# CASE DETAILS SMT. M. HEMALATHA DEVI & ORS v. B. UDAYASRI

- **Citation:** 2023 INSC 870
- **Court:** Supreme Court of India
- **Decided:** 2023-10-05
- **Case number:** Civil Appeal Nos. 6500-6501 of 2023
- **Bench:** Sanjay Kishan Kaul, Sudhanshu Dhulia
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/case-details-smt-m-hemalatha-devi-ors-v-b-udayasri-36632
- **Pages:** 31

## Headnote

Issue for consideration: Whether the dispute between the parties is
arbitrable, and once a party has availed the remedy before a public forum
under a special benefi cial legislation, can it be compelled to go for arbitration.
Consumer Protection Act, 2019 - Consumer Protection Act, 1986
- Arbitration Act & Conciliation, 1996 - s.11(6A), 8(1) - Arbitrability
of consumer dispute - Constructed house/villa was not handed over to
the buyer/consumer-respondent on time - Later, builder terminated
the agreement and the appellants-builders/owners fi led application
u/s.11(5), (6), Arbitration Act, 1996 before the High Court for
appointment of Arbitrator, in terms of the arbitration clause in the
agreement - Respondent fi led complaint before the District Forum -
Appellants' application was dismissed, liberty was granted to fi le a s.8
application before the District Forum which when fi led was dismissed
- Review fi led by the appellants, dismissed - Plea of the appellants
that the High Court erred in dismissing their application as under the
amended provisions of s.11, Arbitration Act, 1996 i.e. after insertion of
sub-section 6A to s.11, by way of an amendment in 2016, the High Court
had no choice but to refer the matter for arbitration:
Held: All disputes are not capable of being referred to arbitration
- The exclusion of a dispute from arbitration may be express or implied,
depending upon the nature of the dispute, and a party to a dispute cannot
be compelled to resort to arbitration merely for the reason that it has been
provided in the contract, to which it is a signatory - The arbitrability of a
dispute has to be examined when one of the parties seeks redressal under a
259
welfare legislation, in spite of being a signatory to an arbitration agreement
- Consumer Protection Act is a piece of welfare legislation with the primary
purpose of protecting the interest of a consumer - Consumer disputes are
assigned by the legislature to public fora, as a measure of public policy -
Therefore, by necessary implication such disputes will fall in the category
of non-arbitrable disputes, and these disputes should be kept away from
a private fora such as 'arbitration', unless both the parties willingly opt
for arbitration over the remedy before public fora - In the present case,
the application u/s.11, Arbitration Act, 1996 fi led by the appellants for
appointment of an arbitrator, was not maintainable - Impugned orders
which held this position upheld - High Court adopted the right approach
in its two impugned orders, where it declined to interfere in the matter and
appoint an arbitrator - Reasoning given in Emaar MGF Land Ltd. v. Aftab
Singh [2018] 14 SCR 791 (Emaar III) would be equally applicable to s.11
application before the High Court - Both the provisions incorporated in s.8
and s.11 [i.e. sub-section (1) and sub-section 6A respectively], seemingly
restrict the scope of the examination by the concerned courts, in their
reference to arbitration, or appointment of arbitrator, as the case might be,
and the language being common, "notwithstanding any judgment, decree or
order" places a similar question before the two courts - Appeals dismissed.
[Paras 9, 22, 23]
Consumer Protection Act, 2019 - Arbitration Act, 1996 - ss.11,8 -
Plea by the appellants that since it is the builder who fi rst approached the
"Court" by fi ling an application u/s.11 for appointment of arbitrator, in
terms of the agreement, the consumer should have submitted before the
jurisdiction of the Arbitration and Conciliation Act, as agreed between
the parties (in their agreement), rather than seeking remedy before the
Consumer Forum:
Held: The question is of election, or of choice, and not of which party
had approached the court fi rst - More importantly it would be the nature
of the dispute, which would determine the forum for its redressal - The
law gives this choice to the consumer to either avail a remedy under the
Consumer Protection Act, by fi ling a complaint before

## Text

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[2023] 13 S.C.R. 258 : 2023 INSC 870
258
CASE DETAILS
SMT. M. HEMALATHA DEVI & ORS.
v.
B. UDAYASRI
(Civil Appeal Nos. 6500-6501 of 2023)
OCTOBER 05, 2023
[SANJAY KISHAN KAUL AND SUDHANSHU DHULIA, JJ.]
HEADNOTES
Issue for consideration: Whether the dispute between the parties is
arbitrable, and once a party has availed the remedy before a public forum
under a special benefi cial legislation, can it be compelled to go for arbitration.
