Consumer Rights and Laws | Consumer Voice

Have a Grievance against a NBFC? There is an Ombudsman to go to

by admin | May 17, 2018 | Consumer Rights and Laws

Have a Grievance against a NBFC? There is an Ombudsman to go to

Thanks to the new Ombudsman Scheme launched this year, individuals investing in fixed deposit schemes of non-banking financial companies (NBFCs) now have a government body to fall back upon in case of deficiency in service including any default in their deposits. This move was muchawaited since their have been several instances of NBFCs not being able to make timely payment of interest and principal to their depositors. The following report will clarify when does the scheme become a legitimate recourse for aggrieved customers and the formalities involved in the process. A simpler way for your grievance against a NBFC to be addressed as you know there is an Ombudsman.

The objective of the scheme, which came into effect on 23 February 2018, is to enable resolution of complaints free of cost, relating to certain aspects of services rendered by certain categories of non-banking financial companies (NBFCs) registered with the Reserve Bank of India (RBI).

RBI has stated in a notification: “…To promote a conducive credit culture among the non-banking financial companies (NBFCs) and to regulate the credit system of the country to its advantage, it is necessary to provide for a system of Ombudsman for redressal of complaints against deficiency in services concerning deposits, loans and advances, and other specified matters…”

To begin with, the scheme will be operationalized for all deposit-accepting NBFCs and subsequently, based on the experience gained, it will be extended to include the remaining identified categories of NBFCs. It is initially being introduced at the four metro centres – viz. Chennai, Kolkata, Mumbai and New Delhi – for handling complaints from the respective zones, so as to cover the entire country.

NBFCs are defined in Section 45-I (f) of the Reserve Bank of India Act, 1934, and are to be registered with the RBI under Section 45-IA of the same Act. The Ombudsman Scheme is applicable to NBFCs that are authorized to accept deposits or have customer interface, with assets size of one billion rupees (Rs 100 crore) or above, as on the date of the audited balance sheet of the previous financial year, or any such asset size as the RBI may prescribe.

Which NBFCs Are Exempted?

At present, the following are excluded from the ambit of the Ombudsman Scheme:
Non-banking financial company – infrastructure finance company (NBFC-IFC)
Core investment company (CIC)
Infrastructure debt fund – non-banking financial company (IDF-NBFC)
NBFC under liquidation

When Can You Make a Complaint to the Ombudsman?

Prior to making a complaint to the Ombudsman, the complainant must have made a written representation to the concerned NBFC and the NBFC has rejected the complaint, or the complainant has not received any reply within a period of one month after the NBFC received his representation, or the complainant is not satisfied with the reply given by the NBFC.

And How?

The complaint will be in writing and duly signed by the complainant or his authorized representative**, and shall be, as far as possible, in the form specified in Annex II to the Scheme.

(**Authorized representative means a person other than an advocate duly appointed and authorized by a complainant to act on his behalf and represent him in the proceedings under the scheme for consideration of his complaint.)

Grounds for Complaint

Any person may file a complaint with the Ombudsman having jurisdiction, on any one of the following grounds alleging deficiency in services:

non-payment or inordinate delay in the payment of interest on deposits
non-adherence to RBI directives, if any, applicable to rate of interest on deposits
non-repayment or inordinate delay in the repayment of deposits
non-presentation or inordinate delay in the presentation of post-dated cheques provided by the customer
failure to convey in writing, the amount of loan sanctioned along with terms and conditions including annualized rate of interest and method of application thereof

Currently, no NBFC can offer an interest rate more than 12.5 per cent across any tenure. Further, they cannot accept deposit for a period less than 12 months and more than 60 months.

failure or refusal to provide sanction letter/terms and conditions of sanction in vernacular language or a language as understood by the borrower
failure or refusal to provide adequate notice on proposed changes being made in sanctioned terms and conditions in vernacular language as understood by the borrower
failure or inordinate delay in releasing securities documents to the borrower on repayment of all dues
levying of charges without adequate prior notice to the borrower/customer
failure to provide legally enforceable built-in repossession clause in the contract/loan agreement
failure to ensure transparency in the contract/loan agreement regarding: (i) notice period before taking possession of security; (ii) circumstances under which the notice period can be waived; (iii) the procedure for taking possession of the security; (iv) a provision regarding the final chance to be given to the borrower for repayment of loan before sale/auction of the security; (v) the procedure for giving repossession to the borrower; and (vi) the procedure for sale/auction of the security;
non-observance of directions issued by RBI to NBFCs
non-adherence to any of the other provisions of RBI guidelines on Fair Practices Code for NBFCs

