Arbitration Clause Can't Oust Consumer Forum Jurisdiction After Complaint Is Admitted: Supreme Court

The Supreme Court has held that the existence of an arbitration clause in an agreement does not, by itself, oust the jurisdiction of a consumer forum. It said that once a consumer complaint has been admitted, the consumer cannot be compelled to pursue arbitration merely because the agreement between the parties contains such a clause.

A Bench of Justices Vikram Nath and V Mohan observed that a private contractual clause cannot override a statutory remedy provided under the Consumer Protection Act, 1986.

"The remedy under the Consumer Protection Act is in addition to and not in derogation of any other remedy available under law. A private contractual clause cannot be permitted to defeat the continued operation of a statutory remedy expressly preserved under Section 3 of the Act," the Bench said.

Can a consumer complaint be referred to arbitration after it is admitted?

Answering this in the negative, Court said that once a complaint is admitted, the consumer forum is required to decide it in accordance with the Consumer Protection Act.

Referring to the proviso to Section 12(4) of the 1986 Act, the Bench noted that an admitted complaint cannot be transferred to any other court, tribunal or authority established under any other law.

"The provision is intended to ensure that a consumer complaint, once admitted, is not rendered illusory by compelling the consumer to begin afresh before another forum or authority," Court observed.

Court added that the existence of another forum or mode of adjudication does not exclude the jurisdiction of the consumer fora.

Background of the case

Court was hearing a civil appeal filed by T K A Padmanabhan against a January 4, 2016 order of the National Consumer Disputes Redressal Commission (NCDRC).

The appellant had filed a consumer complaint before the District Consumer Forum-VII, New Delhi, alleging deficiency in service by Abhiyaan Cooperative Group Housing Society Limited due to delay in handing over possession of a flat.

In 2009, the District Forum referred the parties to arbitration. That order was upheld by the Delhi State Consumer Disputes Redressal Commission in 2013, and the appellant's revision petition was later dismissed by the NCDRC.

The appellant argued that the complaint could not have been referred to arbitration merely because the agreement contained an arbitration clause, particularly when the complaint had already been admitted and notice had been issued to the respondent.

The respondent, on the other hand, contended that the arbitration clause justified relegating the parties to arbitration.

Supreme Court's analysis on consumer forum jurisdiction

Court emphasised that the Consumer Protection Act, 1986 is a beneficial legislation enacted to provide consumers with a simple, inexpensive and speedy remedy against defects in goods or deficiency in service.

It reiterated that Section 3 of the Act expressly provides that the remedy under the Act is additional to other legal remedies. Therefore, the availability of arbitration or any other forum does not automatically bar proceedings before consumer fora.

The Bench relied on Emaar MGF Land Ltd. v. Aftab Singh (2019), where the Supreme Court had held that an arbitration clause does not denude consumer forums of their jurisdiction because the Consumer Protection Act creates a special and additional statutory remedy.

According to the Court, the legal principle laid down in that decision squarely applied to the present case.

"In our opinion, this approach did not give due effect to the scheme of the 1986 Act and to the settled principle that an arbitration clause does not, by itself, oust the jurisdiction of the consumer forum," the Bench observed.

Can a homebuyer claim compensation after taking possession?

Court also found fault with the NCDRC's reasoning that the appellant had ceased to be a consumer because he had accepted possession of the flat without protest.

The Bench said the National Commission failed to address the central issue regarding the consumer forum's jurisdiction and wrongly treated the complaint as one seeking possession alone.

Court pointed out that the appellant's grievance related to delay in handing over possession and his claim for compensation arising from that delay.

"A claim for compensation for delayed possession necessarily arises from the period prior to the actual delivery of possession. The subsequent receipt of possession cannot, by itself, extinguish the right of the allottee to seek adjudication of a claim for compensation for the alleged delay," the Bench held.

It added that questions such as whether there was delay, whether it was attributable to the respondent, whether the appellant accepted possession unconditionally, and whether compensation is payable are all issues requiring adjudication on merits and could not have been decided at the threshold.

Relief granted

Setting aside the orders of the District Forum, the State Commission and the NCDRC, the Supreme Court restored the consumer complaint.

It directed that all questions relating to deficiency in service, delay, waiver, acceptance of possession, entitlement to compensation and other issues on merits shall remain open for adjudication before the competent consumer forum.

Court further directed the District Consumer Disputes Redressal Commission, Dwarka, to decide the complaint after giving both parties an opportunity to lead evidence and complete the proceedings within one year.

Case Title: T K A Padmanabhan Vs Abhiyaan Cooperative Group Housing Society Ltd Through Its Secretary

Bench: Justices Vikram Nath and V Mohana

Date of Judgment: June 04, 2026