TaxTMI 
TaxTMI 
2018 (12) TMI 1940
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....8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "1996 Act") by the Appellant. 3. Looking to the nature of the issue raised in these review petitions, we have heard learned Counsel for the parties on 27.11.2018 in the review petitions after issuing notice on 17.09.2018. Delay in filing of review petitions is condoned. Learned Counsel for the parties have made elaborate submissions, which we proceed to consider in these review petitions. 4. Brief facts giving rise to civil appeals and the review petitions need to be noted for appreciating the issues raised herein. The Appellant is a company which has acquired and purchased land in District 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 a villa in Sector 106, Mohali. A Buyer's agreement was entered dated 06.05.2008 between the Appellant and the Respondent. In the Buyer's agreement, there was an arbitration Clause providing for settlement of disputes between parties under the 1996 Act. On 27.07.2015, the Respondent filed a Complaint No. 701 of 2015 before the NCDRC against the Appellant prayi....
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....and passed an order dated 31.08.2016. The learned Single Member had taken the view that considering the vital importance and far reaching consequence of the legal issue involved in these applications, it would only be appropriate that these applications are considered and decided by a Larger Bench, consisting of at least Three Members. 6. In pursuance of the order of the learned Single Member, a Larger Bench of NCDRC was constituted and Consumer Complaint No. 701 of 2015 with Interim Application No. 247 of 2016 as well as interim applications filed by other complainants were heard and decided by Three Members Bench presided by President of the NCDRC vide its judgment dated 13.07.2017. The Three Members Bench have considered the submissions of the parties in detail and arrived at following conclusions in Paragraph Nos. 55 and 56: 55. 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 di....
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....in Civil Appeal No. 23512-23513 of 2017; (2) Set aside the Order dated 13.07.2017 passed by the Larger Bench of the Hon'ble National Commission in C.C. 701/2015 holding consumer disputes to be non-arbitrable amongst other similar erroneous findings; (3) Set aside the Order dated 28.08.2017 passed by the Single Judge of the Hon'ble National Commission in C.C. 701/2015 dismissing the Application Under Section 8 of the Arbitration and Conciliation Act, 1996; (4) And pass such other or further order or orders as the Hon'ble Court may deem fit and proper in the interest of justice. 8. We have heard Shri Fali S. Nariman, learned senior Counsel appearing for the Appellant and Shri Aditya Swarup, learned Counsel appearing for the Respondent No. 1. 9. Shri Fali S. Nariman in his imitable style in support of review petitions submits that substantial questions of law has been raised in the present review petitions, which need to be addressed and decided by this Court. Shri Nariman submits that after amendment of Section 8 of 1996 Act by the Arbitration and Conciliation (Amendment) Act, 2015 (Act 3 of 2016), by which Parliament had added the words "notwithstanding any....
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....e Consumer Protection Act, 1986, providing either expressly or by necessary implication that consumer disputes may not be submitted to arbitration, the law as explained in the National Seeds Corporation Limited (supra) and in Rosedale Developers Private Limited (supra) clearly shows that arbitration of consumer disputes is definitely envisaged and contemplated in the Consumer Protection Act, 1986, itself, before the amendment by way of substitution of Section 8(1) of the 1996 Act, it was at the option of the complainant (Under Section 8(1) as enacted) to either go to arbitration as provided for in the arbitration agreement or to file a complaint under the Consumer Protection Act, 1986. It is submitted that after the substitution of Section 8(1) even this option is no longer available, it being mandatory for the judicial authority (NCDRC) to refer the parties to arbitration "unless it finds that prima facie no valid arbitration agreement exists". 11. Shri Aditya Swarup, learned Counsel appearing for the Respondent in his short and impressive submissions contends that the Consumer Act, 1986 provides for an additional and beneficial remedy to the consumer to avail of the speedy, expe....
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....his Court in dismissing the appeal, hence, the present petitions are liable to be dismissed. 12. From the submissions of the learned Counsel for the parties and pleadings of the parties following are the principal issues which arise for consideration in these petitions: (i) 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 Arbitration Clause in the builders agreement? (ii) Whether after the amendments made in Section 8 by the Arbitration and Conciliation (Amendment) Act, 2015 the application filed Under Section 8 by the Appellant could not have been rejected in view of substantial changes brought in the statutory scheme by inserting the words "notwithstanding any judgment, decree or order of the Supreme Court or any Court" in Sub-section (1) of Section 8? (iii) 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? (iv) Whether by the insertion of words "notwithstanding any judgment, decree or order of the Supreme Court ....