A complaint is not valid unless

the complainant, before making a complaint to the Ombudsman, had made a written representation to the respective NBFC and the NBFC had rejected the complaint, or the complainant had not received any reply within a period of one month after the NBFC received his representation, or the complainant is not satisfied with the reply given to him by the NBFC
the complaint is made not later than one year after the complainant has received the reply of the NBFC to his representation or, where no reply is received, not later than one year and one month after the date of the representation to the NBFC
the complaint is not in respect of the same cause of action which was settled or dealt with on merits by the Ombudsman in any previous proceedings whether or not received from the same complainant or along with one or more complainants or one or more of the parties concerned with the cause of action
the complaint does not pertain to the same cause of action for which any proceedings before any court, tribunal or arbitrator or any other forum is pending, or a decree or award or order has been passed by any such court, tribunal, arbitrator or forum
the complaint is not frivolous or vexatious in nature
the complaint is made before the expiry of the period of limitation prescribed under the Indian Limitation Act, 1963, for such claims
the complainant has filed, along with the complaint, copies of the documents, if any, which he intends to rely upon, and a declaration that the complaint is maintainable under Clause 9-A

When Is the Complaint Resolved?

The Ombudsman may deem the complaint as resolved in any of the following circumstances:

where the grievance raised by the complainant has been resolved by the NBFC with the intervention of the Ombudsman; or
the complainant agrees, whether in writing or otherwise, to the manner and extent of resolution of the grievance by the Ombudsman based on the conciliation and mediation efforts; or
in the opinion of the Ombudsman, the NBFC has adhered to the extant norms and practices in vogue and the complainant has been informed to this effect through appropriate means, and complainant’s objections, if any, to the same are not received by Ombudsman within the time frame provided.

The Ombudsman’s right to reject

The Ombudsman may reject a complaint at any stage if it appears to him that:

the complaint made is not on the grounds of complaint referred to in Clause 8 of the Scheme; or
the compensation sought is beyond the pecuniary limit specified under the Scheme; or
the complaint made is requiring consideration of elaborate documentary and oral evidence and the proceedings before the Ombudsman are not appropriate for adjudication of such a complaint; or
the complaint made is without any sufficient cause; or
the complaint made is not pursued by the complainant with reasonable diligence required to be taken; or
in the opinion of the Ombudsman there is no loss or damage or inconvenience caused to the complainant.

Besides, the Ombudsman shall, if it appears at any stage of the proceedings that the complaint pertains to the same cause of action for which any proceedings before any court, tribunal or arbitrator or any other forum is pending, or a decree or award or order has been passed by any such court, tribunal, arbitrator or forum, pass an order rejecting the complaint giving reasons thereof.

Amount/Information/Implementation of Award

The Scheme provides for ‘settlement’ – this refers to an agreement reached by the parties, either by conciliation or mediation, under Clause 11.

The following two points are significant:

Notwithstanding anything contained in Sub-Clause (4), the Ombudsman shall not have the power to pass an Award directing payment of an amount that is more than the actual loss suffered by the complainant as a direct consequence of the act of omission or commission of the NBFC, or one million rupees (Rs 1,000,000), whichever is lower.
The Ombudsman may also award compensation not exceeding one hundred thousand rupees (Rs 100,000) to the complainant, taking into account the loss of time, expenses incurred, harassment and mental anguish suffered by the complainant.

A copy of the award shall be sent to the complainant and the NBFC free of cost. An award allowing the complaint shall lapse and be of no effect unless the complainant furnishes to the NBFC and the Ombudsman concerned, within a period of 30 days from the date of receipt of copy of the award, a letter of acceptance of the award in full and final settlement of his claim.

The NBFC shall, unless it has preferred an appeal under Sub-Clause (1) of Clause 14, within one month from the date of receipt by it of the acceptance in writing of the award by the complainant under Sub-Clause (8), comply with the award and intimate compliance to the complainant and the Ombudsman.

There Is an Appellate Authority

The award is not binding on the NBFC or the complainant as they have the option to appeal against the decision of the Ombudsman before the Appellate Authority. The latter shall, after giving the parties a reasonable opportunity of being heard,

dismiss the appeal; or
allow the appeal and set aside the award; or
remand the matter to the Ombudsman for fresh disposal in accordance with such directions as the Appellate Authority may consider necessary or proper; or
modify the award and pass such directions as may be necessary to give effect to the award so modified; or
pass any other order as it may deem fit.