Consumer Protection Act, 2019 - Consumer Protection Act, 1986
- Arbitration Act & Conciliation, 1996 - s.11(6A), 8(1) - Arbitrability
of consumer dispute - Constructed house/villa was not handed over to
the buyer/consumer-respondent on time - Later, builder terminated
the agreement and the appellants-builders/owners fi led application
u/s.11(5), (6), Arbitration Act, 1996 before the High Court for
appointment of Arbitrator, in terms of the arbitration clause in the
agreement - Respondent fi led complaint before the District Forum -
Appellants' application was dismissed, liberty was granted to fi le a s.8
application before the District Forum which when fi led was dismissed
- Review fi led by the appellants, dismissed - Plea of the appellants
that the High Court erred in dismissing their application as under the
amended provisions of s.11, Arbitration Act, 1996 i.e. after insertion of
sub-section 6A to s.11, by way of an amendment in 2016, the High Court
had no choice but to refer the matter for arbitration:
Held: All disputes are not capable of being referred to arbitration
- The exclusion of a dispute from arbitration may be express or implied,
depending upon the nature of the dispute, and a party to a dispute cannot
be compelled to resort to arbitration merely for the reason that it has been
provided in the contract, to which it is a signatory - The arbitrability of a
dispute has to be examined when one of the parties seeks redressal under a
259
welfare legislation, in spite of being a signatory to an arbitration agreement
- Consumer Protection Act is a piece of welfare legislation with the primary
purpose of protecting the interest of a consumer - Consumer disputes are
assigned by the legislature to public fora, as a measure of public policy -
Therefore, by necessary implication such disputes will fall in the category
of non-arbitrable disputes, and these disputes should be kept away from
a private fora such as 'arbitration', unless both the parties willingly opt
for arbitration over the remedy before public fora - In the present case,
the application u/s.11, Arbitration Act, 1996 fi led by the appellants for
appointment of an arbitrator, was not maintainable - Impugned orders
which held this position upheld - High Court adopted the right approach
in its two impugned orders, where it declined to interfere in the matter and
appoint an arbitrator - Reasoning given in Emaar MGF Land Ltd. v. Aftab
Singh [2018] 14 SCR 791 (Emaar III) would be equally applicable to s.11
application before the High Court - Both the provisions incorporated in s.8
and s.11 [i.e. sub-section (1) and sub-section 6A respectively], seemingly
restrict the scope of the examination by the concerned courts, in their
reference to arbitration, or appointment of arbitrator, as the case might be,
and the language being common, "notwithstanding any judgment, decree or
order" places a similar question before the two courts - Appeals dismissed.
[Paras 9, 22, 23]
Consumer Protection Act, 2019 - Arbitration Act, 1996 - ss.11,8 -
Plea by the appellants that since it is the builder who fi rst approached the
"Court" by fi ling an application u/s.11 for appointment of arbitrator, in
terms of the agreement, the consumer should have submitted before the
jurisdiction of the Arbitration and Conciliation Act, as agreed between
the parties (in their agreement), rather than seeking remedy before the
Consumer Forum:
Held: The question is of election, or of choice, and not of which party
had approached the court fi rst - More importantly it would be the nature
of the dispute, which would determine the forum for its redressal - The
law gives this choice to the consumer to either avail a remedy under the
Consumer Protection Act, by fi ling a complaint before the Judicial Authority,
or go for arbitration - This option is not available to the builder, as they
are not 'Consumers', under the 2019 Act - It is the respondent here who
SMT. M. HEMALATHA DEVI & ORS. v. B. UDAYASRI
SUPREME COURT REPORTS
[2023] 13 S.C.R.
260
had to make a "choice" between submitting before the private fora i.e., the
Arbitration Tribunal or to make a complaint before the Consumer Forum,
which is a public for a - She chose to go to the latter - Her reply before the
High Court on the s.11 application of the builder was not her submission
to the arbitration process - In her reply, she informed the High Court of
the complaint made by her as a consumer before the District Consumer
Forum, which is a 'Judicial Authority' and hence s.8 of the Arbitration
Act would come into play and not an application u/s.11 of the Arbitration
Act - Merely because the builder had approached a Court fi rst (u/s.11,
Arbitration Act, 1996) will itself not oust the jurisdiction of the Consumer
Courts - The jurisdiction of a Court is not determined by the fastest fi nger
fi rst, but the nature of the dispute, the public policy in the matter, the will
of the legislature, the election or choice of the consumer amongst various
factors. [Para 10]
Consumer Protection - Arbitration Act, 1996 - s.11(6A), 8(1) -
Doubt as regards a consumer pursuing his remedy before Consumer
Forums as against his going for arbitration, though being a party to an
arbitration agreement, set to rest by Supreme Court decision in Emaar
MGF Land Ltd. v. Aftab Singh [2018] 14 SCR 791 (Emaar III) - It reexamined the issue afresh in the light of the insertion of sub-section 6A
to s.11 and sub-section 1 to s.8, Arbitration Act, 1996 - Legal position
as it existed prior to the amendments and the eff ect of the amendment
on the legal position as examined, discussed.
Consumer Protection Act, 2019 - Consumer Protection Act,
1986 - Arbitration Act, 1996 - Consumer Protection Act, a special and
benefi cial legislation - Remedies provided are special remedies and a
consumer cannot be deprived of them:
Held: Being a special and benefi cial legislation, the remedies provided
in Consumer Protection Act are special remedies and a consumer cannot
be deprived of them should he choose to avail such a remedy, in spite of
an arbitration agreement between the parties - It is a remedy provided to
the consumer where the consumer fi nds a defect in either goods or services
provided to him and therefore seeks a redressal of his grievances before the
consumer forum provided to him by the legislature. [Para 16]
261
LIST OF CITATIONS AND OTHER REFERENCES
Emaar MGF Land Ltd. v. Aftab Singh (2019) 12 SCC 751 : [2018] 14
SCR 791 - relied on.
