Al­ter­na­tive to ar­bi­tra­tion clause

Hindustan Times (Chandigarh) - Estates - - FRONT PAGE - Su­nil Tyagi ■ ht­es­tates@hin­dus­tan­times.com The au­thor is a se­nior part­ner at Zeus Law, a cor­po­rate com­mer­cial law firm. One of its ar­eas of spe­cial­i­sa­tions is real es­tate trans­ac­tional and lit­i­ga­tion work. If you have any queries, email us at ht@zeus.fir

The huge pen­dency of cases in courts of In­dia has un­der­lined the need for al­ter na­tive dis­pute res­o­lu­tion meth­ods. Such meth­ods were in­tro­duced to en­able cost-ef­fec­tive and quick res­o­lu­tions to dis­putes. Ar­bi­tra­tion is one of the most pop­u­lar al­ter­na­tive dis­pute res­o­lu­tion meth­ods. Ar­bi­tra­tion is a process by which a dis­agree­ment/dis­pute is sub­mit­ted, by agree­ment of par­ties in­volved, to one or more ar­bi­tra­tors who make a bind­ing de­ci­sion on the dis­agree­ment/dis­pute. By choos­ing ar­bi­tra­tion, the par­ties opt for pri­vate dis­pute res­o­lu­tion in­stead of go­ing to court. It is gen­er­ally used for res­o­lu­tion of dis­putes re­lat­ing to com­mer­cial mat­ters.

An ar­bi­tra­tion clause is an in­te­gral part of al­most all builder-buyer agree­ments wherein the par­ties agree to sub­mit all ex­ist­ing or fu­ture dis­putes to ar­bi­tra­tion, with­out nec­es­sar­ily know­ing, specif­i­cally, what dis­putes will ever oc­cur. Most of the buy­ers who book/buy an im­move­able prop­erty sold by a builder/de­vel­oper sign the al­ready printed builder-buyer agree­ment con­tain­ing an ar­bi­tra­tion clause where the builder/de­vel­oper re­serves the right to ap­point the sole ar­bi­tra­tor. In case of a dis­pute be­tween a builder/de­vel­oper and a buyer, the pos­si­bil­ity of an im­par­tial and fair award is al­ways in ques­tion.

In this re­spect, an in­ter­est­ing case came up be­fore the Na­tional Con­sumer Dis­putes Re­dres­sal Com­mis­sion (NCDRC) that in­volved Satish Ku­mar Pandey and oth­ers ver­sus Unitech Lim­ited. The ar­gu­ment by Unitech was that since the builder-buyer agree­ment con­tained an ar­bi­tra­tion clause, the ap­pro­pri­ate rem­edy avail­able to the com­plainant was to seek ar­bi­tra­tion and not com­plain to NCDRC. NCDRC’s opin­ion was that the pro­vi­sions of the Con­sumer Pro­tec­tion Act, 1986, were in ad­di­tion to other reme­dies avail­able to the con­sumer. There­fore, the avail­abil­ity of the ar­bi­tra­tion as a rem­edy did not de­bar a con­sumer/com­plainant from ap­proach­ing a con­sumer fo­rum in a case of de­fi­ciency of ser­vices or adop­tion of un­fair trade prac­tices by the ser­vice provider.

NCDRC also re­ferred to var­i­ous Supreme Court (SC) cases where af­ter con­sid­er­ing the pro­vi­sions of the Ar­bi­tra­tion and Con­cil­i­a­tion Act, 1996 and Con­sumer Act, the apex court held that the plain lan­guage of the Con­sumer Act made it clear that the rem­edy avail­able therein was in ad­di­tion to and not in dero­ga­tion of the pro­vi­sions of any other law in force at that time.

In its ob­ser­va­tion, NCDRC said that SC had said that a com­plaint filed by the con­sumer be­fore the con­sumer fora would be main­tain­able de­spite there be­ing an ar­bi­tra­tion clause in the agree­ment be­tween a builder and a buyer. There­fore, in view of the au­thor­i­ta­tive pro­nounce­ment of SC, which was later fol­lowed by the NCDRC in another mat­ter, the Com­mis­sion found no merit in the con­tention that if the builder-buyer agree­ment con­tained an ar­bi­tra­tion clause, the ap­pro­pri­ate rem­edy avail­able to the com­plainant was to seek ar­bi­tra­tion and not a com­plaint be­fore NCDRC and re­jected the same.

To sum up, it may be said that the rem­edy of ar­bi­tra­tion is not the only rem­edy but an op­tional rem­edy avail­able to a con­sumers/com­plainants. If they opt for the rem­edy of ar­bi­tra­tion, then they should not sub­se­quently file a com­plaint un­der the Con­sumer Act. How­ever, if they (con­sumers/com­plainants chose to file a com­plaint in the first in­stance be­fore the com­pe­tent con­sumer fo­rum, then they can­not be de­nied re­lief by in­vok­ing the pro­vi­sions of the Ar­bi­tra­tion Act.


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