Address and Areas of Operation of Ombudsman

Centre	Address of Office of NBFC Ombudsman	Areas of Operation
Chennai	C/o Reserve Bank of India, Fort Glacis, Chennai 600 001 STD code: 044 Tel No. 25395964 Fax No. 25395488	Tamil Nadu, Andaman and Nicobar Islands, Karnataka, Andhra Pradesh, Telangana, Kerala, Union Territory of Lakshadweep, Union Territory of Puducherry
Mumbai	C/o Reserve Bank of India, RBI Byculla Office Building, Opp. Mumbai Central Railway Station, Byculla, Mumbai 400 008	Maharashtra, Goa, Gujarat, Madhya Pradesh, Chhattisgarh, Union Territories of Dadra and Nagar Haveli, Daman and Diu
New Delhi	C/o Reserve Bank of India, Sansad Marg, New Delhi 110 001 STD Code: 011 Tel. No. 23724856 Fax No. 23725218-19	Delhi, Uttar Pradesh, Uttarakhand, Haryana, Punjab, Union Territory of Chandigarh, Himachal Pradesh, Rajasthan, Jammu and Kashmir
Kolkata	C/o Reserve Bank of India, 15, Netaji Subhash Road, Kolkata 700 001 STD Code: 033 Tel. No. 22304982 Fax No. 22305899	West Bengal, Sikkim, Odisha, Assam, Arunachal Pradesh, Manipur, Tripura, Meghalaya, Mizoram, Nagaland, Bihar, Jharkhand

Not Allowed to Board a Flight? The airline could be at fault

by admin | May 17, 2018 | Consumer Rights and Laws

Not Allowed to Board a Flight? The airline could be at fault

In the recent case of Air France versus OP Srivastava & Others (First Appeal No. 310 OF 2008), the National Consumer Disputes Redressal Commission (NCDRC) held that not permitting a passenger holding a confirmed ticket to board a flight amounted to deficiency in service on the part of the airline. Let’s follow the details of the case to understand what to do when it happens and what airline compensation to expect, in addition to what legal options are available to aggrieved passengers.

On 05.11.2002, the complainants, who held senior management positions in the Sahara Group of Companies, had booked their ‘H’ Class confirmed air tickets with Air France through their agent, for travelling to Paris to attend a business meeting. As per their travel itinerary, their departure from Delhi to Paris was on 06.11.2002 and return was on 09.11.2002. Due to change in the schedule of the meeting, at Paris, on 08.11.2002 they requested for change of date of return journey from 09.11.2002 to 10.11.2002. The complainants were issued three ‘K’ Class confirmed tickets from Air France at Delhi, and for this change they were required to pay a differential amount of Rs 10,270 per person.

As it happened, on 10.11.2002 they were not allowed to board Flight No. AF-148 at Charles De’ Gaulle Airport at Paris due to overbooking. The complainants said that they were subjected to humiliation and embarrassment by the staff of Air France. Their tickets were also not endorsed to travel by Air India Flight No. AI-146, departing on the same day. According to the complainants, a valuable 24 hours were lost. They being commercially important persons, (CIP), their every minute was precious for the company; and in their absence, the schedule of meetings got disturbed, resulting in a monetary loss of Rs 5,000,000 to the company as consequential business loss.

Accordingly, the complainants filed a consumer case before the Uttar Pradesh State Commission, praying for direction to Air France to return to them the excess amount charged on tickets with 24 per cent compound interest and a compensation of Rs 5,000,000 for the losses suffered by the company and mental agony undergone by them. Air France, on its part, claimed that as per the accepted practice the passengers were given 300 euros each (equivalent to approximately Rs 53,600) besides free accommodation at a hotel with meals, two telephone vouchers and nine telephone cards for denying boarding. After availing these facilities, the complainants had filed the complaint in order to take undue advantage of the situation.

The UP State Commission allowed the complaint and directed Air France to pay to each of the three complainants a sum of Rs 630,000, totalling 1,890,000, with simple interest @10% p.a., within a period of one month from the date of the order, with a default stipulation of enhanced interest @15% p.a. on the said amount if the same was not paid within the stipulated period. Aggrieved with the said order, the Opposite Party filed an appeal in National Commission.

Air France stated in their appeal before NCDRC that denied boarding is an accepted practice internationally and nationally, and for the same the complainants were sufficiently compensated by being provided with free accommodation and other facilities. The airlines further alleged that the complainants were trying to take “undue advantage of the situation”.

Dismissing the contention of Air France, the National Commission said that the practice of overbooking may be a commercially viable international practice being adopted by all the airlines, probably to ensure that seats in the flights do not go vacant in the event of no-shows by booked passenger(s), but the same cannot be at the altar of the passengers. Not permitting a passenger holding confirmed ticket to board a flight amounted to deficiency of service on the part of the airline, a bench headed by NCDRC President Justice DK Jain said.

