TaxTMI 
TaxTMI 
2018 (12) TMI 1940
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.... of the NCDRC dismissing the application filed Under Section 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 Compl....
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....e parties to the arbitration. A learned Single Member of the Commission proceeded to consider the said applications 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....
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....made by the Appellant: (1) Allow the present review petition and review the Order dated 13.02.2018 passed by this Hon'ble Court 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 amen....
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....it cannot be said that by reason of provision of Consumer Protection Act, consumer disputes cannot be submitted to arbitration. It is further submitted that far from the 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 ....
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....he intention of the Parliament. He submits that the NCDRC has rightly rejected the application Under Section 8 filed by the Appellant and no error has been committed by this 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 c....
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....ory. Various legislations and Regulations permitting the State to intervene and protect interest of the consumers have become a haven for unscrupulous ones as the enforcement machinery either does not move or it moves 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....
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....a complaint before the State Commission under the Consumer Protection At, 1986 which proceedings were stayed by the State Commission and it relegated the parties to arbitration proceedings. The NCDRC held that the proceedings before 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....
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....an arbitration Clause in an agreement and a complaint is made by the consumer, in relation to a certain deficiency of service, then the existence of an arbitration Clause will not be a bar to the entertainment of the complaint by the Redressal Agency, constituted 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 a....
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....2013, DLF Ltd. v. Mridul Estate (P) Ltd. 338b(sic)) passed by the National Consumer Disputes Redressal Commission (for short "the National Commission") whereby the Appellant's prayer for making a reference to the arbitrator was rejected can appropriately be termed as a frivolous 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 Benc....
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....bove stated legal position, the National Commission did not commit any error by holding that the remedy of arbitration available to the complainant does not bar the jurisdiction of the consumer forums and the consumer forums are not under an obligation to refer the matter to the Arbitral Tribunal. With the above observation, 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 comp....
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....rivate fora. Consequently, where the cause/dispute is in arbitrable, the court where a suit is pending, will refuse to refer the parties to arbitration, Under Section 8 of the Act, even if the parties might have agreed upon arbitration as the forum for settlement of such disputes. 36. The well-recognised examples of non-arbitrable 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 ....
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....ect of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid 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 "Arbitr....
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....competition laws; (iii) insolvency/winding up; (iv) bribery/corruption; (v) fraud; (vi) criminal matters. Fraud is one such category spelled out by the decisions of this Court where disputes would be considered as non-arbitrable. 33. Dr. Justice D.Y. Chandrachud, J. in his concurring opinion has referred to Booz Allen and Hamilton Inc. (supra) and noticed the categories of cases, which are not arbitrable. Paragraph 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....
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.... the present case. 36. Now, we come back to the interpretation of Section 8 as amended by Act No. 3 of 2016. What is the legislative intent and object in bringing the amendment to Section 8 is the main question to be answered in this case. Amendment Under Section 8 has been undertaken by the Parliament after taking into consideration the 246th Law Commission Report (2014). Taking into consideration the working of the 1996 Act, there was an earlier attempt to carry out certain amendments in the 1996 Act. 176th Report of the Law 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 246t....
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.... process to be adopted by a judicial authority when considering an application seeking the reference of a pending action to arbitration. The amendment envisages that the judicial authority shall not refer the parties to arbitration only if it finds that there does not exist an arbitration agreement or that it is null and void. If the judicial authority is of the opinion that prima facie the arbitration agreement exists, then it shall refer the dispute to arbitration, and leave the existence of the arbitration agreement to be finally determined by 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." ....
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....serted to provide that where the original arbitration agreement or certified copy thereof is not available with the party who apply Under Sub-section (1), and is retained by the other party, such party shall file a copy of the arbitration agreement along with application Under Sub-section (1) praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before the Court. 41. On amendment to Section 11 by inserting Sub-section (6A), following was stated: Clause 6 of the Bill seeks to amend Section 11 of the principal Act to provide that appointment 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 ....
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.... be in respect of "a matter" which the parties have agreed to refer and which comes within the ambit of arbitration agreement. Where, however, a suit is commenced -- "as to a matter" which lies outside the arbitration agreement and is also between some of the parties who are not parties to the arbitration agreement, there is no question of application of Section 8. The words "a matter" indicate that the entire subject-matter of the suit should be subject to arbitration agreement. 45. Court further held that Section 8 does not admit interpretation to partly referring the disputes to arbitration. In Paragraph No. 16, following was laid down: 16. The next question which requires consideration 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 procedu....
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...., decree or order of any Court" finds place in Sub-section (6A) of Section 11 and Supreme Court and High Court is confined to the examination of the existence of an arbitration agreement. This Court had occasion to consider the amendment made in Section 11(6A) in Duro Felguera, S.A. (supra). Justice Kurian Joseph in his concurring opinion in Paragraph No. 48 has laid down following: 48. Section 11(6-A) added by the 2015 Amendment, reads as follows: 11. (6-A) The Supreme Court or, as the case may be, the High Court, while considering any application Under Sub-section (4) or Sub-section (5) or Sub-section (6), shall, notwithstanding any judgment, decree or order of any court, confine to the examination of the existence of 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....
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.... 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. 50. The Legislative 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 wa....
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....ial remedy provided under Trusts Act, 1882. This Court noticed the judgment of this Court in Booz Allen and Hamilton Inc. (supra) with approval in paragraphs 40 and 42 which is to the following effect: 40. Before we examine the scheme of the Trusts Act, 1882, we consider it apposite to take note of the case law, which has a bearing on this issue. The question came up for consideration before this Court in Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd. as to what is the meaning of the term "arbitrability" and secondly, which type of disputes are capable of settlement by arbitration under the Act. Their Lordships framed three questions to answer the question viz.: (SCC p. 546, para 34) (1) Whether the disputes having regard to their nature could be resolved 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 ma....