The Supreme Court has reaffirmed that consumers cannot be forced out of statutory consumer forums merely because a contract contains an arbitration clause, underscoring that private agreements cannot override remedies specifically created by law.
A Bench comprising Justice Vikram Nath and Justice V. Mohana set aside decisions of the District Consumer Forum, State Consumer Commission and the National Consumer Disputes Redressal Commission (NCDRC), all of which had directed a housing dispute to arbitration instead of deciding it under consumer protection law.
The dispute arose after a homebuyer approached the consumer forum alleging deficiency in service due to a delay in receiving possession of a residential flat. Although the complaint had been admitted and notice had been issued to the housing society, the District Forum later referred the matter to arbitration because the flat purchase agreement contained an arbitration clause.
That approach was upheld by the appellate consumer bodies, prompting the buyer to challenge the decisions before the Supreme Court.
Reversing the concurrent findings, the Court relied on its earlier ruling in Emaar MGF Land Ltd. v. Aftab Singh and emphasized that the consumer protection framework provides an independent and additional remedy. The Bench observed that the presence of an arbitration clause alone does not strip consumer forums of their authority to hear disputes.
The Court noted that once a consumer complaint has been validly admitted, the matter must proceed under the mechanism established by consumer law. A contractual term agreed between private parties cannot be used to sideline a statutory remedy expressly preserved by Parliament.
The judgment further highlighted the significance of the proviso to Section 12(4) of the Consumer Protection Act, 1986, which bars the transfer of an admitted complaint to another court, tribunal or authority established under a different law. According to the Bench, this legislative safeguard makes it clear that consumer disputes, once admitted, are intended to remain within the consumer adjudicatory system.
The Court concluded that the arbitration clause in the housing agreement was insufficient grounds to deny the buyer access to the consumer forum. Accordingly, it allowed the appeal and directed the District Forum to adjudicate the complaint on its merits, preferably within one year.
