New Delhi, Mar 24 (UNI) The Supreme Court has reaffirmed that an arbitration clause in an agreement does not override a consumer’s right to seek redressal before the Consumer Forum.
The Court held that a consumer cannot be compelled to resolve disputes through arbitration solely because such a clause exists in an agreement. Instead, the consumer has the exclusive right to choose between arbitration and approaching the Consumer Forum.
A bench comprising Justice Sudhanshu Dhulia and Justice Ahsanuddin Amanullah heard the case concerning a disputed tripartite agreement that contained an arbitration clause.
The dispute arose when the respondent, who had purchased a flat with a housing loan of Rs. 17,64,644 from ICICI Bank, sought to sell the property to one Mubarak Vahid Patel for Rs. 32,00,000.
The buyer secured a loan of Rs. 23,40,000 from Citicorp Finance, the appellant in the case. Since the flat was already mortgaged with ICICI Bank, the buyer requested Citicorp Finance to disburse Rs. 17,80,000 directly to ICICI Bank to release the flat.
The respondent later filed a consumer complaint before the National Consumer Disputes Redressal Commission (NCDRC), seeking a direction to the appellant to pay the balance sale consideration of Rs. 13,20,000.
The NCDRC ruled in favour of the respondent, ordering Citicorp Finance to refund Rs. 13,20,000 along with interest and pay Rs. 1,00,000 as litigation costs. Dissatisfied with the ruling, Citicorp Finance appealed in the Supreme Court.
In its verdict, the Supreme Court observed that although the tripartite agreement contained an arbitration clause, consumer disputes are generally non-arbitrable unless the consumer voluntarily chooses arbitration.
Referring to the case of M. Hemalatha Devi v. B. Udayasri (2024), the Court emphasized that a party cannot be compelled to resort to arbitration merely because it is stipulated in the contract.
The Court also cited Emaar MGF Land Ltd. v. Aftab Singh and reiterated that arbitration can be an option under the Consumer Protection Act but only at the consumer’s exclusive discretion.
In this case, since the existence of the tripartite agreement was in dispute and the consumer had opted for the Consumer Forum, the arbitration clause could not be enforced against the respondent.
Highlighting the welfare intent of the Consumer Protection Act, the Court underscored that consumer disputes are meant to be addressed in public fora as a matter of public policy. It ruled that such disputes should not be relegated to private arbitration unless both parties willingly agree to it.
The court held that consumer rights take precedence over contractual arbitration clauses, ensuring that consumers are not deprived of access to statutory remedies.
