Hon'ble Mr. Justice Ashok Bhushan
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
REVIEW PETITOIN (C) Nos. 2629-2630 OF 2018
IN
CIVIL APPEAL NOS.23512-23513 OF 2017
M/S. EMAAR MGF LAND LIMITED ...APPELLANT(S)
VERSUS
AFTAB SINGH ...RESPONDENT(S)
J U D G M E N T
ASHOK BHUSHAN,J.
These review petitions have been filed seeking
review of the judgment dated 13.02.2018 of this Court
by which civil appeals were dismissed.
2. The Civil Appeal Nos. 23512-23513 of 2017 had been
filed challenging the order dated 13.07.2017 passed by
Larger Bench of the National Consumer Disputes
Redressal Commission (hereinafter referred to as
“NCDRC”) holding consumer disputes to be nonarbitrable. Prayer was also made to set aside the
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subsequent order dated 28.08.2017 passed by Single
Member 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
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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 Complaint No. 701 of 2015 before the
NCDRC against the appellant praying for following
reliefs in Paragraph No.17 of the complaint, which are
as follows:-
“a. The complainant prays for a direction to
the opposite Parties to deliver the
possession of the built up villa No. 40, At
Sector 106, GMADA, and
b. to adjust the excess payment in terms of
letter dated 2.2.2008, Annexure C-5, which
comes to Rs.2,63,165/- and
c. to adjust the penalty @ Rs.1500/- per month
in terms of clause 8 of the Agreement, after
2011 for 55 months as on date which comes
to Rs.83,500/- and
d. to adjust the final account after making
the above deductions of clause B and C and
to refund the remaining/balance payment
back to the complainant at the earliest
along with interest @ 18% per annum from
6.2.2010 (i.e. 24 months from the date of
the Agreement); and
e. the Hon’ble National Commission May be
pleased to grant compensation to the tune
of Rs. 20,00,000 on account of deficiency
in service on the part of the opposite
parties, mental agony and harassment
suffered by the complainant, and
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f. the cost of this complaint may be awarded
from the opponent to the complainant, and
g. the Hon’ble National Commission may be
pleased to grant any other relief deemed in
fit just and proper by the Hon’ble National
Commission in the Circumstances of the
case.”
5. Notice was issued to the appellant by the NCDRC on
09.11.2015 asking the appellant to appear on
11.01.2016. The appellant appeared and made an
application for extension of time for filing the
written statement. The appellant also filed an
application under Section 8 of the 1996 Act for
referring the matter to arbitration for and on behalf
of the appellant. In the application, appellant has
referred to Clause 43 of the Buyer’s agreement, which
according to appellant would constitute a valid
arbitration agreement in terms of Section 7(2) of the
1996 Act. The appellant also filed a reply to the
complaint. The application filed under Section 8 of
the 1996 Act was objected by the respondent with the
prayer that the said application be rejected. NCDRC
heard the complaint case of the respondent alongwith
several other similarly situated applications in the
complaint case filed by the respondent and other
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similarly situated applications filed under Section 8
for referring the 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
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governed by statutory enactments, established
for specific public purpose to sub-serve a
particular public policy are not arbitrable;
(ii) there are vast domains of the legal
universe that are non-arbitrable and kept at a
distance from private dispute resolution;
(iii) the subject amendment was meant for a
completely different purpose, leaving status
quo ante unaltered and subsequently reaffirmed
and restated by the Hon'ble Supreme Court; (iv)
Section 2(3) of the Arbitration Act recognizes
schemes under other legislations that make
disputes non-arbitrable and (iv) in light of
the overall architecture of the Consumer Act
and Court-evolved jurisprudence, amended subsection (1) of Section 8 cannot be construed
as a mandate to the Consumer Forums,
constituted under the Act, to refer the parties
to Arbitration in terms of the Arbitration
Agreement.
56. Consequently, we unhesitatingly reject the
arguments on behalf of the Builder and hold
that an Arbitration Clause in the afore-stated
kind of Agreements between the Complainants and
the Builder cannot circumscribe the
jurisdiction of a Consumer Fora,
notwithstanding the amendments made to Section
8 of the Arbitration Act.”
7. After the reference having been answered by Three
Members Bench, the Consumer Complaint No. 701 of 20156
alongwith other applications was taken by a Single
Member of the Commission and by order dated 28.08.2017,
the applications filed by the appellant under Section
8 of the 1996 Act were rejected. After rejecting the
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application under Section 8, the Commission directed
the parties to proceed further with the complaint. The
appellant filed F.A.O. No. 395 of 2017 in the Delhi
High Court challenging the orders dated 13.07.2017 and
28.08.2017 of NCDRC. The High Court held that appeals
filed by the appellant under Section 37(1)(a) of the
1996 Act have been wrongly brought before the High
Court. The High Court refused to entertain the appeals
and returned to be presented before the appropriate
Appellate Court. After the judgment of the Delhi High
Court dated 07.11.2017, the appellant filed Civil
Appeal No. 23512-23513 of 2017 challenging the judgment
of Larger Bench of NCDRC dated 13.07.2017 as well as
the consequential order dated 28.08.2017 in this Court.
Both the appeals were called for hearing on 13.02.2018
and were dismissed by this Court. The appellant has
filed these review petitions to review the judgment of
this Court. In the review petitions, following prayers
have been 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
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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 u/S. 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 amendment
of Section 8 of 1996 Act by the Arbitration and
Conciliation (Amendment) Act, 2015 (Act 3 of 2016), by
which Parliament had added the words “notwithstanding
any judgment, decree or order of the Supreme Court or
any Court” in Section 8 of the Arbitration Act w.e.f.