The National Commission also said that if a freehand practice of overbooking was approved, it could cause havoc against the interest of the ticketholders as the airlines might invoke the malpractice of overbooking indiscriminately and beyond reasonable dimensions. Instead of taking recourse to this sort of policy, the airlines must impose stringent conditions for the eventuality of cancellation of tickets. To be specific, the airlines may lay down a condition that in the case of a long journey like the one at hand, if a passenger does not report for boarding up to a certain time before departure, his ticket would be cancelled or refund would be permissible to a minimal extent. Refunding of money equivalent to the entire price of the ticket or with minor deductions to a passenger under contemplation of earning profit by overbooking of the tickets to a large number of passengers would create instability, indiscipline and unfair trade practice, the National Commission said.

The NCDRC held that not permitting a passenger holding a confirmed ticket to board a flight amounted to deficiency of service on the part of the airline. The National Commission upheld UP State Commission’s decision, barring the quantum of compensation, and directed the premier French national carrier to pay a compensation of Rs 400,000 each to the three officials of Sahara Group for causing inconvenience and harassment to them by denying boarding on the Paris–Delhi flight in 2002.

Cause of Action

Another hotly contested issue raised by Air France was that the UP State Commission had not proper territorial jurisdiction to entertain the complaint. The NCDRC observed that the cause of action, wholly or in part, arose at Kanpur.

The NCDRC relied on the Supreme Court case Kandimalla Raghavaiah & Co. versus National Insurance Co. Ltd. (2009) 7 SCC 768), where the expression ‘cause of action’ was defined. It was said by the Supreme Court that it is a bundle of essential facts necessary for the plaintiff to prove and obtain a decree but does not comprise evidence necessary to prove such facts. Failure to prove such facts would give the defendant a right to judgement in his favour. Cause of action thus gives occasion for, and forms, the foundation of the suit. The question of territorial jurisdiction must be decided on the facts pleaded in the petition. National Commission relied on another Supreme Court case, Alchemist Ltd. & Anr. versus State Bank of Sikkim and Ors. (2007) 11 SCC 335, where it was said that even if a small fraction of the cause of action arises within the jurisdiction of the court, the court would have territorial jurisdiction to entertain the suit/petition. Nevertheless, it must be a part of cause of action, nothing less than that.

After observing the aforesaid judgements, the National Commission agreed with the State Commission finding that a part of the cause of action did arise at Kanpur when the tickets were purchased and, hence, it was vested with territorial jurisdiction to entertain and deal with the complaint. The air tickets were purchased through an agent of Air France based at Kanpur who, on receipt of the consideration towards the cost of the tickets, had created PNR through Amadeus (host system of Air France). Thus, UP State Commission had proper territorial jurisdiction to entertain the matter.

Consumer Voice’s advice to consumers

Passengers aggrieved by the action of an airline denying boarding can approach consumer as well as civil courts to claim damages, in addition to minimum damages prescribed under the DGCA regulations. A passenger who holds a confirmed ticket has full right to board the flight and that should not be denied by the airline. In case of overbooking where a passenger is denied boarding, he/she should get compensation from the airline.

Recently, vide order dated 02.02.2018 (W.P.(C) 12006/2015 & C.M. No. 31848/2015W.P.(C) 12006/2015 & C.M. No. 31848/2015), the High Court of Delhi clarified the compensation and refund procedure in case the passenger is denied boarding even after having a confirmed ticket. The Delhi High Court also said that airlines must pay for denying seats to those with confirmed tickets. A passenger has the right to seek compensation in case of denial to fly due to overbooking, over and above its rules that provide slab-wise refund. DGCA 2010 rules do not put a cap on the compensation that can be demanded from the airline in case of overbooking and a passenger has full right to approach civil and consumer courts for relief.

The union aviation ministry has recommended increasing compensation to up to Rs 20,000 per flyer for deficiencies in airline services such as flight delays and cancellations. The ministry will soon put up the draft for public comments. The airlines are against these suggestions on the ground that domestic airfares in India are among the lowest. The Federation of Indian Airlines has also opposed it, saying that the existing rules and compensation levels already safeguard passenger interests in a fair and adequate manner, and increasing the compensation levels will only result in an increase in costs for airlines.

Consumer Voice supports the recommendation made by the aviation ministry to increase the level of compensation.

Can Consumer Forums Set Aside the Arbitration Clause?

by admin | May 16, 2018 | Consumer Rights and Laws

Can Consumer Forums Set Aside the Arbitration Clause?

After 2015, the year in which an amendment was made to Section 8 of Arbitration and Conciliation Act, 1996, several cases were discussed at the National Commission as well as the Supreme Court wherein it seemed that the amendment clause was being used as a shield by the accused parties to wriggle out of the court of law – they tried to legally nullify the jurisdiction of the consumer forum, stating facts from the amended part of Arbitration and Conciliation Act.Recently, an interesting judgement was passed by the Supreme Court in two such cases wherein the bench had concluded that “amendment to Section 8 of the Arbitration and Conciliation Act, 1996, as amended in 2015, has not changed the theory of earlier judgements by the Supreme Court that ‘consumer court has the jurisdiction in the cases where arbitration clause exists in the agreement executed between the parties’.”