Booz Allen and Hamilton Inc. v. SBI Home Finance Limited and
Others (2011) 5 SCC 532 : [2011] 7 SCR 310; Fair Air Engineers (P) Ltd.
v. N.K. Modi (1996) 6 SCC 385 : [1996] 4 Suppl. SCR 820; National Seeds
Corporation Limited v. M. Madhusudhan Reddy and Another (2012) 2 SCC
506 : [2012] 2 SCR 1065; Rosedale Developers Private Limited v. Aghore
Bhattacharya and Others (2018) 11 SCC 337; Aftab Singh v. Emaar MGF
Land Ltd and Anr., 2017 SCC OnLine NCDRC 1614; Emaar MGF Land
Limited v. Aftab Singh, 2018 SCC OnLine SC 2378; Lucknow Development
Authority v. M.K. Gupta (1994) 1 SCC 243 : [1993] 3 Suppl. SCR 615;
Secretary, Thirumurugan Cooperative Agricultural Credit Society v. M.
Lalitha, (2004) 1 SCC 305 : [2003] 6 Suppl. SCR 659; Skypak Couriers
Ltd. v. Tata Chemicals Ltd., (2000) 5 SCC 294 : [2000] 1 Suppl. SCR 324;
A. Ayyasamy v. A. Paramasivam and Others (2016) 10 SCC 386 : [2016]
11 SCR 521; Ameet Lalchand Shah v. Rishabh Enterprises, (2018) 15 SCC
678 : [2018] 6 SCR 1001; SBP & Co. v. Patel Engg. Ltd. (2005) 8 SCC 618:
[2005] 4 Suppl. SCR 688; Vidya Drolia v. Durga Trading Corpn. (2021) 2
SCC 1 : [2020] 11SCR 1001 - referred to.
OTHER CASE DETAILS INCLUDING IMPUGNED
ORDER AND APPEARANCES
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 6500-6501
of 2023.
From the Judgment and Order dated 19.05.2022 in ARBA No.97 of
2020 and dated 25.11.2022 in RIA No.01 of 2022 of the High Court for the
State of Telangana at Hyderabad.
Appearances:
Kishore Rai, Sr. Adv., Himinder Lal, Roy Abraham, Ms. Reena Roy,
Akhil Abraham, Ms. Neelam Saini, Advs. for the Appellants.
Krishna Dev Jagarlamudi, Ms. Bhabna Das, Ms. Inderdeep Kaur Raina,
Advs. for the Respondent.
SMT. M. HEMALATHA DEVI & ORS. v. B. UDAYASRI
SUPREME COURT REPORTS
[2023] 13 S.C.R.
262
JUDGMENT / ORDER OF THE SUPREME COURT
JUDGMENT
SUDHANSHU DHULIA, J.
Leave granted.
2. The appellants before this Court have challenged two orders of the
Telangana High Court. The fi rst is the order dated 19.05.2022, dismissing
the application of the appellants fi led for the appointment of an arbitrator
under Section 11 of the Arbitration & Conciliation Act, 1996 (for short
'Arbitration Act, 1996'). It was dismissed by the High Court on the ground
that the dispute was pending before a Judicial Authority, which is the District
Consumer Disputes Redressal Forum (for short 'District Consumer Forum'),
where a complaint has been fi led by the other party to the agreement, who is a
consumer and therefore the appellants have the option to move an application
under Section 8 of the Arbitration Act, 1996 for reference before Arbitration.
Consequently, the appellants moved an application for referring the dispute
for arbitration. The District Consumer Forum dismissed this application on
the ground that the complainant has invoked a public law remedy before a
"Judicial Authority", under a benefi cial legislation for consumers, which
is the Consumer Protection Act, 2019 (hereinafter referred to as 'The 2019
Act") and therefore under the facts and circumstances of this case, the
dispute is non-arbitrable. Consequent to the dismissal of their application
under Section 8 of the Arbitration Act, 1996, the appellants fi led a Review
Application before the High Court for review of its earlier order dated
19.05.2022. This Review Application was dismissed vide the second order
of the High Court dated 25.11.2022, (which is again impugned before this
Court), on the ground that the appellants had already acted upon the order
dated 19.05.2022, and therefore is now estopped from seeking review of
the order dated 19.05.2022. It is these two orders which are under challenge
before this Court.
