Arbitration Clauses Do Not Bar Consumer Commissions’ Jurisdiction, NCDRC Allows Complaint Against Jai Prakash Associates Ltd.

Dharamvir Singh & Anr. v. Jai Prakash Associates Limited & Anr., Consumer Case No. 675 Of 2016, Decided on 12^th December 2023

Summary:

Jai Prakash Associates Ltd. and its subsidiary Jaypee Sports Int. Ltd. were found liable by the National Consumer Disputes Redressal Commission (‘NCDRC’), New Delhi bench, for failing to give the complainant possession of the housing unit within the allotted time. Furthermore, it was decided that the Consumer Forum’s remedies are in addition to those provided by the Arbitration and Conciliation Act of 1996, rejecting the builder’s argument that the agreement contained an arbitration clause which creates a bar from approaching a consumer forum.

Facts of the Case:

A home project called “Kassia” was reserved by Mr. Dharamvir Singh (“Complainant”) in 2011. It was developed by M/s Jaiprakash Associates Limited (“Builder”) and its subsidiary M/s Japree Sports International Limited. The builder received a deposit of Rs. 54,08,267 from the complainant for the same. After being postponed from its intended June 2013 date, the builder told the complainant that possession will be transferred by December 2015. The complainant cancelled the allocation in April 2015 and requested a refund because they were frustrated with the delay. He sent the builder emails and a legal notice requesting a refund, but the builder did not reply. Aggrieved by such actions of the builder, the complainant lodged a consumer complaint with the NCDRC.

Issues:

• Whether the complainant was an investor or a consumer?
• Whether an arbitration clause in the agreement creates a bar on the consumer from approaching consumer redressal forums?

Judgement:

The NCDRC observed that the builder failed to provide evidence supporting its claims regarding the ‘investor’ status of the complainant. Thus, it held that it could not be assumed that the purchase of the housing unit was being done for a commercial purpose. The NCDRC upheld the maintainability of the complaint as the Consumer Protection Act allows complaints exceeding Rs. 1 crore to be filed before the NCDRC, and in this case, the claimed value surpassed this threshold. Relying on the judgement in the case of Emaar MGF Land Limited Vs. Aftab Singh [(2019) 12 SCC 751], NCDRC observed that the presence of an arbitration clause in the agreement does not bar the aggrieved party from approaching the NCDRC.

Analysis:

The NCDRC has followed the footsteps of Supreme Court and held that the arbitration clause does not bar the aggrieved party from approaching the NCDRC. Taking inspiration from European Union, the government can introduce legislation on the protection of consumers’ rights in arbitration agreements. EU forbids pre-dispute binding arbitration arrangements and assumes that all consumer contracts contain premeditated arbitration clauses that are unjust unless the parties negotiate them after a disagreement develops.