The Consumer complaint arbitration clause issue came before the Supreme Court in a dispute involving delayed possession of a housing society flat. The Court held that the existence of an arbitration clause does not prevent a consumer from pursuing remedies under the Consumer Protection Act, 1986. Reaffirming the statutory rights of consumers, the Court restored a complaint filed by T.K.A. Padmanabhan against Abhiyan Cooperative Group Housing Society Ltd. It directed the District Consumer Disputes Redressal Commission, Dwarka, to decide the matter on merits.
A Bench comprising Justice Vikram Nath and Justice V. Mohana delivered the judgment on June 4, 2026, in T.K.A. Padmanabhan v. Abhiyan Cooperative Group Housing Society Ltd., Through Its Secretary (Civil Appeal No. 10724 of 2016). Justice Vikram Nath authored the judgment.
Supreme Court Sets Aside Arbitration Orders
The Bench allowed the appeal and quashed the orders of the National Consumer Disputes Redressal Commission (NCDRC), the Delhi State Consumer Disputes Redressal Commission, and the District Consumer Forum-VII, New Delhi.
All three forums had directed the parties to resolve the dispute through arbitration. The Supreme Court held that these orders were legally unsustainable.
Background Of The Dispute
T.K.A. Padmanabhan became a member of the respondent housing society in January 2003. He claimed that he paid the entire amount required for the allotment of a flat.
The society allotted Flat No. 232 to him. Both parties executed an agreement on February 27, 2004.
On August 8, 2005, Padmanabhan filed a consumer complaint before the District Forum. He sought compensation for the alleged delay in handing over possession of the flat.
In response, the housing society filed an application under Section 8 of the Arbitration and Conciliation Act, 1996. It requested the Forum to refer the dispute to arbitration.
Initially, the District Forum rejected the application on September 21, 2005. It held that remedies under the Consumer Protection Act existed in addition to other legal remedies.
However, after the Delhi High Court directed reconsideration of the issue, the District Forum changed its view and referred the parties to arbitration on July 27, 2009.
The State Commission dismissed the appellant’s challenge in 2013. The NCDRC also rejected his revision petition in 2016. This led to the present appeal before the Supreme Court.
Arguments Before The Supreme Court
The appellant appeared in person after obtaining permission from the Court.
He argued that the consumer forum should not have referred the complaint to arbitration merely because the agreement contained an arbitration clause. He submitted that once the Forum admitted the complaint and issued notice, it had a duty to decide the dispute on merits.
The respondent society defended the earlier orders. It argued that the arbitration clause justified referral of the dispute to arbitration.
Court Examines Consumer Protection Act
The Supreme Court examined Sections 2(1)(d), 2(1)(o), 3, and 12(4) of the Consumer Protection Act, 1986.
The Court noted that Section 3 clearly states that remedies under the Act are “in addition to and not in derogation of” remedies available under other laws.
The Bench also highlighted the proviso to Section 12(4). It noted that once a District Forum admits a complaint, it cannot transfer the matter to another court, tribunal, or authority established under a different law.
Arbitration Clause Cannot Defeat Consumer Forum Jurisdiction
Addressing the Consumer complaint arbitration clause issue, the Court reiterated that consumer forums retain jurisdiction even when an agreement contains an arbitration clause.
The Bench observed that the Consumer Protection Act is a beneficial legislation. It aims to provide consumers with a simple, inexpensive, and speedy remedy.
The Court relied on several earlier decisions, including:
- Fair Air Engineers Pvt. Ltd. v. N.K. Modi (1996)
- Secretary, Thirumurugan Cooperative Agricultural Credit Society v. M. Lalitha (2004)
- National Seeds Corporation Ltd. v. M. Madhusudhan Reddy (2012)
- Emaar MGF Land Ltd. v. Aftab Singh (2019)
Referring particularly to Emaar MGF Land Ltd. v. Aftab Singh, the Court stated that an arbitration clause cannot override the special remedy available under consumer law.
The Bench observed:
“A private contractual clause cannot be permitted to defeat the continued operation of a statutory remedy which Parliament has expressly made additional to other remedies under Section 3 of the 1986 Act.”
The Court further stated that forcing a consumer to initiate fresh proceedings before another forum would undermine the statutory protection provided by the Act.
NCDRC Failed To Address The Real Issue
The Supreme Court also criticised the NCDRC’s reasoning.
It noted that the main issue before the NCDRC was whether the complaint could be referred to arbitration. Instead, the NCDRC dismissed the revision petition on the ground that the appellant ceased to be a consumer after taking possession of the flat.
The Supreme Court disagreed. It observed that the appellant sought compensation for delayed possession, not possession itself.
The Court clarified that receiving possession does not extinguish a consumer’s right to seek compensation for delay.
It further held that issues such as delay, responsibility for the delay, acceptance of possession, and entitlement to compensation require a full hearing and evaluation of evidence.
Complaint Restored; Dwarka Commission To Decide Within One Year
Allowing the appeal, the Court set aside:
- The NCDRC order dated January 4, 2016;
- The State Commission order dated February 26, 2013; and
- The District Forum order dated July 27, 2009.
The Court restored Consumer Complaint No. 579 of 2005, later renumbered as Complaint No. 712 of 2007.
It directed the District Consumer Disputes Redressal Commission, Dwarka, to adjudicate the complaint on merits.
Since the dispute has remained pending since 2005, the Court directed the Commission to make every effort to conclude the proceedings within one year. It also instructed the Commission to provide both parties adequate opportunity to present evidence and arguments.
The Court disposed of all pending applications.