3. The facts as they stand today are that the complaint fi led by the
consumer (the sole respondent before this Court), has already been allowed
by the District Consumer Forum and the builders (i.e., the appellants before
this Court), have been directed to handover the possession of the plot along
with the constructed villa and pay a compensation of Rs.15,00,000/- (Rupees
263
Fifteen Lakh Only) and a cost of Rs.1,00,000/- (Rupees One Lakh Only)
with default stipulation. The fi ndings given by the District Consumer Forum
disclose the reasons as to why the builder backed out of its promise and
made a default:
" ....., the opposite party no. 3 had chosen to send the termination
notices and sought for execution of cancellation deed knowing that the
value of the plot had escalated to more than 10 times from the date of
agreement and the opposite parties wanted to take the benefi t of such
rise in price value. The opposite party no. 3 did not fi x any reasonable
time for performance of his obligation though time for handing over
the possession was agreed by the opposite party no.3 in the agreement
of sale. The opposite party no. 3 had issued termination notice in the
year 2020 though he failed to keep his promise of handing over the
possession of the Villa by March, 2017.
The failure of the developer, who is also the land owner in the present
case, to hand over the possession of the residential property to the
complainant-purchaser within the contractually stipulated time
count as a defi ciency. There exists fault, shortcoming or inadequacy
in the nature and manner of the action which has been undertaken
to be executed in the implementation of the contract with regard to
the service to be provided by the opposite parties. The terms of the
agreement of sale have been drafted keeping in mind the interest of
the developer (opposite party no. 3). The trade practice which tends
to bring about restrictive trade practice, manipulation of price or its
conditions of delivery or to aff ect now of supplies in the market relating
to goods or services in such a manner as to impose on the consumers
unjustifi ed costs or restrictions and shall include delay beyond the
period agreed to by a trader in supply of such goods or in providing
the services which has led or as is likely to lead to rise in the price is
nothing but restrictive practice by the opposite parties. Further, the act
of the opposite parties amounts to defi ciency of service and unfair trade
practice. Hence, point no. a is answered in favour of the complainant.
10. Point No. b:
Homebuyers put their hard-earned savings into the real estate projects
with a hope that they will own their dream house one day. However,
SMT. M. HEMALATHA DEVI & ORS. v. B. UDAYASRI
[SUDHANSHU DHULIA, J.]
SUPREME COURT REPORTS
[2023] 13 S.C.R.
264
their dreams get shattered when the builders fail to deliver the
possession of their houses even after a prolonged delay.
In the present case, the obligation of the opposite party no. 3 (who is the
land owner and developer) to deliver the Villa on the time mentioned
in the agreement of sale was not fulfi lled despite receipt of payment of
amount as per the said agreement. The receipt of part payment towards
transfer of the plot by the opposite parties without discharging their
obligations for the construction of the Villa and fi nally cancelling the
agreement of sale unilaterally on the pretext that the prices have gone
up for the subject property is nothing but commission of defi ciency
of service and adoption of unfair trade practice on the part of the
opposite parties."
The builders, who are the appellants before this Court, have
already filed their statutory appeal before the State Consumer
Commission which is presently pending and the order of the District
Forum has been stayed.
4. The essential argument of the appellants before this Court is that
the High Court committed a gross error in dismissing the application of
the appellants under Section 11 (sub-sections 5 & 6) of the Arbitration Act,
1996 for the reasons that under the amended provision of Section 11 of the
Arbitration Act, 1996 i.e., after insertion of sub-section 6A to Section 11,
by way of an amendment in 20161, the High Court had no choice but to
refer the matter for arbitration. The provision which has been pressed into
service reads as under:
"11. Appointment of arbitrators: -
XXX

XXX

XXX
6A) The Supreme Court or, as the case may be, the High Court, while
considering any application under sub-section (4) or sub-section (5)
or sub-section (6), shall, notwithstanding any judgment, decree or
1
It may be necessary to note that the aforesaid provision was inserted by an Act No.3 of
2016 and though by an Act No.33 of 2019, Sub Section 6A has been omitted but as the
relevant provisions of the amending Act (No.33 of 2019) has not been notifi ed as yet,
Sub Section 6A continues to be in operation.
265
order of any Court, confi ne to the examination of the existence of an
arbitration agreement."
5. The validity of the two orders impugned before us, therefore,
have to be examined in light of sub-section 6A to Section 11 and Section
8 of the Arbitration Act, 1996. We will thus also be examining whether
the dispute between the parties is arbitrable, and once a party has availed
the remedy before a public forum under a special benefi cial legislation,
can it be compelled to go for arbitration?
In order to arrive at a conclusion, we will fi rst have to refer to the
nature of the dispute between the parties. The respondent before this
Court is a home buyer who had entered into an Agreement for Sale
with the present appellants on 27.08.2013. The present appellants will
hereinafter be referred to as the builders/owners and the respondents
as buyer/consumer. The builders/owners are three in number. They are:
(a) M/s R.G. Prime Spaces Private Limited
(b) Smt. M. Hemalatha Devi
(c) M/s Legend Estates Private Limited
They are the joint owners of the land on which they had agreed
to construct a residential house/villa for the buyer/consumer Smt. B.
