Before Real Estate (Regulation and Development) Act, 2016 (for short “the RE Act”) was enacted, the consumers had the only option of approaching consumer forums with their grievances and had to go through several stages at the consumer forum level being the district forum, then the state forum, and finally the national forum, which not only caused delay, but also made the process lengthy, cumbersome and economically burdensome for the buyers. This apart the arbitration clause contained in the real estate agreements also aggravated to the agony of the buyers. The RE Act was enacted to regulate the sector, ensure protection to the innocent buyers and provide a definite redressal mechanism to the aggrieved buyers. The gap of a proper enforcement body came to be filled by establishment of a specialised body and also creating a dedicated forum for seeking compensation.
The RE Act established two forums viz. the Real Estate Regulation Authority (for short “RERA”) and the Adjudicating Officer (for short “AO”). To add to further chaos the real estate agreements often contain arbitration clause for referring disputes to arbitration. Thus, a conflict arises with respect to the method of dispute resolution which should be followed, the statutory mechanism laid down under the RE Act or that under the Arbitration and Conciliation Act, 1996 (for short “Arbitration Act”).
The RE Act provides a speedy redressal mechanism by disposition of appeals within 60 days and also provides for compensation to the buyers. Thus, complaints are to be filed before RERA and compensation is to be provided by the Adjudicating Officer. However, neither the jurisdiction of consumer forums has been explicitly ousted nor there is a provision for transfer of pending proceedings under COPRA to any of the authorities under the RE Act.
As a matter of fact, all disputes of civil and commercial nature are in principle arbitrable. The Arbitration Act doesn’t enlist the category of such disputes, it only provides for a bar against challenging the award in case the subject matter of the dispute is not arbitrable. After the 2015 amendment, the Arbitration Act, in Section 8 provides for mandatory reference to arbitration when there exists a prima facie clause of arbitration in the agreements.
Section 88 of the RE Act provides that the RE Act is in addition to, and not in derogation of, any other law. Further section 89 states that “The provision of this Act shall have effect, notwithstanding anything inconsistent contained in any other law for the time being in force.” Therefore, it clearly has an overriding effect. Thus, both the sections, suggest that the provisions of the RE Act would prevail over the Arbitration Act. However, this literal interpretation is in conflict with the interpretation contained in the Section 8 of the Arbitration Act. The question arises as to which statute will prevail viz. the RE Act or the Arbitration Act in case of real estate disputes.
This situation is to be settled by applying the principles of statutory interpretation. One of the applicable principles is that of ‘generalia specialibus non derogant’ i.e. – general law yields to special law, should they operate in the same field on the same subject. The provision contained in Section 88 and 89 of the RE Act also exist in beneficial legislations like Competition Commission Act, 2002 (for short “2002 Act”) and COPRA. They have been interpreted in Union of India vs. Competition Commission of India & Ors. (W.P(C) 993/2012 & C.M NO.S 2178-79/2012) where this issue was resolved by observing that the Commission had been set up with special focus as contained in the preamble. The Commission was not merely concerned with the aspect of breach of contract or with regard to implementation of the contract, its mandate is to ensure compliance of, inter alia, Sections 3 and 4 of the 2002 Act. The provisions of the 2002 Act are in addition to, and not in derogation of, the provisions of any other law for the time being in force (Section 62). This provision is para materia with Section 3 of COPRA. The court held that the scope of the proceedings under 2002 Act, and the focus of its investigation and consideration is very different from the scope of an enquiry before an Arbitral Tribunal. An Arbitral Tribunal may not go into aspects of abuse of dominant position by one of the contracting parties. Its focus is to examine the disputes in the light of the contractual clauses. Therefore, the court dismissed the plea of referring the matter to arbitration due to existence of specific legislation.
In the case of A Ayyasamy v A Paramasivam & Ors, 2016 SCC OnLine SC 1110, the apex court held only in those cases where the courts, while dealing with Section 8 of the Arbitration Act, find that there are very serious allegations of fraud which make a clear case of criminal offence or where allegations of fraud are so complicated that it becomes absolutely essential that such complex issues can be decided only by a civil court on the appreciation of the voluminous evidence, should the court avoid the arbitration agreement by dismissing a Section 8 application and proceed with trying the suit on merits. The court held that a suit of mortgage is not a mere money suit. Being enforcement of a right in rem, it will have to be decided by courts of law and not by arbitral tribunals.
Recently on 13h July, 2017, the National Consumer Disputes Redressal Commission in the case of Aftab Singh v. Emaar MFG Land Ltd., Consumer Case No. 701 of 2015 held that consumer forums are not required to refer consumer disputes to arbitration on the basis of an arbitration agreement between the consumer and the supplier or service provider. It held that the COPRA is a socially beneficial legislation. Therefore, courts must choose an interpretation of law that protects this legislation. There are several types of disputes including consumer disputes which cannot be decided in arbitration because of the public interest element involved in the disputes.
The Commission referred to the position under the RE Act in one of the paras stating that “Hence, in view of the binding dictum of the Hon’ble Supreme Court in A. Ayyaswamy (supra), the matters/disputes, which the Authorities under the Real Estate Act are empowered to decide, are non-arbitrable, notwithstanding an Arbitration Agreement between the parties to such matters, which, to a large extent, are similar to the disputes falling for resolution under the Consumer Act.”
It is to be borne in mind that the disputes under the RE Act fall in the category where public interest is involved. The jurisdiction of special courts or forums deciding such matters cannot be superseded by arbitration clauses or agreements. It cannot have been the intention of the legislature to reverse this position by amendment of the Arbitration Act. A binding judicial precedent from the Apex Court is still awaited on this issue. Till that time the dictum of NCDRC as above may be relied on in order to avoid the situation of multiple litigation and conflicting provisions.
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