A Case to Note

A special petition had been filed against the order of the National Consumer Disputes Redressal Commission (NCDRC) in the case of Aftab Singh and others versus Emaar MGF Land Limited and others. The petition had challenged the order of the National Commission on the basis of the amended Section 8 (1) of the Arbitration and Conciliation Act, 1996. (The given section provides the mandate to the judicial authority to refer parties to arbitration if there is a valid arbitration agreement between the parties.) At National Commission, a three-member bench presided by Justice DK Jain had held that such disputes were to be governed by the statutory laws and were non-arbitral.

The SC bench comprising justices AK Goel and U Lalit stayed the NCDRC judgement. In the final verdict, after hearing the appeal of Emaar MGF, SC agreed with the order passed by the National Commission which was in favour of the consumers and dismissed the appeal by the builders, and inter alia stated that consumer disputes were not capable of being settled by arbitration.

“We do not find any ground to interfere with the impugned order(s). The appeals are accordingly dismissed. Pending applications, if any, shall also stand disposed,” stated the bench.

Consumer Act and Arbitration Act

The Emaar MGF case became a much-debated issue in the wake of the complaints against the company for failure of allotment of flats and villas. The complainants alleged that the company had failed to deliver possession of the properties on the committed dates and sought delivery of possession or, in lieu thereof, refund of the amounts deposited by them along with compensation.

The builder, in response, referred to the existence of an arbitration clause in the buyers’ agreements and presented points from the amended sub-Section (1) of Section 8 of Arbitration and Conciliation Act, 1996, to justify that consumer courts could not intervene in the matter.

To strengthen the statement made earlier, a larger bench of NCDRC framed the issue for adjudication as under:

“Whether the Arbitration Act mandates consumer forums, constituted under the Consumer Protection Act, 1986, to refer parties to arbitration in terms of a valid arbitration agreement?”

The bench held that:

Despite amending Section 8 (1) of the Arbitration Act, along with a similar amendment to Section 11 of the said Act to curtail the nature and scope of enquiry to be undertaken in terms of Sections 8 and 11 of the Arbitration Act, there is no intention to alter the interplay between the provisions of the Arbitration Act and the Consumer Act as settled by the Hon’ble Supreme Court of India through various judgements on the issue.
The Consumer Act is a special social legislation enacted to protect consumer rights. It establishes a level-playing field between unequal players (that is, consumers and large corporations), and is quite unlike other legislations that create dispute-resolution mechanisms between level players. Hence, issues covered under this A are not arbitrable, nor are they intended to be covered by the amendment to Section 8 of the Arbitration Act.
By virtue of Section 2 (3) of the Consumer Act, the Arbitration Act itself excludes from its purview certain disputes that fall within the public law regime and with respect to which statutory remedies are put into place to subserve a public policy. Since consumer disputes would fall under the umbrella of the said provision, they were not intended to be covered by the amendment to Section 8 of the Arbitration Act.
The jurisdiction of the consumer forums to adjudicate on consumer disputes is not affected by either Section 8 (as amended) of the Arbitration Act or any other provision thereof.
To accept the builder’s plea would be to hinder the entire purpose and object of the Consumer Act – that is, to ensure the speedy, just and expeditious resolution and disposal of consumer disputes.

As per Section 8 of the Arbitration Act, with regard to power to refer parties to arbitration where there is an arbitration agreement, a judicial authority before which an action is brought in a matter that is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.

While determining whether a consumer dispute ought to be referred to arbitration, the consumer forum will have to focus on the nature of dispute brought before it. In spite of an arbitration clause, a consumer court may go ahead and exercise jurisdiction on matters related to the subjects under its domain – that is, purchase of goods and hiring of services.

Consumers can approach civil and consumer courts too for compensation in case denied boarding: DGCA

by admin | Apr 21, 2018 | Consumer Rights and Laws

Consumers can approach civil and consumer courts too for compensation in case denied boarding: DGCA

The Delhi High Court has confirmed that the Civil Aviation Rules provide an immediate relief as compensation to passengers who are denied boarding. This does not mean that there is a cap on compensation payable and passenger can sue for deficiency in service as well. In its order dated 02.02.2018, the High Court of Delhi clarified the compensation and refund procedure in case the passenger is denied boarding even after confirmed ticket. It also said that airlines must pay for denying seats to those with confirmed tickets.

In 2015, the petitioner had booked his tickets to travel from Delhi to Patna on 12.12.2015 and was due to return on 13.12.2015. He accordingly booked tickets with Air India well in advance on 28.10.2015. The petitioner averred that he reached the airport on time on 12.12.2015 but was denied boarding by Air India on account of overbooking of flights.