Udayasri. The terms of agreement dated 27.08.2013 stipulate that the
project will be developed by M/s Legend Estates Private Limited who
is one of the owners of the property. The total area of the land on which
the residential house/villa was to be constructed was 357 sq. yards
in Kokapet Village, Rajendra Nagar Mandal, Ranga Reddy District,
Telangana, and the total construction was 4,000 sq. feet for a total sale
consideration of Rs.49,42,000/- (Rupees Forty Nine Lakhs and Forty
Two Thousand Only).
6. As per the agreement, the mode of payment was to be done as
per clauses 9.1, 9.2 and 9.3 which read as under:
"9.1 Mode: The purchaser paid to the Developer, the total
consideration mentioned in Clause 8.1 above, in the following
manner:
SMT. M. HEMALATHA DEVI & ORS. v. B. UDAYASRI
[SUDHANSHU DHULIA, J.]
SUPREME COURT REPORTS
[2023] 13 S.C.R.
266
S. No.
Date
Chq. No.
Bank
Amount
1.
29/08/2013
303650
ING, Vysya Bank,
Hyderabad
4,94,200
Total
4,94,200
9.2 The balance of Rs.44.47,800/- (Rupees Forty Four Lakhs Seven
Thousand Eight Hundred Only) shall be paid by the vendee at the time
of registration of sale deed in favour of purchaser or her nominee/s.
9.3 Essence: timely payment of the total consideration is the essence
of this contract."
The possession of the house was to be given as per clauses 10.1 and
10.1.1 of the agreement which reads as under:
"10.1 Possession: Vacant and peaceful possession of the said plot
along with constructed villa shall be delivered by the Developer
to the Purchaser simultaneously with the full payment of the Total
Consideration as mentioned in the Sale deed and the Construction
Agreement and registration of Sale Deeds in favour of the purchaser
shall be done after completion of Villa.
10.1.1 The Developer agrees to hand over possession of the said Villa
within period of three years and six months grace period from the date
of agreement of sale. That in case of the developer is unable to hand
over the possession of Villa in stipulated time then the developer is
liable to pay the purchaser compensation Rs.5/- per sq. ft., per month
for any delay in completing the construction of the Villa."
7. It is therefore, absolutely clear that the builders/owners had to hand
over the fully constructed house/villa to the buyer, within three years from
the date of the agreement i.e., 27.08.2013, with a six months grace period.
In other words, this constructed house/villa had to be handed over to the
buyer/consumer on or before February 27, 2017. This has admittedly not
been done. What happened instead is that in 2020, i.e., after three years
from the date when the constructed house/villa had to be handed over to the
buyer, the builder sends a "Termination Notice" to the buyer and terminates
the agreement, ostensibly on the ground that the buyer had not signed "the
Construction Agreement". It is not disputed that at the time of signing the
267
agreement in the year 2013, the buyer in terms of the agreement (Clauses 9.1,
9.2 and 9.3) had handed over the fi rst instalment of Rs. 4,94,200/- (Rupees
Four Lakh Ninety Four Thousand and Two Hundred Only) to the builders/
owners. The remaining amount of Rs.44,47,800/- (Rupees Forty Four Lakh
Forty Seven Thousand and Eight Hundred Only) was to be paid at the time
of registration of Sale Deed and handing over of the constructed house to
the buyer/consumer. This event, as we have already stated above, never took
place.
8. Meanwhile, the builders/owners after sending notice to the
consumer/buyer moved an application under sub-sections 5 and 6 of Section
11 of the Arbitration Act, 1996 before the High Court for appointment of
an Arbitrator, in terms of the arbitration clause which is admittedly there in
the agreement.
The buyer, who was also a consumer, as defi ned under the 2019 Act,
moved a complaint before the District Consumer Forum. At the same time,
having received notice of Section 11 application, the respondent fi led her
reply before the Court. In her reply, the respondent apprised the High Court
that she being a consumer has moved a complaint before a Judicial Authority,
which is District Consumer Forum, where an application under Section 8 of
the Arbitration Act, 1996 for appointment of Arbitrator is always available to
the appellants. Vide the impugned order dated 19.05.2022, the application of
the present appellants was dismissed by the High Court, and the appellants
were granted liberty to move a Section 8 application of the Arbitration Act,
1996 before the District Consumer Forum. This application (under Section 8
of the Arbitration Act, 1996), as we have already referred to above, was later
dismissed by the District Consumer Forum on the ground that the legislature
had purposely provided a remedy under the 2019 Act in addition to any
other remedy which may be available to the consumer and although there
is an Arbitration clause between the parties but that itself will not oust the
jurisdiction of a Consumer Court for the reason that it is a remedy available
to the consumer in a public fora. The District Consumer Forum relied upon
the Judgment of this Court in Emaar MGF Land Ltd. v. Aftab Singh,
(2019) 12 SCC 751 ("Emaar III") (this seminal decision of the Supreme
Court, we would be discussing in detail in a while), wherein it has been
SMT. M. HEMALATHA DEVI & ORS. v. B. UDAYASRI
[SUDHANSHU DHULIA, J.]
SUPREME COURT REPORTS
[2023] 13 S.C.R.
