Effectiveness Of Arbitration In Consumer Disputes

By Kavya H

Arbitration is considered as an effective alternative remedy for resolving the disputes among the aggrieved parties. Arbitration is preferred in most of the cases in order to achieve expeditious remedies. Consumers play a crucial role in this globalized economy. The impact they have on the globalized sector makes it essential to protect their rights. Hence, providing an efficient and effective dispute resolution mechanism is highly significant. This in itself forms the foundation of this research paper. The paper initially lays down the scheme of the paper by highlighting the introduction to the concept, research questions, research objectives, the methodology adopted, and hypothesis. Later, the importance of arbitration in consumer disputes have been analysed. Further, the need for arbitration in e-commerce and a bird’s eye of the judicial decisions have been put forth. The paper concludes by highlighting the need to resort to arbitral proceedings for the protection of consumers.
Keywords: Arbitration, Consumer, Dispute Resolution, Remedies.

Protecting the rights of the consumers is the most essential component in the present globalized society. The development of e-commerce in the Indian markets has played a significant role and has changed the entire perspective of the consumers. Ensuring them their rights and resolving their grievances is one of the pivotal roles of the government and the justice system. However, efficiency in deciding the matter and expeditiously settling the disputes is highly essential. It is pertinent to note that consumers are to be given special protection in the disputes as they are not given an option to choose and are forced to enter into a specific contract. Arbitration is a dispute resolution mechanism has played a vital role in settling disputes with efficiency and effectiveness.
Research Question
Whether arbitration can be preferred as an effective remedy to resolve the consumer disputes?
Objective And Scope Of The Study
The following are the objectives and scope of the research paper:

• To analyse the importance of resolving consumer disputes efficiently.
• To analyse the role of arbitration in consumer disputes.

Research Methodology

The methodology opted for conducting the research is ‘Doctrinal Research Methodology’. The use of both primary as well as secondary sources have been used for the effective study and analysis. Further, various research papers, journals, books, and conventions have been comprehensively evaluated for effective study.


Arbitration is an effective mechanism in resolving consumer disputes and helps in achieving effective remedies to the aggrieved parties.

Arbitratioan And Consumer Dispute

Arbitration is one of the most important dispute resolution mechanism wherein a disinterred third party hear the disputes and pronounces a binding decision. It substitutes lengthy and binding lawsuits and aims to provide efficacious remedies to the aggrieved parties when a meaningful consent and fair procedures exists. However, this is also subject to the public policy and legislative mandates of the prescribed jurisdiction. [1] In the globalized era, consumer disputes are one of the crucial elements, and providing adequate protection to the consumers from unwarranted interferences and violations is the need of the hour. In this regard, in order to provide efficacious remedy to the consumers, arbitration as a dispute resolution method can be adopted to protect the rights of the consumers. An adequate consumer protection regime is highly significant in order to bring a balance between the bargaining powers of the manufacturers and the consumers. [2] However, it is pertinent to note that the fundamental of arbitration cannot be deteriorated by carrying vague and ambiguous procedures. Even though the Supreme Court has held that the matters can be referred to arbitration in the presence of a valid arbitration agreement, however, this rule has often been diluted due to the doctrine of arbitrability.

The Necessity of Arbitration E-Commerce Disputes

With the advent of e-commerce technology, the disputes in the consumer regime has increased to a vast extent. However, it is pertinent to note that the Indian consumers are themselves responsible for this growth of e-commerce. Therefore, it is highly essential to initiate the institutionalization of dispute resolution mechanisms through the online mode. By initiating such proceedings it will also give teeth to the Online Consumer Mediation Centre. [3] Further, a common irony that exists here is that the validity and enforceability of online arbitration is recognized by India. Unlike traditional arbitration, through online arbitration, the cost and time can be saved and efficient remedy can be achieved. Evidence and pleadings can also be easily conducted in an online arbitration proceedings. Hence, it could be analysed that arbitration proceedings are quintessential for providing the consumers with an effective remedy.