The petitioner stated that paragraph 3.2 of Civil Aviation Requirement (herein referred to as CAR) dated 06.08.2010 permitted overbooking of flight, which according to the petitioner cannot be permitted. Paragraph 3.2 provides for airlines to ask for volunteers to give up their seats so as to make seats available for other booked passengers to travel on the flight, in exchange of such benefits/facilities as the airlines, at its own discretion, may wish to offer, provided airports concerned have dedicated check-in facilities/gate areas that make it practical for the airlines to do so. If the boarding is denied to passengers against their will, the airlines shall as soon as practicable compensate them in addition to refund of air ticket. Under the provisions of the CAR, airlines shall be liable to pay compensation to passengers who are denied boarding. However, in order to minimise No Shows, the airlines are allowed to levy appropriate No Show penalties in relation to the fare to be deducted from the fare paid by the passenger.

A plain reading of paragraph 3.2 of CAR indicates that the Director General of Civil Aviation (DGCA) has recognised that certain airlines follow the practice of overbooking flights; however, the same cannot be read to mean that the DGCA has permitted the airlines to do so, and it certainly cannot mean that such practice has the sanction of law as stated by the counsel appearing for DGCA.

The petitioner also contended that the compensation payable to the passengers, who were denied boarding despite holding confirmed bookings, had been restricted by the CAR. He further contended that the DGCA had no power to issue directions restricting the compensation payable to such passengers. He further submitted that the amount of compensation mentioned in CAR indicated only the immediate relief that the airlines were required to provide to the passengers who had been denied boarding. The counsel of Air India also submitted that not permitting the passenger holding confirmed tickets to board a flight would amount to deficiency in service and passenger would have the right to seek compensation/ damages for such deficiency of service.

Thus, DGCA and national carrier Air India told the Delhi High Court that a passenger had the right to seek compensation in case of denial to fly due to overbooking, over and above its rules that provided slab-wise refund. It was added by DGCA that its 2010 rules did not put a cap on the compensation that could be demanded from the airlines in cases of overbooking and a passenger had full right to approach civil and consumer courts for relief.

Builders can’t force Buyers to go for Arbitration

by admin | Apr 2, 2018 | Consumer Rights and Laws

Builders can’t force Buyers to go for Arbitration

Ankur Saha, Head-Legal Desk: Arbitration has been introduced in the legal system to enable speedy resolution of disputes in civil cases. It is common knowledge that litigation in civil cases can go on for years in a trial court as per Civil Procedure Code (CPC). Litigation requires strict adherence to rules of procedure and law of evidence. Mediation and arbitration has been introduced in the Arbitration and Conciliation Act, 1996 to enable amicable resolution of disputes in a speedier manner. As a result most modern contracts include an arbitration clause to facilitate dispute settlement. However, in builder- flat buyer contracts such a clause may work to the detriment of a buyer as s/he can take recourse to Consumer Courts. In 2018 thousands of cases are pending against builders in different states. Builders prefer to have a dispute settled through arbitration while a consumer does not have faith in the arbitration system and prefers Consumer Courts. A number of Builders have challenged the cases filed in Consumer Courts against them on the ground that since the agreement has an arbitration clause the cases should be dismissed and referred to arbitration. This court room battle has recently been settled in favor of consumers.

Prof. Sri Ram Khanna, our Managing Editor, answers questions on this subject:

Ankur Saha: Can the builders force buyers to settle their disputes through arbitration by restraining them from approaching consumer forums/ commissions?

Prof Khanna: The law on this point has been recently settled by the Supreme Court. In a case before the National Commission this issue was contested where flat buyers argued that arbitration agreements do not bar the jurisdiction of the National Consumer Disputes Redressal Commission (NCDRC) and other consumer forums. This issue was reconsidered at length by a Full Bench of the NCDRC, in Aftab Singh v Emaar MGF Land Limited & Anr [Consumer Case No 701 of 2015] in view of the amendments to the Arbitration and Conciliation Act 1996 (‘the Amended Act’). The Full Bench was constituted pursuant to a referral by the Single Bench on 31 st August, 2016. In its decision of 13th July, 2017, the NCDRC has once again reiterated that since the Consumer Courts are special courts constituted to serve a social purpose, the Amended Arbitration Act does not apply to them. The Commission held that an arbitration clause in agreements between Builders and Purchasers cannot circumscribe the jurisdiction of a Consumer Forum, notwithstanding the recent amendments made to Section 8 of the Arbitration & Conciliation Act, 1996. Recognizing that the Consumer Act was envisaged as a special social legislation to protect consumer rights and provide a special dispute redressal mechanism, the NCDRC held that disputes governed by statutory enactments established
to serve a particular public policy are not arbitrable.

