in terms of the Arbitration Agreement. Applications of builders were dismissed and each of the cases referred back to the respective NCDRC benches for adjudication. 

What is Arbitration?

In simpler words arbitration is mediation or out of court settlement of disputes between two parties.

What is Arbitration Act?

Section 8 of the amended Arbitration Act says a judicial authority will refer for arbitration only those cases where there is an arbitration agreement, and one of the parties files an application seeking arbitration before submitting their first statement on dispute.

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