The issue of consumer disputes being referred to arbitration, known as consumer arbitration, has been a contentious aspect of Indian law. Judicial precedents have led to a situation where consumers must navigate two jurisdictions: consumer forums and arbitral tribunals, as both retain authority when arbitration clauses are present. Indian courts have struggled to find a balance between supporting arbitration and fulfilling the social welfare objectives of the Consumer Protection Act of 1986 and 2019 Act. Although courts have refrained from declaring consumer disputes as un-arbitrable, they have allowed consumers to decide on dispute resolution, despite these consumers often lacking awareness of their legal options.

The Consumer Protection Act of 1986 provided a single access point for justice, albeit in a time-consuming manner. The newer Consumer Protection Act of 2019 was introduced after several amendments to enhance protections for consumers against traditional sellers and emerging e-commerce platforms. This Act aims to be a pivotal tool in safeguarding consumer rights in India and includes the establishment of the Central Consumer Protection Authority (CCPA). The CCPA is equipped to conduct investigations into violations of consumer rights, file complaints, order the recall of unsafe products, halt unfair trade practices, and impose penalties on misleading advertisements.

Additionally, the new Act introduces an Alternate Dispute Resolution mechanism through mediation, intended to streamline the adjudication process. Complaints may be referred for mediation by Consumer Commissions when there is potential for early settlement and mutual agreement. Mediation will be conducted in designated Mediation Cells under the authority of Consumer Commissions, and settlements reached through this process will not be subject to appeal.

Section 100 of the 2019 Act clarifies that the remedies provided by the Act are supplementary to any other legal remedies available, ensuring that consumers can pursue their claims without being limited by the existence of alternative adjudication methods. Consequently, courts have determined that they do not need to prioritize one remedy over another, such as arbitration versus the Consumer Protection remedy.

Initially, before Fair Engineering Pvt Ltd v. NK Modi ((1996) 6 SCC 385), courts were required to refer parties to arbitration if a valid arbitration agreement existed, as per Section 8 of the Arbitration & Conciliation Act, 1996. However, the Fair Engineering case modified this rule, allowing consumers the choice to pursue either arbitration or a consumer forum.

This change was based on the idea that the newer Consumer Protection Act took precedence over the older law, suggesting that lawmakers intended for the Consumer Protection Act to have a greater impact. Consequently, the court recognized the remedy under the Consumer Protection Act as an additional option for consumers, as outlined in Section 3 of the Consumer Protection Act, 1986. The same principle was reiterated in Secretary, Thirumurugan Cooperative Agricultural Credit Society v. M. Lalitha ((2004) 1 SCC 305), where this Court held that the remedy under the Consumer Protection Act is available notwithstanding the existence of remedies under the cooperative societies law. Again, in National Seeds Corporation Ltd. v. M. Madhusudhan Reddy ((2012) 2 SCC 506), this Court emphasised that the availability of an alternative statutory remedy is not a bar to the maintainability of a consumer complaint. The position has been put beyond doubt in Emaar MGF Land Ltd. v. Aftab Singh (2019) 12 SCC 751. In the said decision, this Court held that even where an agreement contains an arbitration clause, the consumer forum is not denuded of its jurisdiction to entertain and decide a consumer complaint.

The Consumer Protection Act, 1986 provided for a special and additional remedy for consumers and this legislative intent has been specifically continued under the Consumer Protection Act, 2019 by way of Section 100 providing that the remedies under the Act are in addition to and not in derogation of any other law for the time being in force. Therefore, the jurisdiction vested in the Consumer Commissions cannot be ousted only on the basis of an arbitration agreement between the parties.

The issue should be assessed based on Sections 36(2) and 36(3) of the Consumer Protection Act, 2019. Section 36 establishes a legal process where the District Commission must decide whether to accept or reject a complaint initially. If this decision is not made within twenty-one days of filing, the complaint is automatically deemed accepted.

The significance of the proviso lies not merely in its text, but also in the statutory policy which it reflects. The importance of the proviso extends beyond its wording to the underlying statutory policy it embodies. The 2019 Act establishes a unique mechanism for resolving consumer disputes. Once this mechanism is properly activated and a complaint is accepted, the consumer cannot be removed from this process simply due to an arbitration clause in their agreement. A private contract should not undermine the statutory remedy that Parliament has explicitly provided in addition to other remedies under Section 100 of the 2019 Act.

Consequently, Sections 36(2) and 36(3) of the Consumer Protection Act, 2019 should be read alongside Section 100 of the same Act. Section 100 emphasizes the supplementary nature of consumer remedies, ensuring that once a consumer complaint is accepted, the consumer is not forced to restart the process with a different forum or authority, thus preventing the complaint from becoming ineffective.

The Act aims to promote social welfare by facilitating the resolution of consumer complaints and assessing damages. It prioritizes consumer interests and departs from traditional legal frameworks under the Civil Procedure Code. The Act seeks to empower consumers against powerful businesses, often described as a ‘network of rackets,’ and addresses the inaction of public bodies that leave consumers feeling helpless. This pervasive issue is increasingly accepted by society as a norm. Consequently, the Act strives to provide affordable and swift consumer services.

The Legislature aimed to provide a remedy beyond consentient arbitration enforceable under the Arbitration Act or civil action under the Code of Civil Procedure. Section 34 of the Arbitration and Conciliation Act does not grant an automatic right or impose a strict limitation on judicial authority’s power; it is discretionary. Thus, while the District Forum, State Commission, and National Commission are judicial authorities, we believe that, considering the Act’s objectives and Section 100 of the Consumer Protection Act, 2019, these forums should handle matters per the Act’s provisions instead of directing parties to arbitration based on their contract.

The Act aims to spare consumers from lengthy arbitration or civil proceedings unless the forums independently determine, based on the specific facts of each case, that a different forum is more suitable for resolving the disputes than those specified in the Act.