Ankur Saha: What were the facts of the case under discussion here?

Prof Khanna: 30 individual cases were filed against a Builder Emaar MGF Land Limited and one case against another builder where the Complainants had booked residential villas/flats/plots in project of the builders and accordingly executed the Buyers’ Agreements. Every agreement contained an arbitration clause in it. The grievance of the Buyers was that the Builder failed to deliver possession of the real estate within the time stipulated by the agreement between them and thus filed complaints before the Single Member of the NCDRC, seeking directions to the builders for delivery and possession of the villas, etc. and/or, in alternative, refund the amounts deposited by them, along with compensation. On the other hand, the Builders filed an application under Section 8 of Arbitration Act praying for reference to arbitration as the agreement contained a valid arbitration clause.

Considering the vital importance and the far reaching consequence of the legal issue involved in these applications, the Learned Single Member referred the issue to a Larger Bench to hear and decide these applications. The judgement in Aftab Singh v Emaar MGF Land Limited & Anr was delivered in July 2017 by the full bench.

Ankur Saha: Is it not a compulsion for buyers to go for arbitration even if the seller-buyer agreement stipulates that disputes be settled through a private resolution mechanism? Can builders cite the changes made under Section 8 in the Arbitration and Conciliation Act in 2015 to make the point that all cases of flat buyers be referred to arbitration?

Prof Khanna: The remedies provided by the Consumer Protection Act 1986 (‘Consumer Act’) are in addition to and not in exclusion/ derogation of other laws in force. Even under the Amended Act, the intent of the legislature is not to bar the jurisdiction of the Consumer Courts, where an arbitration clause exists. The existing interplay between the Consumer Act and the Amended Act remains unaffected. The NCDRC judgment in Aftab Singh v Emaar MGF Land Limited & Anr case has explained these issues in a crystal clear manner.Prof Khanna: The remedies provided by the Consumer Protection Act 1986 (‘Consumer Act’) are in addition to and not in exclusion/ derogation of other laws in force. Even under the Amended Act, the intent of the legislature is not to bar the jurisdiction of the Consumer Courts, where an arbitration clause exists. The existing interplay between the Consumer Act and the Amended Act remains unaffected. The NCDRC judgment in Aftab Singh v Emaar MGF Land Limited & Anr case has explained these issues in a crystal clear manner.

Ankur Saha: Does the amended Section 8 of the Arbitration and Conciliation Act override Section 3 of the Consumer Protection Act, 1986?

Prof Khanna: The Consumer Protection Act, 1986 is a beneficial legislation and, therefore, the intention behind its enactment ought to be advanced. Therefore, a consumer complaint can be filed before the consumer forum taking aid of Section 3 under CPA, despite presence of an arbitration clause as per Arbitration & Conciliation Act, 1996. The amended Section 8 does not override any other law in force. The aforesaid amendment was intended solely to curtail the scope of enquiry by courts into issues of existence of arbitration agreement in applications filed under Section 11 and Section 8 of the Arbitration & Conciliation Act. It did not alter nor affect the interplay between Section 3 of the CPA and the Arbitration & Conciliation Act. The remedies under CPA are in addition to and not in derogation of other laws.

Ankur Saha : Don’t you think that Consumers Courts are ‘judicial authority’ within the meaning of Section 8 of the Amended Arbitration Act therefore, required to refer parties to Arbitration if a valid arbitration clause exists?

Prof Khanna: In the case of Aftab Singh v Emaar MGF Land Limited & Anr, NCDRC held that the Amended Act did not bar the jurisdiction of the Consumer Courts. The Full Bench of the NCDRC relied on judgments of the Supreme Court which have laid down categories of disputes that are considered non-arbitrable. The court referred to Booz Allen Hamilton Inc v SBI Home Finance Ltd [(2011) 5 SCC 532], where the Supreme Court said that the Arbitral Tribunals are private forum chosen voluntarily by the parties to the dispute, to adjudicate their disputes in place of courts and tribunals which are public forum constituted under the laws of the country. Every civil or commercial dispute, either contractual or non-contractual, 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. The Supreme Court had laid down 7 categories of non-arbitrable disputes and said that Adjudication of certain categories of proceedings are reserved by the legislature exclusively for public forum as a matter of public policy. Considering the specific case of the Indian Trusts Act, 1882, the NCDRC relied on the Supreme Court ruling in Vimal Kishore Shah v Jayesh Dinesh Shah where it was held that, since sufficient and adequate remedy is provided under the Trusts Act, 1882 for deciding the disputes in relation to trust deed, trustees and beneficiaries, the remedy provided under the Arbitration Act for deciding such disputes is barred by implication”. The NCDRC reiterated that public policy requires that parties cannot also be permitted to contract out of the legislative mandate which requires certain kind of disputes to be settled by Special Courts constituted by the Act.