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....oves ineffectively, inefficiently and for reasons which are not necessary to be stated. The importance of the Act lies in promoting welfare of the society by enabling the consumer to participate directly in the market economy. It attempts to remove the helplessness of a consumer which he faces against powerful business, described as, 'a network of rackets' or a society in which, 'producers have secured power' to 'rob the rest' and the might of public bodies which are degenerating into storehouses of inaction where papers do not move from one desk to another as a matter of duty and responsibility but for extraneous consideration leaving the common man helpless, bewildered and shocked. The malady is becoming so rampant, widespread and deep that the society instead of bothering, complaining and fighting against it, is accepting it as part of life. The enactment in these unbelievable yet harsh realities appears to be a silver lining, which may in course of time succeed in checking the rot. 16. Section 3 of the Act provided that the provisions of this Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force....
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....e the Consumer fora is not a legal proceedings and Commission is not a judicial authority, therefore, Section 34 of the Arbitration Act, 1940 is not available to stay the proceedings. The said order of NCDRC was challenged in this Court. This Court reversed the order of the State Commission and remitted the matter to the State Commission to decide the matter on merits according to law. This Court held that the Parliament was well aware of the Arbitration Act, 1940 when the Consumer Protection Act was enacted providing for additional remedy. In paragraphs 15 and 16 following has been laid down: 15. Accordingly, it must be held that the provisions of the Act are to be construed widely to give effect to the object and purpose of the Act. It is seen that Section 3 envisages that the provisions of the Act are in addition to and are not in derogation of any other law in force. It is true, as rightly contended by Shri Suri, that the words "in derogation of the provisions of any other law for the time being in force" would be given proper meaning and effect and if the complaint is not stayed and the parties are not relegated to the arbitration, the Act purports to operate in derogation o....
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....nstituted under the Consumer Protection Act, since the remedy provided under the Act is in addition to the provisions of any other law for the time being in force. 19. Another judgment which is relevant for the present issue is National Seeds Corporation Limited v. M. Madhusudhan Reddy and Anr. (2012) 2 SCC 506. In the above case, the Respondent filed a complaint in the District Consumer Redressal Forum that they had suffered loss due to failure of the crops/less yield because the seeds sold/supplied by the Appellant were defective. The compensation was awarded against which appeal was dismissed. The Appellant challenged the order of the Commission and main contention was that the District Forum has no jurisdiction to entertain the complaint, in view of the provisions of Seeds Act, 1966 it was contended that there was arbitration Clause contained in the agreement and the only remedy available to the Respondent is an appropriate arbitration and the District Forum has no jurisdiction to entertain the complaint. This Court repelled the submission and dismissed the appeal. In paragraph 64 this Court had noticed the contention of the Appellant which is to the following effect: 64. Ac....
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....us piece of litigation which merits nothing but dismissal at the threshold with exemplary costs. 2. The Respondents filed complaint alleging deficiency in service on the Appellant's part and claimed compensation to the tune of Rs. 17,41,09,000 with costs of Rs. 1,00,000. On being noticed by the National Commission, the Appellant filed a written statement to contest the complaint. It also filed an application Under Section 8 of the Arbitration and Conciliation Act, 1996 (for short "the 1996 Act") for making a reference to the arbitrator. A two-member Bench of the National Commission referred the matter to the larger Bench. After considering the relevant statutory provisions and adverting to several judgments including the judgments in Fair Air Engineers (P) Ltd. v. N.K. Modi; Skypak Couriers Ltd. v. Tata Chemicals Ltd. and National Seeds Corporation Ltd. v. M. Madhusudhan Reddy, the larger Bench of the National Commission held that the consumer forums constituted under the Consumer Protection Act, 1986 (for short "the 1986 Act") are not bound to refer the dispute raised in the complaint to an Arbitral Tribunal in terms of the arbitration Clause contained in the agreement enter....
