India: Interpretation Of Section 8 And 37 Of The Amended Arbitration And Conciliation Act, 1996 Vis-À-Vis Consumer Protection Act, 1986

Last Updated: 30 January 2018
Article by Akshat Bajpai

 In the recent case of "Emaar MGF Land Ltd and Ors v Aftab Singh"17, the Delhi High Court has harmoniously interpreted Section 37 and 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) in light of the amendment brought to the Act.

However, the remedy provided for appeal in the Consumer Protection Act, 1986, has been held as to not authorize the High Court to hear appeals from the orders passed by the National Consumer Disputes Redressal Commission (hereinafter referred to as NCDRC) in exercise of its original jurisdiction. The appellant had approached the High Court under Section 37 (1) (a) of the Act, against two orders of the National Consumer Disputes Redressal Commission, wherein identical applications of the appellant seeking a reference under Section 8 of the Act, were dismissed.

The subject matter of consumer complaints of the respondents against the appellants was grievance of deficiency of service -primarily on the ground of failure on the part of the appellants to deliver timely possession of the residential villas (flats/plots, etc) being developed by it, in Mohali (and other places). The appellants, upon being served with the notices, on the basis of consumer complaints, submitted the applications under Section 8 of the Act, referring to an arbitration clause in each such buyer's agreement and praying for a reference accordingly.

The High Court framed the moot issue for consideration as to whether the appeals can be maintained before it, under Section 37 1(a) or not. Relevant provisions of law considered by the High Court were:

Section 37 of the Ac t, Appealable Orders

"... (1) An appeal shall lie from the following orders (and from no others) to the Court authorized by law to hear appeals from original decrees of the Court passing the order, namely:

Section 8 of the Act, Power to refer parties to arbitration where there is an arbitration agreement

"...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..."

Section 23 of the Consumer Protection Act , 1986, Appeals

"...Any person, aggrieved by an order made by the National Commission in exercise of its powers conferred by sub-clause (i) of clause (a) of section 21, may prefer an appeal against such order of the Supreme Court within a period of thirty days from the date of the order..."

The High Court, relying on the established jurisprudence, affirmed that while considering an application for the parties to a dispute to be referred to arbitration on the ground that it is subject to an arbitration agreement in terms of Section 8(1), the judicial authority exercises the jurisdiction conferred upon it by the Act, and not the jurisdiction it exercises under the law where under it has been established. In addition, debunking the finer details of Section 8 of the Act, the High Court highlighted the fact that while conferring the jurisdiction to refer the parties to a dispute to arbitration, the law refers to the forum as a "judicial authority", and not a "court".

The High Court then elaborated, that the remedy of appeal was provided in Section 37(1) till 2015 Amendment against orders of a court with reference to the jurisdiction conferred on the "court" (as defined in Section 2) for "interim measures" (under Section 9) or to consider "setting aside an arbitral award" (under Section 34) only. Hence, the provision in Section 37(1) prior to its amendment, was not concerned with act of any forum except a "court". The High Court then interpreted that the words "the court passing the order" appearing in Section 37(1), post the amendment, acquired a new dimension and needed to be properly construed so as to harmonize them with Section 8 which confers the jurisdiction to pass the order that may be challenged in appeal.

It was elucidated by the High Court that Section 8 does not restrict such a power to a "court" but extends it to every "judicial authority". Thus, under section 37(1)(a) the forum conceived by the expression "the court passing the order" under the amended law has to be read contextually and understood to connote "the judicial authority" which passed the order making or refusing the reference. The expression "original decrees of the Court passing the order" under section 37 was held to mean a decision taken by a court of first instance in exercise of its original jurisdiction.

Despite harmonizing Section 8 and 37 of the Act, the High Court went on to hold that the High Court is not authorized by the law to hear appeals from the orders passed by NCDRC in exercise of its original jurisdiction due to Section 23 of the Consumer Protection Act, 1986, which expressly provides that such an appeal is available under the said law, only before the Supreme Court. Thus, it was held that the appeal against the order of NCDRC (making or) refusing the reference of the dispute to arbitration, cannot be brought before the High Court since appeals against orders of said forum lie before the Supreme Court.

The order by the High Court establishes the point that the remedy of a consumer of services is independent of the contractual terms providing for arbitration to settle disputes. This is a pro-consumer order which saves the consumer from the clutches of an adhesion contract just like in the present case between the builder and buyer with uneven bargaining powers. The order also gives credence to the ratio that remedies provided for in a special law, will hold the ground vis-àvis the procedure enunciated in the Act.

It needs to be noted that in an appeal before the Supreme Court of India (Civil Appeal Diary No (s). 37997/2017) against the order of the NCDRC dated 13-07-2017, the order of both the NCDRC and the Delhi High Court have been stayed and the matter has been listed for final hearing on February 07, 2018.


17 FAO 395/2017

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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