Analaysis Of Ensuring Consumer Protection Light Of Arbitration

concept of arbitration in consumer disputes have been highlighted in various judicial decisions and mainly focussed on two important factors. Firstly, with regard to the nature of the remedy sought and secondly, whether the remedy can be provided by courts or arbitral tribunals. A similar approach was taken by the Supreme Court in the case of A. Ayyasamy v. Paramasivam [4], wherein these two factors were considered by the honourable Court.
The inarbitrability of consumer protection was considered even in the year 1996 in the case of Fair Air Engineers Pvt. Ltd. and Another v. N. K. Modi [5]. The concept of approaching the consumer forum even in the existence of a valid arbitration agreement was prevalent during 1996. However, later several approaches towards recognizing arbitration in the regime of consumer protection was highlighted by various authorities.
The Supreme Court in the case of Thirumugugan Cooperative Agricultural Credit Society v. M Lalitha [6], beneficial rule of interpretation was applied and held that there are only a few legislations with are created with the objective of attaining general welfare. Further, the schematic of the consumer protection act portrays the intention of the drafters to discharge the consumers from the cumbersome civil proceedings. However, this deprived Section 8 of the Arbitration Act and has made consumer disputes arbitrable. This was also recognized in the case of National Insurance Co. Ltd. v. Hindustan Safety Glass Works Ltd. [7] The court held that, “In a dispute concerning a consumer, it is necessary for the courts to take a pragmatic view of the rights of the consumer principally since it is the consumer who is placed at a disadvantage vis-a-vis the supplier of services or goods. It is to overcome this disadvantage that a beneficent legislation in the form of the Consumer Protection Act, 1986 was enacted by Parliament”.

Case Study

M/s Emaar MGF Land Limited v. Aftab Singh, Review Petition (C) Nos 2629-2630 of 2018
The case relates to a dispute in the delivery of possession for the deficiency of service. The case was initially heard by a single bench of the NCDRC. An application under Section 8 (1) of the Arbitration and Conciliation Act, 1996 was filed before the NCDRC for referring the matter to arbitration due to the presence of an arbitration clause in the agreement. Various other petitions were filed in the regard and the single bench of the NCRDC referred the matters before a three-member bench as the dispute highlighted a significant question of law as to the arbitrability of the consumer disputes.
However, the three-member bench of NCDRC ruled that the consumer disputes cannot be submitted to arbitration as there was a special legislation of Consumer Protection Act, 1986 which is enacted for the benefit of consumers. As the petition was dismissed, the appellants filed various civil appeals before the Delhi High Court. However, the same was dismissed due to the lack of jurisdiction. Further, the Supreme Court also dismissed the petition. However, a review petition was filed before the Supreme Court mentioning that the case concerned a significant question of law on the arbitrability of consumer disputes.
In a conclusive judgment, the Supreme Court has decided that the consumer court is the appropriate forum for raising consumer disputes even though the agreement contains an arbitration clause. Further, various landmark judgments were considered to decide on the matter of ‘arbitrability’.
The amended provision of Section 8 (1) states that the court is bound to refer a matter before an arbitral tribunal unless no valid arbitration agreement exists, notwithstanding any judgment, decree, or order of the Supreme Court or any other court. A thorough analysis of the jurisprudence of Section 8 (1) was conducted by the Supreme Court of India and also considered the provisions both prior and post the 2015 Amendment. However, the Supreme Court upheld the decision of the NCDRC stating that the consumer disputes involve a question of right in persona and not right in rem. Only such matters which involve a right in rem can be referred to arbitration. Further, the Court considered consumer disputes within the purview of non-arbitrable disputes. It was also clarified by the Court that such a bar is considered only in cases where a consumer files a consumer complaint.


I conclude, arbitration as a dispute resolution mechanism is the need of the hour in cases of consumer disputes. It provides efficient and speedy remedies to the aggrieved parties. Even though the existence of special legislation and judicial precedents is prevalent, still there is a scope in the future to adopt the concept of arbitration in consumer disputes. Ultimately, the real objective of the Consumer Protection Act is to provide efficient remedies to the consumers and thereby protect their interests and concerns. To achieve this objective, arbitration plays a vital role in ensuring protection to the consumers.
[1] Dr. Suresh Patidar, The Consumer Protection Act, 1986 of India – 25 Years of Enactment: A Critical Study, 6 PACIFIC BUS. REV. IN’TL (2013).
[3] Derric Yeoh, Is Online Dispute Resolution the Future of Alternative Dispute Resolution, KLUWER ARB. BLOG (Mar. 29, 2018, 08:00 PM), http://arbitrationblog.kluwerarbitration.com/2018/03/29/online-disputeresolution-futurealternative-dispute-resolution/.
[4] A. Ayyasamy v. Paramasivam, (2016) 10 SCC 386.
[5] Fair Air Engineers Pvt. Ltd. v. N.K. Modi, (1996) 6 SCC 385.
[6] Thirumugugan Cooperative Agricultural Credit Society v. M Lalitha, Appeal (Civil) 92 of 1998.
[7] National Insurance Co. Ltd. v. Hindustan Safety Glass Works Ltd., Civil Appeal No. 3883 of 2007.

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