23.10.2015, the Parliamentary intendment is clear that
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after the said amendment, the judicial authority is
mandated to refer a dispute for arbitration if there
is a valid arbitration agreement and parties apply not
later than the date of submitting his first statement
on the substance of the dispute. He submits that the
above words cannot be treated as redundant while
interpreting the amended Section 8. It is further
submitted that this Court acting as an Appellate Court
under Section 23 of Consumer Protection Act, 1986 read
with Section 37(1)(a) of 1996 Act has duty to go into
every fact and law including the amendment made in
Section 8 of the 1996 Act. It is submitted that
Constitution Bench of this Court has already held that
consumer fora are covered by the term “judicial
authority” for the purposes of Section 8 of the 1996
Act, hence, it was obligatory for the Commission to
refer the dispute to arbitration in view of the
arbitration clause between the parties. NCDRC has
wrongly termed consumer disputes as non-arbitrable,
which is contrary to the decision of this Court in
National Seeds Corporation Limited Vs. M. Madhusudan
Reddy and Another, (2012) 2 SCC 506. This Court had
interpreted the words “notwithstanding any judgment,
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decree or order of the Supreme Court or any Court” as
occurring in newly added Section 11(6A) of the 1996 Act
in Duro Felguera, S.A. Vs. Gangavaram Port Limited,
(2017) 9 SCC 729, which interpretation is equally
applicable to Section 8 as amended by Act 3 of 2016.
NCDRC has erred in relying on judgment of this Court
in A. Ayyasamy Vs. A. Paramasivam and Others, (2016)
10 SCC 386. The amendment in Section 8 of Arbitration
Act by Act 3 of 2016 now makes it obligatory to judicial
authority to refer disputes to arbitration
notwithstanding any judgment, decree or order of the
Supreme Court or any Court. Judgments of this Court
interpreting Section 8 prior to 2016 amendment, thus,
have become wholly irrelevant and have to be
disregarded while deciding the application under
Section 8 filed after 2016 amendment.
10. Referring to Section 2(3) of the 1996 Act, it is
submitted that 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
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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 in his short and impressive submissions
contends that the Consumer Act, 1986 provides for an
additional and beneficial remedy to the consumer to
avail of the speedy, expeditious disposal of his or her
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dispute. The consequences of allowing the present
petition and setting aside the impugned order would,
inter alia, be that every consumer, no matter how small
or big the dispute, would now be forced to adjudicate
his dispute before an arbitral tribunal and not avail
of the beneficial remedy provided to him or her. Under
the 1986 Act. Accepting the interpretation placed by
the appellant on the 1996 Act will mean collapsing of
entire edifice of consumer jurisprudence but also
jurisprudence relating to trusts, tenancy disputes,
industrial disputes, telecom disputes, intellectual
property disputes and other non-arbitral disputes.
Repeating the words of NCDRC, it is submitted that “the
ripples of the amendment to Section 8(1) cannot be so
large as to inundate the domains of other legislations
and jurisprudence, painstakingly built by the
Legislators and Courts, especially without any
engagement, debate and critique with the foundations
of these related laws”. Section 2(3) of the
Arbitration Act expressly states that Part I of the
Arbitration Act “shall not affect any other law for the
time being in force by virtue of which certain disputes
may not be referred to arbitration”. Under this
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Section, if any law provides, either expressly or by
necessary implication that specified disputes may not
be submitted to arbitration, then, in spite of the non
obstante provision in Section 5 of the Arbitration Act,
the law will be saved by Section 2(3) of the Arbitration
Act. Section 2(3) of the Arbitration Act restricts the
overriding effect apparent in Section 5 of the
Arbitration Act. The Consumer Act being a beneficial
legislation enacted to give an additional remedy for
the settlement of disputes, the same cannot be taken
away by Section 8 of the 1996 Act. This Court in
jurisdiction cases have already held that Arbitration
Act does not exclude the jurisdiction of the Consumer
Forum to decide disputes under the Consumer Act. The
amendment to Section 8(1) of the Arbitration Act by Act
3 of 2016 was never intended to interfere with the
jurisdiction of Consumer Forum to decide consumer
disputes. He submits that amendment in Section 8(1)
is being read in a manner which was never the 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
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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
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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 changed the legal position as
was earlier existing prior to the
aforesaid amendment?
(iv) Whether by the insertion of words
“notwithstanding any judgment, decree
or order of the Supreme Court or any
Court” under Section 8(1) by the
(Amendment) Act, 2015 legislature
intended to do away with the decision
of judgments of Supreme Court laying
down that Consumer Protection Act being
special remedy can be initiated and
continued despite there being any
arbitration agreement between the
parties?
13. All the issues being interconnected are being taken
together. The main emphasis of Shri Fali S. Nariman,
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learned senior counsel for the petitioner is that
entire legal regime pertaining to the 1996, Act in
relation to Consumer Protection Act when seen after the
amendment fully supports the interpretation put by the
petitioner which has not at all adverted by the NCDRC
and this Court.
14. Before we come to the amendments made by the 2015,
Act and its real intent and consequences, it is
necessary to look into the law as was existing prior
to the said amendment in relation to proceedings under
Consumer Protection Act in reference to arbitration
agreement under 1996 Act.
