Does an arbitration clause in an agreement bar consumer forum’s jurisdiction? NCDRC answers relying on SC decision

National Consumer Disputes Redressal Commission

National Consumer Disputes Redressal Commission (NCDRC): Coram of Justice R.K. Agrawal (President) and Dr S.M. Kantikar (Member)reiterated that the presence of an arbitration clause in the agreement does not bar the jurisdiction of consumer fora.

Grievance of the Buyer

Complainants alleged that the Project in which they had booked their flat has not been completed till date even after about 8 years from the date of the booking. OP developer indulged in unfair trade practices by utilizing the money collected from the complainants, for its personal gains on benefits and further diverted the funds collected from the complainants to its other projects.

Complainants noting that the project has not even reached the 50% completion stage, clearly showed that the OP had no intention of developing/completing the project.

It was also alleged that even after 8 years, the construction of the project is not even close to completion, there are no laying of roads, utility supplies, access/service roads, facilities, clubs, no sign of rail over bridge etc. It was further alleged that the unexpected, unreasonable and inordinate delay in developing and constructing the project, and facilities and also the delay in handing over possession of the flat, clearly amounts to deficiency in services.

Builder’s Contention

OP contended that the present Complaint is not maintainable in light of Clause 33 of the Agreement executed between the Parties, according to which, all or any disputes arising out of or touching upon or in relation to the terms of the Agreement including its interpretation and validity and the respective rights and obligations of the parties have to be settled amicably by mutual discussion failing which the disputes have to be settled through arbitration. The Opposite Party has further submitted that Complainant 1 has no privity of contract with the Opposite Party and no relief can be granted to the said Buyer’s Association.

Analysis, Law and Decision

Coram while analysing the matter and noting the contention with respect to the arbitration clause relied on the Supreme Court decision of Emaar MGF Land Ltd. v. Aftab Singh – I, (2015) CPJ 5 (SC), in which it was laid down that an Arbitration clause on the agreement does not bar the jurisdiction of the Consumer Fora to entertain the complaint.

Hence, the objection raised by the Counsel for the OP that the clause of the Arbitration bars this commission from entertaining the complaint was unsustainable.

Counsel’s contention for the Developer that the Complainants are not ‘Consumers’ and that the subject Flats were booked for investment purpose was completely unsustainable in the light of the judgement of this Commission in Kavita Ahuja v. Shipra Estates I (2016) CPJ 31, in which the principle laid down is that the onus of establishing that the Complainants were dealing in real estate i.e. in the purchase and sale of plots/ flats in his normal course of business to earn profits, shifts to the OP Developer, which in the instant case the Opposite Party Developer had failed to discharge.

Further, as per Clause 4.5 of the Agreement of the Flat Buyer Agreement, in case of failure to deliver possession, the OP developer was liable to refund the amounts paid by the allottees with simple interest 10% pa for the period such amounts were laying with the Developer/SPV and to pay not other compensation whatsoever, whereas, in terms of Clause 1.19 in case of late payment, the Complainant/Buyer is liable to pay interest @18% p.a.

The above-stated terms depicted that they were wholly one-sided and unfair, therefore the complainant cannot be made bound to the terms of the agreement.

Elaborating further, Commission stated that it was not in dispute that the Complainants were allotted the Flats in the year 2009 and till date the construction of the flat has not been completed.

Coram opined that buyer cannot be made to wait indefinitely for the delivery of possession and the act of OP with regard to relying on Farmers’ agitation while retaining the amounts deposited by the complainants was not only an act of deficiency of service but also amounted to Unfair Trade Practice.


Complainants are entitled to refund of the principal amount with a reasonable interest of @9% p.a. from the date of the respective date of deposit till the date of actual refund. [Ansal API Megapolis Buyer’s Assn. v. Ansal Hi-Tech Townships Ltd., 2021 SCC OnLine NCDRC 330, decided on 8-11-2021]

Advocates before the Commission:

For the Complainants: Mr Saurabh Jain, Advocate

For the Opposite Party: Mr Rakesh Kumar, Advocate Mr Rupesh Kumar Sinha, Advocate

One comment

  • Rapes are unstoppable in India. Corruption is also unstoppable in India. While in China xi jinping succeeded in stopping both. It appears something has gone wrong in our judicial system or in Central rule.

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