State Consumer Disputes Redressal Commission
Pavitpal Singh vs Emaar Mgf Land Ltd. on 25 April, 2016
STATE CONSUMER DISPUTES REDRESSAL COMMISSION,
PUNJAB
DAKSHIN MARG, SECTOR 37-A, CHANDIGARH.
Misc. Application No.3239 of 2015
In
Consumer Complaint No.219 of 2015
Date of institution : 27.11.2015
Date of decision : 25.04.2016
Pavitpal Singh S/o Kesar Singh, R/o House No.784/2640, Gurdev
Nagar, Ludhiana, District Ludhiana.
....Complainant
Versus
EMAAR MGF Land Limited, SCO 120-122, Sector 17-C,
Chandigarh, through its Authorized Signatory.
....Opposite Party
Application on behalf of the opposite
party, under Section 8 of the Arbitration
and Conciliation Act, 1996, for referring
the matter to Arbitrator.
Quorum:-
Hon'ble Mr. Justice Gurdev Singh, President
Mr. Vinod Kumar Gupta, Member
Present:-
For the complainant : Shri S.S. Chatrath, Advocate For the opposite party : Shri Ashim Aggarwal, Advocate. JUSTICE GURDEV SINGH, PRESIDENT:
M.A.No.3239 of 2015:
The applicant/opposite party has filed this application, under Section 8 of the Arbitration and Conciliation Act, 1996 (in short, "the Act of 1996"), for referring the matter to the arbitrator. It has contended therein that in the complaint filed by Pavitpal Singh, complainant, various disputes have been raised; which, as per Misc. Application No.3239 of 2015 2 In Consumer Complaint No.219 of 2015 Clause 39 of the Agreement dated 04.07.2007, are to be referred to the Arbitrator. As per that Clause, any dispute, arising out of or touching upon or in relation to the terms of the Agreement itself or its termination, including the interpretation and validity thereof and the respective rights and obligations of the parties, is to be settled amicably, by mutual discussion and failing that is to be settled through arbitration and the arbitration proceedings are to be governed by the Act of 1996. Once the parties have agreed to settle the disputes, arising out of the Agreement, by means of arbitration, the complainant was to invoke the said Clause of the Agreement and instead of doing so, he filed the complaint before this Commission; which is a Judicial Authority. As per Section 8 of the Act of 1996, the Judicial Authority, before which an action is brought in a matter, which is the subject matter of Arbitration Agreement, then any party to the Arbitration Agreement may apply for referring the matter to the Arbitrator. In these circumstances, this Commission has no jurisdiction to entertain, proceed and try the same, in view of the specific bar created by this Section 8. The only option with this Commission is to refer the parties to the arbitration.
2. The application was contested by the complainant, by filing detailed reply. In the reply, he admitted that the Agreement dated 04.07.2007 was executed between him and the opposite party/applicant and that the same contains Clause 39, which provides for the reference of the disputes arising between them to the Arbitrator and that in respect of the disputes arising between them, he filed the complaint before this Commission. He denied the Misc. Application No.3239 of 2015 3 In Consumer Complaint No.219 of 2015 other averments made in the application and pleaded that the opposite party/applicant is running away from performing its part of the contract, i.e. delivery of timely possession of the plot and payment of penalty at the rate of Rs.25,000/-, per month, in case of its failure to deliver the possession within three years of the signing of the Agreement. It failed to deliver the possession of the plot till date, despite the fact that Agreement was signed on 04.07.2007. It has admitted its liability to pay the compensation, as per Penalty Clause contained in the Agreement. The application has been filed, with a mala fide intention, to scuttle the process of law and to further delay the handing over of the possession and payment of penalty. In fact, there is absolutely no dispute between the parties, as the opposite party/applicant admitted its liability to hand over the possession of the plot and to pay the penalty. The remedy provided under the Consumer Protection Act, 1986 (in short, "the Act of 1986"), is a special remedy with the object of redressal of the grievance of the affected consumers in an expeditious and non- expensive manner and Section 3 thereof declares that the provisions of Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force. The Hon'ble Supreme Court has already laid down that despite the Arbitration Agreement and Section 8 of the Act of 1996, the complaint shall be maintainable under the Act of 1986. The application is nothing, but abuse of process of the law. He prayed for the dismissal thereof, with exemplary costs.