15. The Consumer Protection Act, 1986 has been enacted
to provide for better protection of the interests of
consumers and for the purpose, to make provision for
the establishment of Consumer Councils and other
authorities for the settlement of consumer disputes and
for matter connected therewith. This Court had occasion
to consider the object and purpose of the Act in Lucknow
Development Act vs. M.K. Gupta, (1994) 1 SCC 243, this
Court elaborately noticed the object and purpose of the
Act in the following words:
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“To begin with the preamble of the Act, which can
afford useful assistance to ascertain the
legislative intention, it was enacted, ‘to provide
for the protection of the interest of consumers’.
Use of the word ‘protection’ furnishes key to the
minds of makers of the Act. Various definitions and
provisions which elaborately attempt to achieve
this objective have to be construed in this light
without departing from the settled view that a
preamble cannot control otherwise plain meaning of
a provision. In fact the law meets long felt
necessity of protecting the common man from such
wrongs for which the remedy under ordinary law for
various reasons has become illusory. 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 of time succeed
in checking the rot.”
16. Section 3 of the Act provided that the provisions
of this Act shall be in addition to and not in
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derogation of the provisions of any other law for the
time being in force. Noticing the object and purpose
of the Act as well as Section 3, this Court in
Secretary, Thirumurugan Cooperative Agricultural
Credit Society vs. M. Lalitha (dead) Through LRs. And
others, (2004) 1 SCC 395, laid down following in
paragraph 11 and 12:
“11. From the Statement of Objects and Reasons
and the scheme of the 1986 Act, it is apparent
that the main objective of the Act is to
provide for better protection of the interest
of the consumer and for that purpose to provide
for better redressal, mechanism through which
cheaper, easier, expeditious and effective
redressal is made available to consumers. To
serve the purpose of the Act, various quasijudicial forums are set up at the district,
State and national level with wide range of
powers vested in them. These quasi-judicial
forums, observing the principles of natural
justice, are empowered to give relief of a
specific nature and to award, wherever
appropriate, compensation to the consumers and
to impose penalties for non-compliance with
their orders.
12. As per Section 3 of the Act, as already
stated above, the provisions of the Act shall
be in addition to and not in derogation of any
other provisions of any other law for the time
being in force. Having due regard to the scheme
of the Act and purpose sought to be achieved
to protect the interest of the consumers
better, the provisions are to be interpreted
broadly, positively and purposefully in the
context of the present case to give meaning to
additional/extended jurisdiction, particularly
when Section 3 seeks to provide remedy under
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the Act in addition to other remedies provided
under other Acts unless there is a clear bar.”
17. This court had occasion to consider the provisions
of Section 34 of Arbitration Act, 1940 in reference to
the Consumer Protection Act, 1986 in Fair Air
Engineering Pvt. Ltd. and another vs. N.K. Modi, (1996)
6 SCC 385. This Court in the said case held that
consumer fora is a judicial authority. In the above
case, the appellant had entered into a contract with
the respondent to carry out installation of a centrally
air-conditioned plant in the residential house of the
respondent. The respondent filed 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
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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 of the
provisions of any other law for the time being
in force” would be given proper meaning and
effect and if the complaint is not stayed and
the parties are not relegated to the
arbitration, the Act purports to operate in
derogation of the provisions of the Arbitration
Act. Prima facie, the contention appears to be
plausible but on construction and conspectus
of the provisions of the Act we think that the
contention is not well founded. Parliament is
aware of the provisions of the Arbitration Act
and the Contract Act, 1872 and the
consequential remedy available under Section 9
of the Code of Civil Procedure, i.e., to avail
of right of civil action in a competent court
of civil jurisdiction. Nonetheless, the Act
provides the additional remedy.
16. It would, therefore, be clear that the
legislature intended to provide a remedy in
addition to the consentient arbitration which
could be enforced under the Arbitration Act or
the civil action in a suit under the provisions
of the Code of Civil Procedure. Thereby, as
seen, Section 34 of the Act does not confer an
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automatic right nor create an automatic embargo
on the exercise of the power by the judicial
authority under the Act. It is a matter of
discretion. Considered from this perspective,
we hold that though the District Forum, State
Commission and National Commission are
judicial authorities, for the purpose of
Section 34 of the Arbitration Act, in view of
the object of the Act and by operation of
Section 3 thereof, we are of the considered
view that it would be appropriate that these
forums created under the Act are at liberty to
proceed with the matters in accordance with the
provisions of the Act rather than relegating
the parties to an arbitration proceedings
pursuant to a contract entered into between the
parties. The reason is that the Act intends to
relieve the consumers of the cumbersome
arbitration proceedings or civil action unless
the forums on their own and on the peculiar
facts and circumstances of a particular case,
come to the conclusion that the appropriate
forum for adjudication of the disputes would
be otherwise those given in the Act.”
18. This Court had occasion to consider the provisions
of Consumer Protection Act as well as the Arbitration
Act, 1996. In Skypak Couriers Ltd. v. Tata Chemicals,
(2000) 5 SCC 294, this Court laid down the following:
“Even if there exists 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.”
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19. Another judgment which is relevant for the present
issue is National Seeds Corporation Limited vs. M.
Madhusudhan Reddy and another, (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
arbitration and the District Forum has no jurisdiction
to entertain the complaint. This Court repelled the
submission and dismissed the appeal. In paragraph 64
this Court had noticed the contention of the appellant
which is to the following effect:
“64. According to the learned counsel for the
appellant, if the growers had applied for
arbitration then in terms of Section 8 of the
Arbitration and Conciliation Act the dispute
arising out of the arbitration clause had to be
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referred to an appropriate arbitrator and the
District Consumer Forums were not entitled to
entertain their complaint. This contention
represents an extension of the main objection
of the appellant that the only remedy available
to the farmers and growers who claim to have
suffered loss on account of use of defective
seeds sold/supplied by the appellant was to file
complaints with the Seed Inspectors concerned
for taking action under Sections 19 and/or 21
of the Seeds Act.”