Ankur Saha: Given the fact that Consumer Courts are not required to refer the parties Arbitration, but don’t you think that Consumer Protection Act is in derogation of other laws?

Prof Khanna: The Hon’ble Supreme Court in Skypak Couriers Ltd. Vs. Tata Chemicals Ltd., said that even if there exists an arbitration clause in an agreement and a complaint is made by the consumer, in relation to a certain efficiency of service, then the existence of an arbitration clause will not be a bar to the entertainment of the complaint by the Redressal Agency, constituted under the Consumer Protection Act, since the remedy provided under the Act is in addition to the provisions of any other law for the time being in force”. NCDRC also cited the SC judgment in Secretary, Thirumugugan Cooperative Agricultural Credit Society Vs. M. Lalitha (through LRs) & Ors., whereby it was held that the Consumer Protection Act is applied in addition to and not in derogation of other laws.

Ankur Saha : What would be the consequence if the jurisdiction of Consumer Courts were ousted by the amendments in The Arbitration Act , 1996.?

Prof Khanna: The importance of remedies available under the CPA and the special object and purpose of a beneficial legislation such as the CPA in protecting interests of consumers. Allowing Section 8 of Arbitration and Conciliation Act to oust the jurisdiction of consumer forum would set at naught the entire purpose and object of the Consumer Act, which was to ensure speedy, just and expeditious resolution and disposal of consumer disputes. Exposure of such disputes to the Arbitration Act could invite application of portions of the Arbitration & Conciliation Act that are enforceable only through Civil Courts. This would be repugnant to the manifest purpose underlying the enactment of the CPA.

In light of the overall architecture of the CPA and Court-evolved jurisprudence, The NCDRC held that the amended sub-section (1) of Section 8 of the Arbitration and Conciliation Act, 1996 cannot be construed as a mandate to the Consumer Forum, constituted under the CPA, to refer the parties to arbitration in terms of the Arbitration Agreement.

Ankur Saha: is this the final position of law under the Consumers Protection Act, 1986? Is there a possibility of change in this interpretation of the legal provisions?

Prof Khanna: The judgment in the Aftab Singh v Emaar MGF Land Limited & Anr case was delivered by the full bench of NCDRC on 13 th July, 2017. This was challenged in appeal before the Supreme Court by the builders concerned. The Supreme Court bench consisting of J. Adarsh Kumar Goel and Uday Umesh Lalit heard the arguments of the builders and dismissed the appeals filed by builders. They stated in their brief order “we do not find any ground to interfere with the impugned order(s) passed by the NCDRC on 13 th July, 2017. The appeals are accordingly dismissed “. (Civil appeal nos. 23512-23513 in Emaar MGF Land Ltd and Anr. vs Aftab Singh). With this dismissal the interpretation and ratio on the subject in the NCDRC matter has become the final and binding law on this issue. We feel that it is a milestone in the evolution of consumer jurisprudence in India. Consumer Voice welcomes this development with open arms and great commendation to the three judges of the NCDRC who decided this matter. They are: Justice D. K. Jain, Presiding Judge, J. Ajit Barihoke and J. V. K. Jain. They deserve our appreciation for their well reasoned and learned judgment.

Arbitration agreements cannot oust the jurisdiction of consumer forums

by admin | Mar 6, 2018 | Consumer Rights and Laws, Real Estate

Arbitration agreements cannot oust the jurisdiction of consumer forums

In a recent judgement, the Supreme Court affirmed that arbitration agreements cannot oust the jurisdiction of consumer forums. The order will benefit homebuyers who usually have an arbitration clause in their agreements with the real estate companies. Such clauses lay down that in cases of disputes, aggrieved consumers will have to resort to arbitration before moving to civil courts.Emphasising upon consumers’ rights, a bench of justices Adarsh K Goel and Uday U Lalit has upheld the National Consumer Commission’s judegment that had maintained that despite an arbitration clause in the agreements, consumers could still knock on the doors of consumer forums to seek quick redressal. The apex court passed this order while dismissing several appeals that were filed by Emaar MGF Land Ltd. “In terms of the signed order, the appeals are dismissed. Pending applications, if any, shall also stand
disposed of,” stated the order.

Emaar MGF had challenged the National Commission’s full-bench verdict of July 2017 wherein the apex consumer forum ruled that authority and jurisdiction of consumer forum could not be circumscribed by any arbitration clause. According to the Commission, consumer disputes are not capable of being settled by arbitration and that the jurisdiction of the consumer fora to adjudicate upon consumer disputes is not affected by Section 8 (as amended) of the Arbitration and Conciliation Act, 1996, that mandates reference to arbitration.

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