Arbitration Clause Does Not Bar Consumer from Approaching Consumer Forum: Supreme Court
In M/S Citicorp Finance (India) Ltd. v. Snehasis Nanda, the Supreme Court reiterated that an arbitration clause in an agreement does not override a consumer's right to approach the Consumer Forum. A consumer cannot be compelled to arbitrate a dispute solely because an arbitration clause exists in the agreement; the choice to pursue arbitration or seek redress before a consumer forum lies exclusively with the consumer.
The case, heard by Justices Sudhanshu Dhulia and Ahsanuddin Amanullah, involved a tripartite agreement containing an arbitration clause. The respondent, who had availed a home loan of ₹17,64,644 from ICICI Bank, was to sell the mortgaged flat to a third party, Mubarak Vahid Patel, for ₹32,00,000. Patel secured a loan of ₹23,40,000 from Citicorp Finance, requesting that ₹17,80,000 be paid directly to ICICI Bank to release the mortgage.
The respondent later filed a complaint before the NCDRC, claiming Citicorp failed to pay him the balance sale consideration of ₹13,20,000, despite the tripartite agreement. The NCDRC allowed the complaint, directing Citicorp to pay ₹13,20,000 with interest and ₹1,00,000 in litigation costs. Citicorp challenged this before the Supreme Court, citing the arbitration clause.
Referring to Emaar MGF Land Ltd. v. Aftab Singh (2019) and M. Hemalatha Devi v. B. Udayasri (2024), the Court held that consumer disputes are non-arbitrable unless the consumer voluntarily opts for arbitration. It also noted that the existence of the tripartite agreement was itself disputed, and Citicorp, not being a 'consumer' under the Act, could not enforce arbitration.
The Court emphasized that under consumer welfare legislation, such as the Consumer Protection Act, disputes should be resolved in public forums unless both parties mutually and voluntarily choose arbitration.