20. The contention was dealt with in paragraph 66 where
following was laid down:
“66. The remedy of arbitration is not the only
remedy available to a grower. Rather, it is an
optional remedy. He can either seek reference
to an arbitrator or file a complaint under the
Consumer Protection Act. If the grower opts for
the remedy of arbitration, then it may be
possible to say that he cannot, subsequently,
file complaint under the Consumer Protection
Act. However, if he chooses to file a complaint
in the first instance before the competent
Consumer Forum, then he cannot be denied relief
by invoking Section 8 of the Arbitration and
Conciliation Act, 1996. Moreover, the plain
language of Section 3 of the Consumer Protection
Act makes it clear that the remedy available in
that Act is in addition to and not in derogation
of the provisions of any other law for the time
being in force.”
21. Another judgment where this Court reiterated the
position of law is Rosedale Developers Private Limited
Vs Aghore Bhattacharya And Others, (2018) 11 SCC 337
(decided on 06.09.2013). In the above case, a complaint
was filed by the respondent before NCDRC. An
24
application was filed by the appellant praying for
making reference to the arbitrator in view of the
arbitration agreement. The issue has been noticed in
paragraphs 1 and 2 which are to the following effect:
“1. Delay condoned. This appeal filed against
order dated 13-5-2013 (2013 SCC OnLine Ncdrc
486, DLF Ltd. v. Mridul Estate (P) Ltd.338b)
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 Corpn. Ltd.
v. M. Madhusudhan Reddy, the larger Bench of
the National Commission held that the consumer
forums constituted under the Consumer
Protection Act, 1986 (for short “the 1986 Act”)
are not bound to refer the dispute raised in
the complaint to an Arbitral Tribunal in terms
of the arbitration clause contained in the
agreement entered into between the parties.
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22. The contention was raised before this Court that
once an application under Section 8 of 1996 Act is
filed, Consumer Forum is duty-bound to make a reference
to the arbitrator. The above submission was noticed in
paragraph 3 which is to the following effect:
“3. Shri Sanjay Ghose, learned counsel for the
appellant relied upon the judgment of the
Constitution Bench in SBP & Co. v. Patel Engg.
Ltd. as also the judgments in Agri Gold Exims
Ltd. v. Sri Lakshmi Knits and Wovens and Magma
Leasing and Finance Ltd. v. Potluri Madhavilata
and argued that once an application is filed
under Section 8 of the 1996 Act, the consumer
forum is duty-bound to make a reference to the
arbitrator because that section is mandatory
in character.”
23. This Court rejected the above submission and laid
down in paragraph 4:
“4. In our opinion, there is no merit in the
submission of the learned counsel. The question
whether the existence of an arbitration clause
contained in the agreement executed between the
parties excludes the jurisdiction of the
consumer forum and on an application made by
either party, the consumer forum is duty-bound
to make a reference to the arbitrator was
extensively considered in National Seeds
Corpn. Ltd. v. M. Madhusudhan Reddy and it was
observed: (SCC pp. 534-35, paras 64-66.)”
24. This Court held that there is no merit in the above
submission of the counsel. This Court referred to
26
judgments of this Court in National Seeds Corporation
Ltd. (supra) and Fair Air Engineers Pvt. Ltd.(supra)
and laid down following in paragraph 6 and 7:
“6. The judgments relied upon by Shri Ghose do
not have any bearing on the issue raised in
this appeal. In neither of those cases, has
this Court interpreted the provisions of the
1996 Act in the light of the provisions
contained in the 1986 Act. Therefore, the
propositions laid down in those judgments that
Section 8 of the 1996 Act is mandatory cannot
lead to an inference that the consumer forum
is bound to make a reference to the Arbitral
Tribunal.
7. In view of the abovestated 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
27
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 complaint
by consumer as defined under the Act for defect or
deficiencies caused by a service provider, the cheap
and a quick remedy has been provided to the consumer
which is the object and purpose of the Act as noticed
above.
26. Not only the proceedings of Consumer Protection
Act, 1986 are special proceedings which were required
to be continued under the Act despite an arbitration
agreement, there are large number of other fields where
an arbitration agreement can neither stop or stultify
the proceedings. For example, any action of a party,
omission or commission of a person which amounts to an
offence has to be examined by a criminal court and no
amount of agreement between the parties shall be
relevant for the said case. For example, there may be
28
a commercial agreement between two parties that all
issues pertaining to transaction are to be decided by
arbitration as per arbitration clause in the agreement.
In case where a cheque is dishonoured by one party in
transaction, despite the arbitration agreement party
aggrieved has to approach the criminal court.
Similarly, there are several issues which are nonarbitrable. There can be prohibition both express or
implied for not deciding a dispute on the basis of an
arbitration agreement. This Court had occasion to
consider the above aspect and has noticed various
disputes which are non-arbitrable, reference is made
to the judgment of this Court in Booz Allen and Hamilton
Inc. vs. SBI Home Finance Limited and others, (2011) 5
SCC 532. In paragraphs 35 to 38 following has been laid
down:
“35. The Arbitral Tribunals are private fora
chosen voluntarily by the parties to the
dispute, to adjudicate their disputes in place
of courts and tribunals which are public fora
constituted under the laws of the country.
