Whether A Consumer Forum Bound To Refer The Dispute To Arbitration Despite Existence Of A Valid Arbitration Agreement?

Published date20 November 2023
Subject MatterLitigation, Mediation & Arbitration, Arbitration & Dispute Resolution
Law FirmClasis Law
AuthorMr Nihal Shaikh and Dev Motta

Introduction

Smt. M. Hemalatha Devi & Ors. ("Appellants") filed an Appeal1 before the Hon'ble Supreme Court of India ("Supreme Court") challenging the impugned orders dated May 19, 2022 and November 25, 2022 passed by the Telangana High Court ("High Court") which dismissed the application of the Appellants to appoint an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 ("Act").

Facts

a. Smt. B. Udayasri ("Respondent") being a home buyer, had entered into an Agreement for Sale dated August 27, 2013 ("Agreement") with the Appellants who were the owners/builders. Pursuant to the Agreement, the Appellants had agreed to construct a residential house/ villa for the Respondent on or before February 27, 2017. However, in 2020, the Appellants sent a termination notice to the Respondent on the ground that the Respondent had not signed the "Construction Agreement". After sending the termination notice, the Appellant moved an application under Section 11 of the Act for the appointment of the arbitrator.

b. Meanwhile, the Respondent filed a consumer complaint before the District Consumer Forum. Further, before the Hon'ble High Court, the Respondent submitted that she had moved a complaint before judicial authority i.e. District Consumer Forum where the Appellants can file an application under Section 8 of the Act for appointment of arbitrator. Vide impugned order dated May 19, 2022, the application under Section 11 of the Appellants was dismissed and they were granted liberty to file a Section 8 application before the District Consumer Forum.

c. On filing the Section 8 application before the District Consumer Forum, the Hon'ble forum dismissed the same on the ground that although there is an arbitration clause between the parties, the same shall not oust itself from the jurisdiction of a consumer court.

d. On such dismissal, the Appellant filed a Review Petition before the Hon'ble High Court against the impugned order dated May 19, 2022 which was rejected vide order dated November 25, 2022 on the ground that the Appellant already acted upon the order dated May 19, 2022.

e. Being aggrieved by the impugned orders dated May 19, 2022 and November 25, 2022 passed by the Hon'ble High Court, the Appellant filed an Appeal before the Apex Court.

Observations

The Hon'ble Supreme Court observed as follows:

a. A consumer i.e. the Respondent has a choice under the law to either avail a remedy under the Consumer Protection Act or to go for arbitration...

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