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....ion, the appeal is dismissed. 25. This Court in the series of judgments as noticed above considered the provisions of Consumer Protection Act, 1986 as well as Arbitration Act, 1996 and laid down that complaint under Consumer Protection Act being a special remedy, despite there being an arbitration agreement the proceedings before Consumer Forum have to go on and no error committed by Consumer Forum on rejecting the application. There is reason for not interjecting proceedings under Consumer Protection Act on the strength an arbitration agreement by Act, 1996. The remedy under Consumer Protection Act is a remedy provided to a consumer when there is a defect in any goods or services. The complaint means any allegation in writing made by a complainant has also been explained in Section 2(c) of the Act. The remedy under the Consumer Protection Act is confined to complaint by consumer as defined under the Act for defect or deficiencies caused by a service provider, the cheap and a quick remedy has been provided to the consumer which is the object and purpose of the Act as noticed above. 26. Not only the proceedings of Consumer Protection Act, 1986 are special proceedings which were re....
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....e disputes are: (i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency and winding-up matters; (v) testamentary matters (grant of probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes. 37. It may be noticed that the cases referred to above relate to actions in rem. A right in rem is a right exercisable against the world at large, as contrasted from a right in personam which is an interest protected solely against specific individuals. Actions in personam refer to actions determining the rights and interests of the parties themselves in the subject-matter of the case, whereas actions in rem refer to actions determining the title to property and the rights of the parties, not merely among themselves but also against all persons at any time claiming....
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....arbitration agreement exists. (2) the following proviso shall be inserted, namely: "Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration Under Sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court. 30. Two more provisions of the 1996 Act need to be noted before we proceed further to consider the issues. The 1996 Act contains two Parts - Part I and Part II. Part I contains heading "Arbitration" and Part II contains heading "Enforcement of certain Foreign Awards". Chapter I of Part I is "General Provisions", in which Section 2 deals with definitions. Section 2(1) begins with the words "In this Part, unless the context otherwise requires". Section 2(1) contains definitions. Section 2(3) provides: Section 2(3) This Part shall not affect any other law for the time being in force ....
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.... No. 35 of the judgment is quoted as below: 35. Ordinarily every civil or commercial dispute whether based on contract or otherwise which is capable of being decided by a civil court is in principle capable of being adjudicated upon and resolved by arbitration "subject to the dispute being governed by the arbitration agreement" unless the jurisdiction of the Arbitral Tribunal is excluded either expressly or by necessary implication. In Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd., this Court held that (at SCC p. 546, para 35) adjudication of certain categories of proceedings is reserved by the legislature exclusively for public fora as a matter of public policy. Certain other categories of cases, though not exclusively reserved for adjudication by courts and tribunals may by necessary implication stand excluded from the purview of private fora. This Court set down certain examples of non-arbitrable disputes such as: (SCC pp. 546-47, para 36) (i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights and child custody; (iii) m....
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.... Commission on the "Arbitration and Conciliation (Amendment) Bill, 2001" was submitted by the Commission, although, the Government decided to accept the recommendations and introduced a bill namely "Arbitration and Conciliation (Amendment) Bill, 2003, the bill was referred to Department relating Standing Committee on Personnel, Public Grievances, Law and Justice for a further analysis, which opined that many provisions of the bill were insufficient hence the bill was withdrawn. The Ministry of Law and Justice issued a consultation paper and asked the Law Commission to take a study of the amendments proposed to the 1996 Act. The Law Commission submitted 246th Report "Amendments to the Arbitration and Conciliation Act, 1996 in August, 2014. The Commission in its Report has observed "judicial intervention in arbitration proceedings adds significantly to the delays in the arbitration process and ultimately negates the benefits of arbitration". Commission referring to amendments, which were recommended in Section 8 and 11 in paragraph No. 33 stated following: 33. It is in this context, the Commission has recommended amendments to Sections 8 and 11 of the Arbitration and Conciliation A....
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....y the arbitral tribunal. However, if the judicial authority concludes that the agreement does not exist, then the conclusion will be final and not prima facie. The amendment also envisages that there shall be a conclusive determination as to whether the arbitration agreement is null and void.] (iii) In Sub-section (2), after the words "duly certified copy thereof" add "or a copy accompanied by an affidavit calling upon the other party to produce the original arbitration agreement or duly certified copy thereof in a circumstance where the original arbitration agreement or duly certified copy is retained only by the other party." [NOTE: In many transactions involving Government bodies and smaller market players, the original/duly certified copy of the arbitration agreement is only retained by the former. This amendment would ensure that the latter class is not prejudiced in any manner by virtue of the same.] 38. The Commission proposed amendment in Section 11 by adding Sub-section (6A). In its Report, following Note was submitted in the above context: [NOTE: The proposed Section 11 (6A) envisages the same process of determination as is reflected in the proposed amendment to Se....