268
held that an Arbitration Clause in the agreement does not bar the jurisdiction
of the Consumer Forum to entertain the complaint. After the dismissal of
their Section 8 application, the appellants moved an application before the
Telangana High Court seeking review of its order dated 19.05.2022. The
Review Petition was also dismissed vide order dated 25.11.2022 on the
ground that the earlier order had been acted upon by the appellants.
9. Now before this Court, there is a long line of decisions, including the
decision which had come up post amendment to sub-section (1) of Section
8 and post insertion of sub-section 6A to Section 11 of the Arbitration Act,
1996, where it has been held that in spite of sub-section (1) to Section 8 the
Court has to fi nd out not only whether there is an arbitration clause in the
agreement but whether the dispute is arbitrable or not.
All disputes are not capable of being referred to arbitration2. The
nature of certain disputes may be such that they should never be sent near
an arbitration table. To give an illustration, there would be certain types
of criminal matters, matters involving public corruption, etc. This aspect
has been well considered by this Court in Booz Allen and Hamilton Inc.
v. SBI Home Finance Limited and Others, (2011) 5 SCC 532 and it has
been held as under:
"35. The Arbitral Tribunals are private fora chosen voluntarily by the
parties to the dispute, to adjudicate their disputes in place of courts
and tribunals which are public fora constituted under the laws of the
country. Every civil or commercial dispute, either contractual or noncontractual, which can be decided by a court, is in principle capable of
being adjudicated and resolved by arbitration unless the jurisdiction
of the Arbitral Tribunals is excluded either expressly or by necessary
implication. Adjudication of certain categories of proceedings are
reserved by the legislature exclusively for public fora as a matter of
public policy. Certain other categories of cases, though not expressly
2
"Not all matters are capable of being referred to arbitration. As a matter of English
law certain matters are reserved for the court alone and if a tribunal purports to deal
with them the resulting award will be unenforceable. These include matters where the
type of remedy required is not one which an Arbitral Tribunal is empowered to give."
[Russel on Arbitration (22 Edn.)]
269
reserved for adjudication by public fora (courts and tribunals), may
by necessary implication stand excluded from the purview of private
fora. Consequently, where the cause/dispute is inarbitrable, the court
where a suit is pending, will refuse to refer the parties to arbitration,
under Section 8 of the Act, even if the parties might have agreed upon
arbitration as the forum for settlement of such disputes.
36. The well-recognised examples of non-arbitrable disputes are: (i)
disputes relating to rights and liabilities which give rise to or arise
out of criminal off ences; (ii) matrimonial disputes relating to divorce,
judicial separation, restitution of conjugal rights, child custody; (iii)
guardianship matters; (iv) insolvency and winding-up matters; (v)
testamentary matters (grant of probate, letters of administration and
succession certifi cate); and (vi) eviction or tenancy matters governed
by special statutes where the tenant enjoys statutory protection against
eviction and only the specifi ed courts are conferred jurisdiction to
grant eviction or decide the disputes."
The exclusion of a dispute from arbitration may be express or implied,
depending again upon the nature of the dispute, and a party to a dispute
cannot be compelled to resort to arbitration merely for the reason that it has
been provided in the contract, to which it is a signatory. The arbitrability of
a dispute has to be examined when one of the parties seeks redressal under a
welfare legislation, in spite of being a signatory to an arbitration agreement.
'The Consumer Protection Act' is defi nitely a piece of welfare legislation
with the primary purpose of protecting the interest of a consumer. Consumer
disputes are assigned by the legislature to public fora, as a measure of public
policy. Therefore, by necessary implication such disputes will fall in the
category of non-arbitrable disputes, and these disputes should be kept away
from a private fora such as 'arbitration', unless both the parties willingly
opt for arbitration over the remedy before public fora.
In Fair Air Engineers (P) Ltd. v. N.K. Modi (1996) 6 SCC 385, Section
8 of the Arbitration Act, 1996 was considered in light of the provisions of
the 1986 Act.
"16. It would, therefore, be clear that the legislature intended to
provide a remedy in addition to the consentient arbitration which could
be enforced under the Arbitration Act or the civil action in a suit under
SMT. M. HEMALATHA DEVI & ORS. v. B. UDAYASRI
[SUDHANSHU DHULIA, J.]
SUPREME COURT REPORTS
[2023] 13 S.C.R.
270
the provisions of the Code of Civil Procedure. Thereby, as seen, Section
34 of the Act does not confer an automatic right nor create an automatic
embargo on the exercise of the power by the judicial authority under the
Act. It is a matter of discretion. Considered from this perspective, we
hold that though the District Forum, State Commission and National
Commission are judicial authorities, for the purpose of Section 34 of
the Arbitration Act, in view of the object of the Act and by operation
of Section 3 thereof, we are of the considered view that it would be
appropriate that these forums created under the Act are at liberty to
proceed with the matters in accordance with the provisions of the
Act rather than relegating the parties to an arbitration proceedings
pursuant to a contract entered into between the parties. The reason
is that the Act intends to relieve the consumers of the cumbersome
arbitration proceedings or civil action unless the forums on their own
and on the peculiar facts and circumstances of a particular case, come
to the conclusion that the appropriate forum for adjudication of the
disputes would be otherwise those given in the Act."