Every civil or commercial dispute, either
contractual or non-contractual, which can be
decided by a court, is in principle capable of
being adjudicated and resolved by arbitration
unless the jurisdiction of the Arbitral
Tribunals is excluded either expressly or by
necessary implication. Adjudication of certain
categories of proceedings are reserved by the
29
legislature exclusively for public fora as a
matter of public policy. Certain other
categories of cases, though not expressly
reserved for adjudication by public fora
(courts and tribunals), may by necessary
implication stand excluded from the purview of
private fora. Consequently, where the
cause/dispute is inarbitrable, 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 nonarbitrable 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
against specific individuals. Actions in
personam refer to actions determining the
rights and interests of the parties themselves
in the subject-matter of the case, whereas
actions in rem refer to actions determining the
title to property and the rights of the
parties, not merely among themselves but also
against all persons at any time claiming an
interest in that property. Correspondingly, a
30
judgment in personam refers to a judgment
against a person as distinguished from a
judgment against a thing, right or status and
a judgment in rem refers to a judgment that
determines the status or condition of property
which operates directly on the property itself.
(Vide Black’s Law Dictionary.)
38. Generally and traditionally all disputes
relating to rights in personam are considered
to be amenable to arbitration; and all disputes
relating to rights in rem are required to be
adjudicated by courts and public tribunals,
being unsuited for private arbitration. This
is not however a rigid or inflexible rule.
Disputes relating to subordinate rights in
personam arising from rights in rem have always
been considered to be arbitrable.”
27. The complaints filed under the Consumer Protection
Act can also be proceeded with despite there being any
arbitration agreement between the parties which have
been well settled by the catena of decisions as noticed
above.
28. Now, the issue to be addressed is effect and
consequences of the above stated position of law
consequent to the Arbitration and Conciliation
(Amendment) Act, 2015 amending Section 8. Section 8(1)
and 8(2) of Act, 1996 (as existed prior to amendment
of the Act, 1996) are as follows:
“8. Power to refer parties to arbitration
where there is an arbitration agreement.-
(1) A judicial authority before which an
31
action is brought in a matter which is the
subject of an arbitration agreement shall,
if a party so applies not later than when
submitting his first statement on the
substance of the dispute, refer the parties
to arbitration.
(2) The application referred to in subsection (1) shall not be entertained unless
it is accompanied by the original arbitration
agreement or a duly certified copy thereof.”
29. Section 8(1) and 8(2) after Amendment by Act, 2015
are as follows:
“Section 8(1) A judicial authority, before
which an action is brought in a matter which
is the subject 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.”.”
32
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 “Arbitration” and Part II
contains heading “Enforcement of certain Foreign
Awards”. Chapter I of Part I is “General Provisions”,
in which Section 2 deals with definitions. Section
2(1) begins with the words “In this Part, unless the
context otherwise requires”. Section 2(1) contains
definitions. Section 2(3) provides:-
“Section 2(3) This Part shall not affect any
other law for the time being in force by virtue
of which certain disputes may not be submitted
to arbitration.”
31. There are two aspects to be noticed in the Scheme
of Section 2, firstly, Section 2 contains a heading
“Definitions” but it is covered by general heading of
Chapter I “General Provisions”. Section 2(3) does not
contain any definition but contain a general provision
which clarifies that “This Part shall not affect any
other law for the time being in force by virtue of
which certain disputes may not be submitted to
arbitration”. Section 2(3) gives predominance of any
other law for the time being in force by virtue of
33
which certain disputes may not be submitted to
arbitration.
32. We have already noted several categories of cases,
which are not arbitrable. While referring to judgment
of this Court in Booz Allen and Hamilton Inc. (supra),
those principles have again been reiterated by this
Court in A. Ayyasamy (supra), Dr. A.K. Sikri, J.
delivering the judgment in that case has noticed
certain cases, which are not arbitrable in paragraph
No.14, which is as follows:-
“14. In the instant case, there is no dispute
about the arbitration agreement inasmuch as
there is a specific arbitration clause in the
partnership deed. However, the question is as
to whether the dispute raised by the respondent
in the suit is incapable of settlement through
arbitration. As pointed out above, the Act does
not make any provision excluding any category
of disputes treating them as non-arbitrable.
Notwithstanding the above, the courts have held
that certain kinds of disputes may not be
capable of adjudication through the means of
arbitration. The courts have held that certain
disputes like criminal offences of a public
nature, disputes arising out of illegal
agreements and disputes relating to status,
such as divorce, cannot be referred to
arbitration. The following categories of
disputes are generally treated as nonarbitrable:
(i) patent, trade marks and copyright;
(ii) anti-trust/competition laws;
(iii) insolvency/winding up;
34
(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 exclusively reserved for
adjudication by courts and tribunals may by
necessary implication stand excluded from the
purview of private fora. This Court set down
certain examples of non-arbitrable disputes
such as: (SCC pp. 546-47, para 36)
(i) disputes relating to rights and liabilities
which give rise to or arise out of criminal
offences;
35
(ii) matrimonial disputes relating to divorce,
judicial separation, restitution of conjugal
rights and child custody;
(iii) matters of guardianship;
(iv) insolvency and winding up;
(v) testamentary matters, such as the grant of
probate, letters of administration and
succession certificates; and
(vi) eviction or tenancy matters governed by
special statutes where a tenant enjoys special
protection against eviction and specific
courts are conferred with the exclusive
jurisdiction to deal with the dispute.
This Court held that this class of actions
operates in rem, which is a right exercisable
against the world at large as contrasted with
a right in personam which is an interest
protected against specified individuals. All
disputes relating to rights in personam are
considered to be amenable to arbitration while
rights in rem are required to be adjudicated
by courts and public tribunals. The enforcement
of a mortgage has been held to be a right in
rem for which proceedings in arbitration would
not be maintainable. In Vimal Kishor Shah v.
