This article attempts to analyze the ramification of parties electing to remedy of Arbitration in the Contract and whether the election of such remedy in the Contract tantamount to opting out of the statutory remedy of the Consumer Protection Act, 1986 (CPA). The author is of the view that the remedy provided under CPA is an additional remedy and is not derogation of any other law as envisaged under Section 3 of CPA. CPA is a beneficial piece of legislation and intended to protect the interest of consumers and this is reflected in the preamble of CPA, namely, “An Act to provide for better protection of the interests of consumers”.
It is necessary to appreciate the contextual background on which CPA was enacted in India. The General Assembly of the United Nations after extensive discussion and negotiations among Governments and taking into account the interest and needs of consumers in all countries, particularly those in developing countries, adopted the draft guidelines submitted by the Secretary-General to the Economic and Social Council (UNESCO) in 1983. The objective was to assist countries in achieving or maintaining adequate protection for their population as consumers etc. India is a signatory to the resolution passed by the General Assembly which is known as Consumer Protection Resolution No.39/248. With a view to fulfill the objectives enshrined in the guidelines adopted by the General Assembly of the United Nations, the CPA was enacted to provide for better protection of the interest of consumers.
The remedy of Arbitration may be effectively substituted to the right to approach the civil court under section 9 of Civil Procedure Code, 1908, where such remedy is elected by the parties under a Contract, however, it cannot take away the special remedy provided under CPA as it was enacted for purposes of providing protection of the interest of consumers. The Arbitration agreement in boiler plate contracts with Bankers, Insurers, Telecom service providers, and other service providers is generally one-sided. For a user, it involves a huge cost to attend those arbitrations. Moreover, the time and venue of such arbitration is pre—fixed in the favor of such service providers, and therefore, it is not an effective substitute to the remedy of CPA.
The Hon’ble Supreme Court in M/S. Fair Air Engineers Pvt. Ltd. vs N.K. Modi, AIR 1997 SC 533 had an occasion to analyze the competing remedies and it ruled that provisions of CPA are to be construed widely to give effect to the object and purpose of CPA. It opined that the Parliament was aware of the provisions of the Arbitration Act and the Contract Act and the consequential remedy available under Section 9 of the CPC, i.e., to avail of the right of civil action in a competent court of civil jurisdiction. Nonetheless, the CPA provides an additional remedy. The court held that it would be appropriate that consumer courts/ forums created under CPA are at liberty to proceed with the matters in accordance with the provisions of CPA rather than relegating the parties to an arbitration proceeding pursuant to a contract entered into between the parties.
A three-judge bench of Supreme Court in Skypak Couriers Ltd. Etc. vs Tata Chemicals Ltd. Etc. 2000 Supp(1) SCR 324 held that the existence of an arbitration clause will not be a bar to the entertainment of the complaint by the Redressal Agency, constituted under the CPA, “since the remedy provided under the Act is in addition to the provisions of any other law for the time being in force”.
In M/S. National Seeds Corpn. Ltd vs M.Madhusudhan Reddy &Anrdecided on 16 January 2012, the Hon’ble Supreme Court ruled that the remedy of arbitration is not the only remedy available to a consumer. It held that it is an optional remedy. The consumer can either seek reference to an arbitrator or file a complaint under CPA. If a Consumer opts for the remedy of arbitration, then it may be possible to say that he cannot, subsequently, file a complaint under the Consumer Act. However, if he chooses to file a complaint in the first instance before the competent Consumer Forum under CPA, then he cannot be denied relief by invoking Section 8 of the Arbitration and Conciliation Act, 1996 Act. It held that the plain language of Section 3 of CPA makes it clear that the remedy is in addition to and not in derogation of the provisions of any other law for the time being in force.
I am of the view that the mere existence of an arbitration agreement will not disentitle the remedy of CPA, provided if the person is a ‘consumer’ within the meaning of Section 2(d) of CPA and the dispute squarely falls under the domain of CPA. However, if the person opts for the remedy of Arbitration, then he cannot avail of the remedy of CPA. It may not be out of place to refer to the judgment of the Hon’ble Supreme Court in the case of General Manager, Telecom Vs. M.Krishan decided on 1.09.2009 wherein the court erroneously ruled that remedy provided under section 7 B of Telegraph Act (statutory arbitration), impliedly bars the remedy of CPA. However, Department of Telecommunications, Government of India vide its Office Memorandum dated 31/03/2014, realizing the public outcry declared that Consumer forums can adjudicate a dispute between individual consumer and telecom service providers.
