[The Viewpoint] Consumers Wield Freedom of Choice in Dispute Resolution

The consumer who has the option of redressing his issues under arbitration, does have the choice of either consumer forums or arbitration.
Raghavan Ramabhadran, Krithika Jaganathan, Aparna Venkataraman
Raghavan Ramabhadran, Krithika Jaganathan, Aparna Venkataraman

India offers multiple forums and modes for dispute resolution. One example of such forums are the three Commissions – District, State, and National – according to pecuniary jurisdiction under the Consumer Protection Act, 2019 (“CPA 2019”). Apart from resolution through the Courts, arbitration, mediation, conciliation and negotiation are some forms of dispute resolution that is practiced in India. There is a natural confusion arising in cases where there are such multiple avenues that can address the disputes.

For the link between arbitration and a consumer dispute under CPA 2019 or its predecessor the Consumer Protection Act, 1986 (“CPA 1986”), certain conditions must be met. One, that the dispute at hand be a consumer dispute, for which either of the parties has to be a “consumer” under the CPA 2019. That the definition of ‘consumer’ is broad is now settled through the Supreme Court case of Lucknow Development Authority v. MK Gupta which has stated that as far as the CPA 1986 is concerned, the consumer would be anyone who purchases the goods and those who avail the services (as opposed to those who pay for the services). The case also made it clear that for any action to be considered a service, it is not important to determine whether the service provider is a statutory body or a private body. What is more important is the nature of the service performed. Through Kishore Lal v. Chairman, ESIC, it is understood that the definition of a consumer under CPA 1986 has been kept wide deliberately to include transactions with not only goods, but also services, both purchase and hire for a consideration. Thus, the only supply/service that stood excluded from the CPA 1986 would be free ones, for which there was no consideration involved. Once this is established, the other aspect that there is an arbitration contract or clause in the contract between the parties. A slight deviation is available to the parties if the legislation governing such transactions mandates arbitration. These arbitrations are also called “statutory arbitrations,” and are allowed through S. 2(4) of the Arbitration and Conciliation Act, 1996 (“ACA”) It also goes without saying that the dispute should be arbitrable.

In such a situation where the afore-stated conditions are met, there can be a confusion arising as to where forum must a dispute be taken to. Hence, the Courts have stepped in and clarified the position of law. Recently, this very question was resolved by a three-judge bench of the Hon’ble Supreme Court in Vodafone Idea Cellular Ltd. v. Ajay Kumar Agarwal which held that consumers could freely approach the appropriate consumer forum instead of undergoing statutory arbitration.

There are several decisions that discuss whether a consumer grievance redressal forum would stand ousted in light of an arbitration clause contained in a boilerplate contract or under a statute governing that supply/service underscore the same formula: that both the CP Acts operate concurrently and can be invoked despite the existence of an arbitration clause. The Hon’ble Supreme Court in Fair Air Engineers (P) Ltd. v. NK Modi reiterated that the three commissions under the CPA 1986 were judicial forums. It went on to add that S. 3 of the CPA, 1986 amply clarified that it operates in addition to the other legislations, marking the remedy for redressal under the CPA 1986 as an alternative to statutory arbitration under the Arbitration & Conciliation Act, 1940. In Skypak Courier v. Tata Chemicals, the Hon’ble Supreme Court held expressly that a consumer can avail redressal under the CPA 1986, despite the existence of an arbitration agreement between the parties. In The Secretary, Thirumurugan Co-operative Agricultural Credit Society v. M. Lalitha (Dead) through LRs & Ors., the Hon’ble Supreme Court reiterated that the position that the ACA prevails over the CPA 1986 in incorrect.

In M/s National Seeds Corporation v. M. Madhusudhan Reddy, the Hon’ble Court reiterated that in the event of two remedies available to the parties through both the arbitration and the consumer protection fora, the parties can avail their remedy first with the appropriate consumer forum and then move on to invoke the arbitration agreement/clause.  It was further stated that invoking the arbitration agreement/clause first and subsequently seeking a remedy at the consumer courts would not be possible. In Rosedale Developers Pvt. Ltd. V. Aghore Bhattacharya & Ors., the Hon’ble Apex Court upheld the decision of the National Commission that consumer forums are not bound to relegate a distraught consumer to arbitration when the consumer can avail remedy under the CPA 1986. The case of Emaar MGF Land Ltd. v. Aftab Singh is a landmark case on this matter, where after referring to the afore-mentioned cases, the Hon’ble Supreme Court reaffirmed the additional remedy offered under the CPA 1986 and/or 2019. The Hon’ble Court also pointed out the fact that when S. 8(1) of ACA was amended, the focus was not the additional remedies offered in other statutes, but rather to reinforce minimal judicial interference in arbitration as a whole.

The dicta that remedy under the CPA 1986/2019 operate as additional remedies has been pronounced not just in the context of ACA, but also for other legislations which has envisaged statutory arbitration. One such case is that of IREO Grace Realtech Pvt. Ltd. v. Abhisekh Khanna & Ors. the Hon’ble Supreme Court reiterated the additional jurisdiction accorded to the CPA 1986 (the logic of which can also be extended to CPA 2019) in the backdrop of the Real Estate (Regulation and Development) Act, 2016 (“RERA”). The Hon’ble Court essentially upheld the Imperia Structures Ltd. v. Anil Patni and quoted extensively from its decisions in Thirumurugan, National Seeds Corporation Ltd., and Emaar MGF Land Ltd. to state that reading S. 3 of CPA 1986 with Ss. 79 and 88 of the RERA clarified that the party has remedy available under both the Acts.

Even in Vodafone Idea Cellular Ltd. v. Ajay Kumar Agarwal, the Hon’ble Bench upheld Emaar MGF Land Ltd. by declaring that S. 7B of the Indian Telegraph Act, 1885 (“ITA”) could not casually oust the jurisdiction of the CPA, 1986 since the CPAs are welfare legislations aimed at protecting consumer interest and hence a consumer could elect which recourse was more suitable to them. Rejecting the argument that Section 7B of the ITA and S. 3 of the CPA 1986 or S. 100 of the CPA 2019 was seemingly at odds with one another, the Hon’ble Supreme Court opined that since the CPAs were enacted posterior to the ITA, any seeming inconsistency would be addressed because the later law would prevail. 

Conclusion: consumer interest reigns supreme

Thus, the consumer who has the option of redressing his issues under Arbitration, does have the choice of either consumer forums or arbitration. It must however be kept in mind that the consumer can opt for the consumer forums first and then opt for arbitration, but the vice versa would not be tenable. This is due to the consumer forums being granted the position of additional remedies. This interpretation accorded by the Hon’ble Supreme Court is welcomed as a testament to the underlying objective of the CPA: to protect and provide for swifter, more accessible, cost-efficient redressal mechanisms to an affected consumer, especially when arbitrations are neither affordable nor are accessible to laypersons in the absence of due legal assistance. Of course, the ultimate promise of protecting consumer interest requires regular reassurance.

Raghavan Ramabadran is the Executive Partner, Krithika Jaganathan is a Principal Associate and Aparna Venkataraman is an Associate at Lakshmikumaran & Sridharan Attorneys.

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