Jayesh Dinesh Shah, (2016) 8 SCC 788 this Court
added a seventh category of cases to the six
non-arbitrable categories set out in Booz
Allen, namely, disputes relating to trusts,
trustees and beneficiaries arising out of a
trust deed and the Trust Act.”
34. Another Section, which needs to be noted is Section
5, which is as follows:-
“Section 5. Extent of judicial intervention.—
Notwithstanding anything contained in any
other law for the time being in force, in
matters governed by this Part, no judicial
authority shall intervene except where so
provided in this Part.”
36
35. Section 5 contains an injunction to judicial
authority from intervening except where so provided in
this Part. Section 2(3), Section 8, Section 11 and
Section 34 are some of the provisions, which provides
for judicial intervention in matters. Here, we are
concerned with power of judicial authority under
Section 8, hence Section 5 is not much relevant in 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
37
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 246th Report
“Amendments to the Arbitration and Conciliation Act,
1996 in August, 2014. The Commission in its Report has
observed “judicial intervention in arbitration
proceedings adds significantly to the delays in the
arbitration process and ultimately negates the benefits
of arbitration”. Commission referring to amendments,
which were recommended in Section 8 and 11 in paragraph
No. 33 stated following:-
“33. It is in this context, the Commission has
recommended amendments to sections 8 and 11 of
the Arbitration and Conciliation Act, 1996. The
scope of the judicial intervention is only
restricted to situations where the
Court/Judicial Authority finds that the
arbitration agreement does not exist or is null
and void. In so far as the nature of
intervention is concerned, it is recommended
38
that in the event the Court/Judicial Authority
is prima facie satisfied against the argument
challenging the arbitration agreement, it
shall appoint the arbitrator and/or refer the
parties to arbitration, as the case may be. 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……….”
37. The Report of the Commission on amendment to
Section 8 as well as Note thereon contains a Note,
which is to the following effect:-
“[NOTE: The words “such of the parties… to the
arbitration agreement” and proviso (i) of the
amendment have been proposed in the context of
the decision of the Supreme Court in Sukanya
Holdings Pvt. Ltd. v. Jayesh H. Pandya and
Anr., (2003) 5 SCC 531, – in cases where all
the parties to the dispute are not parties to
the arbitration agreement, the reference is to
be rejected only where such parties are
necessary parties to the action – and not if
they are only proper parties, or are otherwise
legal strangers to the action and have been
added only to circumvent the arbitration
agreement. Proviso (ii) of the amendment
contemplates a two-step 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
39
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.”
[NOTE: In many transactions involving
Government bodies and smaller market players,
the original/ duly certified copy of the
arbitration agreement is only retained by the
former. This amendment would ensure that the
latter class is not prejudiced in any manner
by virtue of the same.]”
38. The Commission proposed amendment in Section 11 by
adding sub-section (6A). In its Report, following Note
was submitted in the above context:-
“[NOTE: The proposed section 11 (6A) envisages
the same process of determination as is
reflected in the proposed amendment to section
8. Explanation 2 envisages that reference by
the High Court to any person or institution
designated by it shall not be regarded as a
40
delegation of judicial power. Explanation 3 has
been inserted with the hope and expectation
that High Courts would encourage the parties
to refer the disputes to institutionalize
arbitration by a professional Indian or
international arbitral institute.]”
39. After taking into consideration the Report of the
Law Commission, a Bill namely “The Arbitration and
Conciliation (Amendment) Bill, 2015” was submitted.
The Statement of Objects and Reasons of the Bill throws
considerable light on the Objects and Reasons of the
amendments. Relevant part of the Statement of Objects
and Reasons is as follows:-
“2. The Act was enacted to provide for speedy
disposal of cases relating to arbitration with
least court intervention. With the passage of
time, some difficulties in the applicability
of the Act have been noticed. Interpretation
of the provisions of the Act by courts in some
cases have resulted in delay of disposal of
arbitration proceedings and increase in
interference of courts in arbitration matters,
which tend to defeat the object of the
Act……………………..”
6. xxxxxxxxxxxxxxxxxxxxxxx
(iv) to provide that while considering any
application for appointment of arbitrator, the
High Court or the Supreme Court shall examine
the existence of a prima facie arbitration
agreement and not other issues;
xxxxxxxxxxxxxxxxxxxxx”
41
40. Notes on the Clauses on amendment in Section 8
reads as follows:-
“Clause 4 of the Bill seeks to amend section 8
of the principal Act to specify that the
judicial authority shall refer the parties to
arbitration unless it finds that prima facie
no valid arbitration agreement exits. A proviso
below sub-section (2) is inserted 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.
Subsection (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 Others Vs.
42
P.V.G. Raju (Dead) and Others, (2000) 4 SCC 539,
several conditions were noticed by this Court, which
are to be satisfied before Court can exercise its power
under Section 8. In paragraph No.5, following has been
stated:-
“5. The conditions which are required to be
satisfied under sub-sections (1) and (2) of
Section 8 before the court can exercise its
powers are:
(1) there is an arbitration agreement;
(2) a party to the agreement brings an action
in the court against the other party;
(3) subject-matter of the action is the same
as the subject-matter of the arbitration
agreement;
(4) the other party moves the court for
referring the parties to arbitration before it
submits his first statement on the substance
of the dispute.
Xxxxxxxxxxxxxxxxxx”
43. In Paragraph No. 8 of the judgment, it was further
stated that the language of Section 8 is peremptory and
it is, therefore, obligatory for the Court to refer the
parties to arbitration in terms of their arbitration
agreement.
