NCDRC Reiterates: Arbitration Clause in Agreement Does Not Bar Jurisdiction of Consumer Fora

NCDRC Reiterates: Arbitration Clause in Agreement Does Not Bar Jurisdiction of Consumer Fora

The National Consumer Dispute Redressal Commission (NCDRC) by its single member Justice R.K. Agarwal (President) has reiterated that, arbitration clause in the agreement does not bar the jurisdiction of the Consumer Fora to entertain the complaint.

The factual matrix of the case is that the, Opposite Party- M/s. Emaar MGF Land Ltd. (‘Developer’) advertised a residential colony called 'The Villas' with facilities such as car parking spaces, recreational facilities, and landscaped gardens. Based on the advertisement, the Complainants booked a villa and paid a deposit of Rs. 11,00,000. The Buyer’s Agreement was signed in 2008, and possession was supposed to be given by 2010.

However, the Developer kept delaying possession, and no construction work had progressed for three years when the Complainants checked the site in 2015. As a result, the Complainants had to stay in a rented accommodation. The Complainants asked for a refund with interest and compensation in 2015, though nothing happened. Therefore, the Complainants filed a Complaint in the NCDRC alleging deficiency of service and unfair trade practice on the part of the developer, praying for a refund of the money they paid with interest, compensation for harassment, mental agony, and litigation expenses.

Per contra, the Developer argued that disputes should be resolved through arbitration according to the Buyer’s Agreement. They further argued that the Arbitration and Conciliation Act, of 1996 has an overriding effect over the Consumer Protection Act (for short ‘the Act’) which makes it mandatory for the Commission to refer the matter to arbitration.

Further, the Developer argued that the Complainants cannot be considered as ‘consumers’ under Section 2(1)(d)(ii) of the Act because they booked the Villa for investment purposes and not for personal use. They also argued that the Complaint should be dismissed because the Complainants were not seeking possession of the Villa, and they had failed to make timely payments.

The NCDRC placed reliance on the decision passed by Supreme Court in M/s Emaar MGF Land Ltd. vs. Aftab Singh (2019) wherein it was held that, the existence of an Arbitration clause in the Agreement does not bar the jurisdiction of the Consumer Forums to entertain the Complaint.

Hence, the Commission rejected the Developer's argument that the arbitration clause prevented the Consumer Court from hearing the case. Thus, the Developer’s request to refer the case to arbitration was dismissed.

The NCDRC apropos to the issue whether the Complainants were ‘consumers’ under the definition of the Consumer Protection Act, held that the onus to prove Complainant was dealing in real estate i.e., in the purchase and sale of plots/flats in his normal course of business to earn profits, shifts on the Opposite Party. In the present case, the NCDRC was of the view that the Opposite Party had failed to establish their case.

Therefore, the Complainants were considered consumers under Section 2 (1)(d) of the Act, and the Complaint was found to fall under the jurisdiction of the Commission.

Accordingly, the NCDRC directed the Opposite Party Developer to refund to the Complainants a sum of Rs. 1,07,90,736 along with interest 9 per cent failing which the rate of interest shall increase to 12 per cent.