Again, the question which came up before this Court was whether
existence of Arbitration clause in the agreement would exclude the
jurisdiction of the Consumer Courts and whether the Consumer Court is
bound to refer the matter for reference to arbitration. This was in the case
of National Seeds Corporation Limited v. M. Madhusudhan Reddy and
Another (2012) 2 SCC 506 and it was answered thus:
"64. According to the learned counsel for the appellant, if the growers
had applied for arbitration then in terms of Section 8 of the Arbitration
and Conciliation Act the dispute arising out of the arbitration clause
had to be referred to an appropriate arbitrator and the District
Consumer Forums were not entitled to entertain their complaint.
This contention represents an extension of the main objection of the
appellant that the only remedy available to the farmers and growers
who claim to have suff ered loss on account of use of defective seeds
sold/supplied by the appellant was to fi le complaints with the Seed
Inspectors concerned for taking action under Sections 19 and/or 21
of the Seeds Act.
271
65. The consideration of this issue needs to be prefaced with an
observation that the grievance of a farmer/grower who has suff ered
fi nancially due to loss or failure of crop on account of use of defective
seeds sold/supplied by the appellant or by an authorised person is not
remedied by prosecuting the seller/supplier of the seeds. Even if such
person is found guilty and sentenced to imprisonment, the aggrieved
farmer/grower does not get anything. Therefore, the so-called remedy
available to an aggrieved farmer/grower to lodge a complaint with
the Seed Inspector concerned for prosecution of the seller/supplier of
the seeds cannot but be treated as illusory and he cannot be denied
relief under the Consumer Protection Act on the ground of availability
of an alternative remedy.
66. The remedy of arbitration is not the only remedy available to a
grower. Rather, it is an optional remedy. He can either seek reference
to an arbitrator or fi le a complaint under the Consumer Protection
Act. If the grower opts for the remedy of arbitration, then it may be
possible to say that he cannot, subsequently, fi le complaint under the
Consumer Protection Act. However, if he chooses to fi le a complaint
in the fi rst instance before the competent Consumer Forum, then he
cannot be denied relief by invoking Section 8 of the Arbitration and
Conciliation Act, 1996. Moreover, the plain language of Section 3 of
the Consumer Protection Act makes it clear that the remedy available
in that Act is in addition to and not in derogation of the provisions of
any other law for the time being in force."
Later, in a similar matter before this Court [Rosedale Developers
Private Limited v. Aghore Bhattacharya and Others (2018) 11 SCC 337],
the plea of the builder for arbitrability was dismissed at the very threshold as
a "frivolous piece of litigation", relying upon National Seeds Corporation
Limited (supra).
10. Another question raised before this Court by the appellants is that
since it is the builder who had fi rst approached the "Court" by fi ling an
application under Section 11 for appointment of an arbitrator, in terms of
the agreement, the consumer in all fairness should have submitted before
the jurisdiction of the Arbitration and Conciliation Act, as agreed between
the parties (in their agreement), rather than seeking remedy before the
Consumer Forum.
SMT. M. HEMALATHA DEVI & ORS. v. B. UDAYASRI
[SUDHANSHU DHULIA, J.]
SUPREME COURT REPORTS
[2023] 13 S.C.R.
272
The question, however, is of election, or of choice, and not of which
party had approached the court fi rst. More importantly it would be the
nature of the dispute, which would determine the forum for its redressal.
The law gives this choice to the consumer to either avail a remedy under
the Consumer Protection Act, by fi ling a complaint before the Judicial
Authority, or go for arbitration. This option is not available to the builder,
as they are not 'Consumers', under the 2019 Act. It is the respondent here
Smt. B. Udayasri who has to make a "choice" between submitting before the
private fora i.e., the Arbitration Tribunal or to make a complaint before the
Consumer Forum, which is a public fora. She has chosen to go to the latter.
Her reply before the Telangana High Court on the Section 11 application
of the builder is not her submission to the arbitration process. In her reply,
she informs the High Court of the complaint made by her as a consumer
before the District Consumer Forum, which is a 'Judicial Authority' and
hence Section 8 of the Arbitration Act, 1996 would come into play and not
an application under Section 11 of the Arbitration Act, 1996.
Now merely because the builder had approached a Court fi rst (under
Section 11 of the Arbitration Act, 1996) will itself not oust the jurisdiction
of the Consumer Courts. The jurisdiction of a Court is not determined by
the fastest fi nger fi rst, but the nature of the dispute, the public policy in the
matter, the will of the legislature, the election or choice of the consumer
amongst various factors.
11. Any doubt which so far may have existed for a consumer pursuing
his remedy before Consumer Forums as against his going for 'arbitration',
though being a party to an arbitration agreement, have now been set to rest
by a recent Supreme Court decision in Emaar III (supra). This decision is
signifi cant for the reason that it has re-examined the whole issue afresh in
the light of the insertion of sub-section 6A to Section 11 and sub-section 1
to Section 8 of the Arbitration Act, 1996.
A short background to this case should be in order as this Court while
determining the present dispute has relied heavily on the above decision.