43
44. In Sukanya Holdings (P) Ltd. Vs. Jayesh H. Pandya
and Another, (2003) 5 SCC 531, this Court had occasion
to consider the ingredients of Section 8. This Court
noticed certain circumstances, where matter was not
required to be referred to the Arbitral Tribunal. In
Paragraph No. 12, 13 and 15, following has been held:-
“12. …………… Further, the matter is not required
to be referred to the Arbitral Tribunal, if:
(1) the parties to the arbitration agreement
have not filed any such application for
referring the dispute to the arbitrator; (2)
in a pending suit, such application is not
filed before submitting first statement on the
substance of the dispute; or (3) such
application is not accompanied by the original
arbitration agreement or duly certified copy
thereof………………………………..
13. Secondly, there is no provision in the Act
that when the subject-matter of the suit
includes subject-matter of the arbitration
agreement as well as other disputes, the matter
is required to be referred to arbitration.
There is also no provision for splitting the
cause or parties and referring the subjectmatter of the suit to the arbitrators.
15. The relevant language used in Section 8 is:
“in a matter which is the subject of an
arbitration agreement”. The court is required
to refer the parties to arbitration. Therefore,
the suit should 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
44
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 subjectmatter 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 procedure not contemplated under the Act.
If bifurcation of the subject-matter of a suit
was contemplated, the legislature would have
used appropriate language to permit such a
course. Since there is no such indication in
the language, it follows that bifurcation of
the subject-matter of an action brought before
a judicial authority is not allowed.”
46. The law as declared by this Court in the above
cases was in existence when the Law Commission
submitted its 246th Report and Parliament considered
the Bill, 2015 for Amendment Act, 2016. The Law
Commission itself in its Report has referred to
45
amendment in Section 8 in context of decision of this
Court in Sukanya Holdings (P) Ltd. (supra), which was
clearly noticed in the Note to Section 8 as extracted
above. The words “notwithstanding any judgment, decree
or order of the Supreme Court or any Court” added by
amendment in Section 8 were with intent to minimise the
intervention of judicial authority in context of
arbitration agreement. As per the amended Section
8(1), the judicial authority has only to consider the
question whether the parties have a valid arbitration
agreement? The Court cannot refuse to refer the
parties to arbitration “unless it finds that prima
facie no valid arbitration agreement exists”. The
amended provision, thus, limits the intervention by
judicial authority to only one aspect, i.e. refusal by
judicial authority to refer is confined to only one
aspect, when it finds that prima facie no valid
arbitration agreement exists. Other several
conditions, which were noticed by this court in various
pronouncements made prior to amendment were not to be
adhered to and the Legislative intendment was clear
departure from fulfilling various conditions as noticed
in the judgment of P. Anand Gajapathi Raju (supra) and
46
Sukanya Holdings (P) Ltd. (supra). Same Legislative
intendment is decipherable by amendment of Section 11
by adding sub-section (6A). Section 11(6A) is as
follows:-
11. Appointment of arbitrators.—
xxxxxxxxxxxxxxxxxxxxxxxx
[(6A) The Supreme Court or, as the case may
be, the High Court, while considering any
application under sub-section (4) or subsection (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.
47. The same words “notwithstanding any judgment,
decree or order of any Court” finds place in subsection (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-
47
section (4) or sub-section (5) or subsection (6), shall, notwithstanding any
judgment, decree or order of any court,
confine to the examination of the
existence of an arbitration agreement.”
(emphasis supplied)
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 the disputes which
have arisen between the parties to the
agreement.”
48. Section 8 of the 1996 Act as amended also came for
consideration in Ameet Lalchand Shah and Others Vs.
Rishabh Enterprises and Another, AIR 2018 SC 3041:
(2018) 6 SCALE 621: 2018 SCC Online SC 487. This Court
noticed the object and purpose of amended Section 8.
In Paragraph No. 29 to 31, following has been laid
down:-
“29. "Principally four amendments to Section
8(1) have been introduced by the 2015
Amendments-(i) the relevant "party" that is
entitled to apply seeking reference to
arbitration has been clarified/amplified to
include persons claiming "through or under"
such a party to the arbitration agreement; (ii)
scope of examination by the judicial authority
is restricted to a finding whether "no valid
arbitration agreement exists" and the nature
48
of examination by the judicial authority is
clarified to be on a "prima facie" basis; (iii)
the cut-off date by which an application Under
Section 8 is to be presented has been defined
to mean "the date of" submitting the first
statement on the substance of the dispute; and
(iv) the amendments are expressed to apply
notwithstanding any prior judicial precedent.
The proviso to Section 8(2) has been added to
allow a party that does not possess the
original or certified copy of the arbitration
agreement on account of it being retained by
the other party, to nevertheless apply under
Section 8 seeking reference, and call upon the
other party to produce the same." (Ref: Justice
R.S. Bachawat's Law of Arbitration and
Conciliation, Sixth Edition, Vol. I (Sections
1 to 34) at page 695 published by LexisNexis).
31. The language of amendment to Section 8 of
the Act is clear that the amendment to Section
8(1) of the Act would apply notwithstanding any
prayer, judgment, decree or order of the
Supreme Court or any other Court. The High
Court laid emphasis upon the word ".....unless
it finds that prima-facie no valid agreement
exists". The High Court observed that there is
no arbitration agreement between Astonfield
and Rishabh. After referring to Sukanya
Holdings and the amended Section 8 and Section
45 of the Act, the High Court pointed out the
difference in language of Section 8 and Section
45 of the Act. The High Court distinguished
between Sukanya Holdings and Chloro Controls,
and observed that Sukanya Holdings was not
overruled by Chloro Controls….”