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....t of arbitrator shall be made by the Supreme Court or the High Court, as the case may be, instead of the Chief Justice of India or the Chief Justice of the High Court. Sub-section (6A) is inserted to provide that the Supreme Court or the High Court while considering application Under Sub-section (4) to (6) shall confine to the examination of an arbitration agreement.... 42. Prior to above amendment, this Court in several cases has interpreted Section 8. Several conditions for exercising power Under Section 8 were laid down by this Court. In P. Anand Gajapathi Raju and Ors. v. P.V.G. Raju (Dead) and Ors. (2000) 4 SCC 539, several conditions were noticed by this Court, which are to be satisfied before Court can exercise its power Under Section 8. In paragraph No. 5, following has been stated: 5. The conditions which are required to be satisfied Under Sub-sections (1) and (2) of Section 8 before the court can exercise its powers are: (1) there is an arbitration agreement; (2) a party to the agreement brings an action in the court against the other party; (3) subject-matter of the action is the same as the subject-matter of the arbitration agreement; (4) the other party move....
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....n is -- even if there is no provision for partly referring the dispute to arbitration, whether such a course is possible Under Section 8 of the Act. In our view, it would be difficult to give an interpretation to Section 8 under which bifurcation of the cause of action, that is to say, the subject-matter of the suit or in some cases bifurcation of the suit between parties who are parties to the arbitration agreement and others is possible. This would be laying down a totally new procedure not contemplated under the Act. If bifurcation of the subject-matter of a suit was contemplated, the legislature would have used appropriate language to permit such a course. Since there is no such indication in the language, it follows that bifurcation of the subject-matter of an action brought before a judicial authority is not allowed. 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 n....
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....an arbitration agreement. From a reading of Section 11(6-A), the intention of the legislature is crystal clear i.e. the court should and need only look into one aspect--the existence of an arbitration agreement. What are the factors for deciding as to whether there is an arbitration agreement is the next question. The resolution to that is simple--it needs to be seen if the agreement contains a Clause which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement. 48. Section 8 of the 1996 Act as amended also came for consideration in Ameet Lalchand Shah and Ors. v. Rishabh Enterprises and Anr. AIR 2018 SC 3041: (2018) 6 SCALE 621. This Court noticed the object and purpose of amended Section 8. In Paragraph No. 29 to 31, following has been laid down: 29. "Principally four amendments to Section 8(1) have been introduced by the 2015 Amendments-(i) the relevant "party" that is entitled to apply seeking reference to arbitration has been clarified/amplified to include persons claiming "through or under" such a party to the arbitration agreement; (ii) scope of examination by the judicial authority is restricted to a finding whether "n....
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....islative intent and object were confined to only above aspects and was not on those aspects, where certain disputes were not required to be referred to arbitration. Can it be said that after amendment Under Section 8(1), the law laid down by this Court in reference to Section 2(3), where large number of categories have been held to be non-arbitrable has been reversed or set at naught. Neither any such Legislature intendment was there nor any such consequence was contemplated that law laid down by this Court in context of Section 2(3) has to be ignored or reversed. 51. While carrying out amendment Under Section 8(1) of Act, 1996, the statutes providing additional remedies/special remedies were not in contemplation. The legislative intent is clear that judicial authority's discretion to refuse arbitration was minimise in respect of jurisdiction exercise by judicial authority in reference to Section 8. The amendment was also aimed to do away with special or additional remedies is not decipherable from any material. The Law Commission 246th Report, the Statement and Objects of Bill and the notes on clauses do not indicate that amendments were made for overriding special/additional....
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.... by a private forum chosen by the parties (Arbitral Tribunal) or whether such disputes exclusively fall within the domain of public fora (courts)?; (2) Whether the disputes are covered by the arbitration agreement?; and (3) Whether the parties have referred the disputes to arbitrator? 42. The question to be considered in this appeal is whether the disputes relating to affairs and management of the Trust including the disputes arising inter se trustees, beneficiaries in relation to their appointment, powers, duties, obligations, removal, etc. are capable of being settled through arbitration by taking recourse to the provisions of the Act, if there is a Clause in the trust deed to that effect or such disputes have to be decided under the Trusts Act, 1882 with the aid of forum prescribed under the said Act? 53. After noticing the issues which have arisen in the above case this Court laid down following in paragraphs 51 and 53: 51. The principle of interpretation that where a specific remedy is given, it thereby deprives the person who insists upon a remedy of any other form of remedy than that given by the statute, is one which is very familiar, and which runs through the law....