We must also refer here to the well elaborated order of a larger bench of
National Consumer Disputes Redressal Commission (NCDRC), dated
13.07.2017 in Aftab Singh v. Emaar MGF Land Ltd and Anr., 2017 SCC
OnLine NCDRC 1614 ("Emaar I") which had set the background to the
decision of this Court in Emaar III (supra).
273
By Act No.3 of 2016, an amendment was incorporated, inter alia,
in Sections 8 & 11 of the Arbitration Act, 1996. The amendment was
incorporated by Act No. 3 of 2016 was w.e.f. 23.10.2015. These are as
follows:
Pre-Amendment
Post Amendment
Section 8:
8. Power to refer parties to arbitration
where there is an arbitration
agreement.-
(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 so applies not later than when
submitting his fi rst statement on the
substance of the dispute, refer the
parties to arbitration.
(2) The application referred to
in sub-section (1) shall not be
entertained unless it is accompanied
by the original arbitration agreement
or a duly certifi ed copy thereof.
Section 8:
8. Power to refer parties to arbitration
where there is an arbitration
agreement.-
(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 fi rst
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 fi nds that prima facie no valid
arbitration agreement exists.
(2) The application referred to
in sub-section (1) shall not be
entertained unless it is accompanied
by the original arbitration agreement
or a duly certifi ed copy thereof.
Provided that where the original
arbitration agreement or a certifi ed
copy thereof is not available with
the party applying for reference to
arbitration under sub-section (1) and
SMT. M. HEMALATHA DEVI & ORS. v. B. UDAYASRI
[SUDHANSHU DHULIA, J.]
SUPREME COURT REPORTS
[2023] 13 S.C.R.
274
(3) ........
the said agreement or certifi ed copy
is retained by the other party to
that agreement, then, the party so
applying shall fi le such application
along with a copy of the arbitration
agreement and a petition praying
the court to call upon the other party
to produce the original arbitration
agreement or its duly certifi ed copy
before that court.
(3) .......
Section 11:
Appointment of arbitrators.-
(1) .......
(2) .......
(3) .......
(4) If the appointment procedure in
sub-section (3) applies and-
(a) .......
(b) the two appointed arbitrators
fail to agree on the third arbitrator
within thirty days from the date of
their appointment, the appointment
shall be made, upon request of a
party, by the Chief Justice or any
person or institution designated by
him.
(5) Failing any agreement referred to
in sub-section (2), in an arbitration
with a sole arbitrator, if the parties
fail to agree on the arbitrator within
Section 11:
Appointment of arbitrators.-
(1) .......
(2) .......
(3) .......
(4) If the appointment procedure in
sub-section (3) applies and-
(a) ......
(b) the two appointed arbitrators
fail to agree on the third arbitrator
within thirty days from the date of
their appointment, the appointment
shall be made, upon request of a
party, by the Supreme Court or, as
the case may be, the High Court or
any person or institution designated
by such Court;
(5) Failing any agreement referred to
in sub-section (2), in an arbitration
with a sole arbitrator, if the parties
fail to agree on the arbitrator within
275
thirty days from receipt of a request
by one party from the other party to
so agree the appointment shall be
made, upon request of a party, by
the Chief Justice or any person or
institution designated by him.
(6) Where, under an appointment
procedure agreed upon by the
parties,-
(a) .....
(b) ....
(c) a person, including an institution,
fails to perform any function
entrusted to him or it under that
procedure, a party may request
the Chief Justice or any person or
institution designated by him to
take the necessary measure, unless
the agreement on the appointment
procedure provides other means for
securing the appointment.
thirty days from receipt of a request
by one party from the other party to
so agree the appointment shall be
made, upon request of a party, by the
Supreme Court or, as the case may
be, the High Court or any person or
institution designated by such Court.
(6) Where, under an appointment
procedure agreed upon by the
parties,-
(a) .....
(b) .....
(c) a person, including an institution,
fails to perform any function
entrusted to him or it under that
procedure, a party may request the
Supreme Court or, as the case may
be, the High Court or any person or
institution designated by such Court
to take the necessary measure, unless
the agreement on the appointment
procedure provides other means for
securing the appointment
(6A) The Supreme Court or, as
the case may be, the High Court,
while considering any application
under sub-section (4) or subsection (5) or sub-section (6), shall,
notwithstanding any judgment,
decree or order of any Court, confi ne
to the examination of the existence
of an arbitration agreement.
SMT. M. HEMALATHA DEVI & ORS. v. B. UDAYASRI
[SUDHANSHU DHULIA, J.]
SUPREME COURT REPORTS
[2023] 13 S.C.R.
276
(6B) The designation of any person
or institution by the Supreme Court
or, as the case may be, the High
Court, for the purposes of this
section shall not be regarded as a
delegation of judicial power by the
Supreme Court or the High Court.
Now post amendment, the newly incorporated sub-section (1) to
Section 8 has the words "notwithstanding any judgment, decree or order of
the Supreme Court or any court, refer the parties to arbitration unless it fi nds
that prima facie no valid arbitration agreement exists".