Misc. Application No.3239 of 2015 4
In Consumer Complaint No.219 of 2015
3. We have heard learned counsel for both the sides and have carefully gone through the records of the case.
4. It was submitted by the learned counsel for the opposite party/applicant that as per amended Section 8 of the Act of 1996, the judgments, orders or decrees passed by the Hon'ble Supreme Court and other Courts are to be ignored and the matter is to be referred to the arbitrator; once it is proved that the parties entered into an Arbitration Agreement or any Agreement, containing Arbitration Clause, to refer the disputes to the arbitrator and the complaint under the Act of 1986 is not maintainable. By virtue of the amendment made in said Section, all the judgments of the Hon'ble Supreme Court and other Courts, laying down that despite the Arbitration Clause the complaint is maintainable under the Act of 1986, stand nullified. Once it is proved to the satisfaction of this Commission, which is a Judicial Authority, that the Agreement between the parties contained an Arbitration Clause, it is bound to refer the disputes raised in the complaint to the arbitrator and it cannot proceed with the same. He prayed that the application be allowed accordingly.
5. On the other hand, it was submitted by the learned counsel for the complainant that the amendment in Section 8 of the Act of 1996 makes no difference, so far as the additional remedy under Section 3 of the Act of 1986 is concerned. In the amended Section 8, only those judgments, decrees or orders of the Hon'ble Supreme Court or other Courts are nullified, which were on the point of the existence or non-existence of the Arbitration Agreement and Misc. Application No.3239 of 2015 5 In Consumer Complaint No.219 of 2015 not the judgments, which laid down the law that the remedy provided under Section 3 of the Act of 1986 is the additional remedy and in- spite of the Arbitration Clause in the Agreement entered into between the parties, the complaint can still be filed under that Act. The application is, therefore, liable to be dismissed.
6. The Arbitration and Conciliation (Amendment) Ordinance, 2015 was promulgated by the President; vide which, besides the other amendments, the following sub-section (1) of Section 8 of the principal Act was substituted:-
"(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."
After that Ordinance, that very amendment was incorporated in the principal Act. In view of the arguments raised by both the sides, the question arises, as to which judgment, decree or order of the Hon'ble Supreme Court or other Court is to be ignored by the Judicial Authority, while referring the parties to the arbitration? At the time the said Ordinance was issued, it was well settled law, as was laid down in the judgment of the Hon'ble Supreme Court cited in (2012) 2 SCC Misc. Application No.3239 of 2015 6 In Consumer Complaint No.219 of 2015 506 (M/s National Seeds Corporation Limited Vs. M. Madhusudhan Reddy & Anr.), that the remedy available under Section 3 of the Act of 1986 is in addition to and not in derogation of the provisions of any other law for the time being in force and that the complaint before the Consumer Fora under the Act is maintainable, despite being an Arbitration Clause in the Agreement to refer the dispute to the Arbitrator.
7. In order to determine, whether the legislation had the intention to overrule that judgment, by promulgating the said Ordinance and subsequently making the amendment in the principal Act itself, the background leading to the issuance and promulgation of that Ordinance and the making of the Amendment is to be gone into.
8. The Law Commission of India gave its Report No.246 regarding its recommendations for making amendments in the Act of 1996. Paras No.13, 22, 28 and 31 are relevant for deciding the controversy raised in the present application and the same are reproduced below:-
"13. The Commission notes that there are numerous provisions in the Act which deal with the conduct of arbitral proceedings, and these are set out in Chapter V of the Act. However, despite existing provisions in the Act which are aimed at ensuring proper conduct of arbitral proceedings, the Commission found that the experience of arbitrating in India has been largely unsatisfactory for all stakeholders. Misc. Application No.3239 of 2015 7
In Consumer Complaint No.219 of 2015
22. Judicial intervention in arbitration proceedings adds significantly to the delays in the arbitration process and ultimately negates the benefits of arbitration. Two reasons can be attributed to such delays. First, the judicial system is over-burdened with work and is not sufficiently efficient to dispose cases, especially commercial cases, with the speed and dispatch that is required. Second, the bar for judicial intervention (despite the existence of section 5 of the Act) has been consistently set at a low threshold by the Indian judiciary, which translates into many more admissions of cases in Court which arise out of or are related to the Act.
28. The Act recognizes situations where the intervention of the Court is envisaged at the pre-arbitral stage, i.e. prior to the constitution of the arbitral tribunal, which includes sections 8, 9, 11 in the case of Part I arbitrations and section 45 in the case of Part II arbitrations. sections 8, 45 and also section 11 relating to "reference to arbitration" and "appointment of the tribunal", directly affect the constitution of the tribunal and functioning of the arbitral proceedings. Therefore, their operation has a direct and significant impact on the "conduct" of arbitrations. Section 9, being solely for the purpose of securing interim relief, although having the potential to affect the rights of parties, does not affect the "conduct" of the arbitration in the same way as these other provisions. It is in this context the Commission Misc. Application No.3239 of 2015 8 In Consumer Complaint No.219 of 2015 has examined and deliberated the working of these provisions and proposed certain amendments.
