Arbitration Clause and Consumer Protection Act - India Consumer Forum

Arbitration Clause and Consumer Protection Act

Recently we were presented with a query as to whether a dispute can be referred to a Consumer Court even if the warranty terms for the product under dispute contains the clause “all dispute arising between parties shall be subject to Arbitration Act”.

Section 3 of Consumer Protection Act 1986 states as follows:

“Act not in derogation of any other law.—The provisions of this Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force.”

This can be interpreted that CPA is not a replacement of any other law that is agreed between the parties to settle disputes.  However, CPA is in addition to whatever law or other provisions available at the material time.

Going by the above, one is not prevented from availing the provisions of CPA provided the Complainant is a Consumer and the nature of complaint falls within the meaning of consumer dispute as defined in the Act.  The opposite party may very well argue that the disputes are subject to Arbitration Act.  However, Consumer Courts take a lenient view in favour of the consumers on the following grounds:

Consumer Protection Act is enacted by the Parliament of Law, Govt. of India and it has the status of a Court.  It is enacted to enable ordinary consumers to secure less expensive and speedy redressal of their grievances.

In a recent order on a dispute between Mr.Lakhbir Singh and BSNL & Ors. in the District Consumer Forum, Ferozepur (CC No.180/2009), it is stated that:

“The Consumer Forum established under the Consumer Protection Act, 1986 does not exercise jurisdiction upon each and every matter, rather the jurisdiction of the Consumer Forum can be invoked only on the matters/disputes where the consumer element is involved. So when a dispute where the rights of the consumers are to be adjudicated there only the consumer courts, specially enacted for the said purpose, have the jurisdiction and all other Forums fall subordinate to it. It is now clear that the Consumer Protection law is not a general law, but a special law enacted for the better protection of the interests of the consumers. Where there is a deficiency in service and unfair trade practice, the provisions of the Consumer Protection Act, 1986 can be invoked irrespective of any other statute dealing with the same matter. The remedy under the Consumer Protection Act is an additional and special remedy.

The Hon’ble National Commission in “Union of India and Others Versus Jagdamba Rice Mills, 1993 (1) CLT 705, while discussing Section 7-B of the Indian Telegraph Act and referring to the authority styled as Santokh Singh Versus Divisional Engineer Telephones, Shilong, AIR 1990 Ghuwahati 47, has observed that the Government of India has itself taken a policy decision to the effect that all the requests and reference to Arbitration under the Indian Telegraph Act shall be rejected and Arbitrator shall be appointed only in such cases where subscriber approaches a court with a request for arbitration and court orders for the same. So when the Government of India to be more specific Telecom Authority itself is not willing to refer the dispute concerning the telegraph apparatus etc. to the Arbitrator except upon the orders of the court, then it does not behoove to the opposite parties to raise an objection under Section 7-B of the Telegraph Act.

Now, it is also a settled law that where two interpretations of statute/law are possible, then the one favouring the consumer is to be taken. Moreover, in case of petty consumer disputes, to direct a poor consumer to approach the Central Government for appointment of an Arbitrator for the adjudication of his small dispute, would be just the denial of justice to him especially when the legislature has enacted a consumer friendly legislation for better protection of the consumer rights and the remedy is available at the door step of the consumer as the District Consumer Forums have been established at every District head quarter of a State.”

Settling disputes by way of Arbitration may prove to be expensive and a long drawn process.  This procedure is not suggested for settling consumer disputes, for which the special Act CPA is enacted.  So in our general view, disputes can be referred to the Consumer Courts even if the warranty terms incorporate Arbitration clause.


Disclaimer:  The above is only a general view on the query raised and does not constitute a legal opinion.  For a more accurate view in the matter it is advisable to take the assistance of a legal expert.



    • ICF on 13/01/2010 at 8:39 pm

    We received the following response from the querist:


    Thank You for your valuable information. Your information really encouraged me to purchase a Consumer Protection Bare Act and in that I have also found a judgement Ram Nath v. Improvement Trust, Bhatinda, 1994 (I)CPR 357 where it is held that “It is authoritatively settled that the arbitration clause is not a bar to the entertainment of the complaint by the Redressal Agency constituted
    under the Act, even if the arbitration provision has been laid down in a statue”. I will be soon filing a consumer complaint and will definitely inform you the progress in the matter.

    Mona Doshi


    Our sincere thanks for the above input.

    • mintu on 24/04/2010 at 11:35 am

    Thanks for valuable information but what is about second part of sec 3 of C P Act “not in derogation of the provisions of any other law for the time being in force”

    That legal proposition has drastically changed after the commencement of A & C Act 1996 for arbitration. Section 3 of the Consumer Protection Act, 1986 clearly lays down that its provisions are in addition to but not at the cost of in derogation of the provisions of any other law for the time being in force. This shows that the Act provides additional means of obtaining remedy for a consumer but if the remedy is going to derogate the provision of other law then this additional remedy will not be available to the consumer

    That the “derogate” means to partially take away the effectiveness of a law and derogation is the partial repeal or abrogation of a law by a later act that limits its scope or impairs its utility and force, The general rule of statutory construction is that statutes enacted in derogation of any other law are to be strictly (narrowly) interpreted. If present dispute/difference not referred in arbitration then it would amount to allow the provision of C P Act in derogation of the provisions of any other law (here A & C Act 1996) for the time being in force contrary to its section 3.

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