49. 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
49
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 was there nor any such
consequence was contemplated that law laid down by this
50
Court in context of Section 2(3) has to be ignored or
reversed.
51. While carrying out amendment under Section 8(1) of
Act, 1996, the statutes providing additional
remedies/special remedies were not in contemplation.
The legislative intent is clear that judicial
authority’s discretion to refuse arbitration was
minimise in respect of jurisdiction exercise by
judicial authority in reference to Section 8. The
amendment was also aimed to do away with special or
additional remedies is not decipherable from any
material. The Law Commission 246th Report, the Statement
and Objects of Bill and the notes on clauses do not
indicate that amendments were made for overriding
special/additional remedies provided under different
statutes. In the event, the interpretation as put by
the learned counsel for the petitioner is accepted,
Section 8 has to be read to override the law laid down
by this Court in reference to various
special/additional jurisdictions as has been adverted
to and noted in judgment of this Court in Booz Allen
51
and Hamilton Inc.(supra) which was never the intent of
amendment in Section 8.
52. The amendment in Section 8 cannot be given such
expansive meaning and intent so as to inundate entire
regime of special legislations where such disputes were
held to be not arbitrable. Something which legislation
never intended cannot be accepted as side wind to
override the settled law. The submission of the
petitioner that after the amendment the law as laid
down by this Court in National Seeds Corporation
Limited(supra) is no more a good law cannot be
accepted. The words “notwithstanding any judgment,
decree or order of the Supreme Court or any Court” were
meant only to those precedents where it was laid down
that the judicial authority while making reference
under Section 8 shall entitle to look into various
facets of the arbitration agreement, subject matter of
the arbitration whether the claim is alive or dead,
whether the arbitration agreement is null and void. The
words added in Section 8 cannot be meant for any other
meaning. Reference is also made to the judgment of this
Court in Vimal Kishor Shah and others vs. Jayesh Dinesh
52
Shah and others, (2016) 8 SCC 788. This Court in the
above case had occasion to consider the provisions of
Section 8 of the Act, 1996 in reference to special
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 management of the Trust including
the disputes arising inter se trustees,
beneficiaries in relation to their
53
appointment, powers, duties, obligations,
removal, etc. are capable of being settled
through arbitration by taking recourse to the
provisions of the Act, if there is a clause in
the trust deed to that effect or such disputes
have to be decided under the Trusts Act, 1882
with the aid of forum prescribed under the said
Act?”
53. After noticing the issues which have arisen in
the above case this Court laid down following in
paragraphs 51 and 53:
“51. The principle of interpretation that
where a specific remedy is given, it thereby
deprives the person who insists upon a remedy
of any other form of remedy than that given by
the statute, is one which is very familiar, and
which runs through the law, was adopted by this
Court in Premier Automobiles Ltd. v. Kamlekar
Shantaram Wadke while examining the question
of bar in filing civil suit in the context of
remedies provided under the Industrial
Disputes Act (see G.P. Singh, Principles of
Statutory Interpretation, 12th Edn., pp. 763-
64). We apply this principle here because, as
held above, the Trusts Act, 1882 creates an
obligation and further specifies the rights and
duties of the settlor, trustees and the
beneficiaries apart from several conditions
specified in the trust deed and further
provides a specific remedy for its enforcement
by filing applications in civil court. It is
for this reason, we are of the view that since
sufficient and adequate remedy is provided
under the Trusts Act, 1882 for deciding the
disputes in relation to trust deed, trustees
and beneficiaries, the remedy provided under
the Arbitration Act for deciding such disputes
is barred by implication.
54
53. We, accordingly, hold that the disputes
relating to trust, trustees and beneficiaries
arising out of the trust deed and the Trusts
Act, 1882 are not capable of being decided by
the arbitrator despite existence of
arbitration agreement to that effect between
the parties. A fortiori, we hold that the
application filed by the respondents under
Section 11 of the Act is not maintainable on
the ground that firstly, it is not based on an
“arbitration agreement” within the meaning of
Sections 2(1)(b) and 2(1)(h) read with Section
7 of the Act and secondly, assuming that there
exists an arbitration agreement (Clause 20 of
the trust deed) yet the disputes specified
therein are not capable of being referred to
private arbitration for their adjudication on
merits.”
54. This Court held that disputes within the trust,
trustees and beneficiaries are not capable of being
decided by the arbitrator despite existence of
arbitration agreement to that effect between the
parties. This Court held that the remedy provided under
the Arbitration Act for deciding such disputes is
barred by implication. The ratio laid down in the above
case is fully applicable with regard to disputes raised
in consumer fora.
55. We may, however, hasten to add that in the event a
person entitled to seek an additional special remedy
provided under the statutes does not opt for the
additional/special remedy and he is a party to an
55
arbitration agreement, there is no inhibition in
disputes being proceeded in arbitration. It is only the
case where specific/special remedies are provided for
and which are opted by an aggrieved person that
judicial authority can refuse to relegate the parties
to the arbitration.
56. We, thus, do not find that any error has been
committed by the NCDRC in rejecting the application
filed by the appellant under Section 8. No exception
can be taken to the dismissal of the appeals by this
Court against the judgment of NCDRC. No ground is made
out to review the order dated 13.02.2018. The review
petitions are dismissed.
......................J.
( UDAY UMESH LALIT )
......................J.
( ASHOK BHUSHAN )
New Delhi,
December 10, 2018.