31. The Commission is of the view that, in this context, the same test regarding scope and nature of judicial intervention, as applicable in the context of section 11, should also apply to sections 8 and 45 of the Act - since the scope and nature of judicial intervention should not change upon whether a party (intending to defeat the arbitration agreement) refuses to appoint an arbitrator in terms of the arbitration agreement, or moves a proceeding before a judicial authority in the face of such an arbitration agreement."
The recommendations, so made by the Commission, were interpreted in Para-33, which is reproduced below:-
"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 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 Misc. Application No.3239 of 2015 9 In Consumer Complaint No.219 of 2015 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. The amendment also envisages that there shall be a conclusive determination as to whether the arbitration agreement is null and void. In the event that the judicial authority refers the dispute to arbitration and/or appoints an arbitrator, under sections 8 and 11 respectively, such a decision will be final and non- appealable. An appeal can be maintained under section 37 only in the event of refusal to refer parties to arbitration, or refusal to appoint an arbitrator."
A perusal of this Para makes it clear that the recommendation was made that in the event of Court/Judicial Authority prima facie being satisfied that the arbitration agreement exists, then it shall appoint the arbitrator and/or refer the matter to the arbitrator, as the case may be, and that it shall not refer the parties to arbitration, only when it finds that there does not exist Arbitration Agreement or that it is null and void and that if the Judicial Authority concludes that the Misc. Application No.3239 of 2015 10 In Consumer Complaint No.219 of 2015 agreement does not exist, then the conclusion will be final and not prima facie. As per that recommendation, the amendment also envisages that there shall be conclusive determination, as to whether the Arbitration Agreement is null and void. It becomes very much clear that the Law Commission recommended the amendment in Section 8 of the Act, so as to make it incumbent upon the Court/Judicial Authority to conclude, as to whether the Agreement exists or does not exist and whether that Agreement is null and void? In view of that, the reference to judgment, decree or order of the Hon'ble Supreme Court or other Court is only to those judgments, decrees or orders, which are on that point and not on any other point.
9. The position is further cleared from the "Objects and Reasons" recorded by the Legislation, before making the said Amendment. The relevant "Objects and Reasons" are reproduced below:-
"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. With a view to overcome the difficulties, the matter was referred to the Misc. Application No.3239 of 2015 11 In Consumer Complaint No.219 of 2015 Law Commission of India, which examined the issue in detail and submitted its 176th Report."
These "Objects and Reasons" further make it clear that the reference to the judgments in Section 8 is to those judgments, decrees or orders, which relate to the appointment of the arbitrator etc. and not to those, which deal with Section 3 of the Act of 1986 and which lay down that the remedy under the Act of 1986 is in addition to and not in derogation of the provisions of any other law for the time being in force and the complaint can be filed under that Act, in-spite of the existence of an Arbitration Agreement or Arbitration Clause entered into between the parties. Therefore, it cannot be said that by virtue of the amendment made in Section 8, the complaint under the Act of 1986 is no more maintainable before the Fora under the Act, on account of the existence of the Arbitration Clause in the Agreement executed between the parties.
10. Similar question came up for consideration before the Hon'ble National Commission in F.A. No.127 of 2016 (MAHINDRA HOLIDAYS & RESORTS INDIA LTD. Vs. ADNAN SAMOON RASSIAWALA & OTHERS) decided on 18.03.2016. Submission was raised before the Commission on behalf of the appellant that after the amendment of Section 8 of the Act of 1996, in view of the promulgation of the above said Ordinance, the complaint filed before the State Commission was not maintainable. That submission was recorded by the Hon'ble National Commission in its order dated 01.03.2016. The short question, which was considered at the time of Misc. Application No.3239 of 2015 12 In Consumer Complaint No.219 of 2015 final disposal of the appeal was, as to whether the State Commission was justified in dismissing the application filed by the appellant, under Section 8 of the Act of 1996, seeking stay of proceedings in the complaint and for referring the matter to arbitration, in view of the fact that there was Arbitration Agreement between the parties? That question was decided against the appellant and the order passed by the State Commission was upheld. The ratio of this judgment of the Hon'ble National Commission squarely applies to the facts of the present case.
11. In view of the above discussion, this application filed by the opposite party/applicant is to be dismissed and is dismissed as such.
(JUSTICE GURDEV SINGH) PRESIDENT (VINOD KUMAR GUPTA) MEMBER April 25, 2016.
(Gurmeet S)