1996 (8) TMI 510 - SC - Companies Law

Whether there is an arbitration agreement between the parties? Whether the proceedings of the forums created under the Act are legal proceedings and the authorities have the trappings of judicial authorities of a court within the meaning of Section 34 of the Arbitration Act? Whether the case shall be stayed by operation of Section 34 of the Arbitration Act? Held that - As the State Commission expressly has gone into the question and held that by operation of Clause (12) of the quotation there is an arbitration agreement brought into vogue between the parties. Thereby, Clause (12) of the agreement became as integral part of the contract. Thus, there is an arbitration agreement between the parties. The word court must be read in the context in which it is used in the statute. In the context in which the word court is used in Section 9A of the Special Courts Act, it is intended to encompass all curial or judicial bodies which have the jurisdiction to decide matters or claims, inter alia, arising out of transactions in securities entered into between the stated dates in which a person notified was involved. Therein, the Company Law Board has been held to be a court exercising the functions of the court; therefore, it is possessed of the trappings of a Court. Thus, we have no hesitation to hold that the proceedings before the District Forum, State Commission and the National Commission are legal proceedings. The District Forum, National Commission and the State Commission are judicial authorities falling under Section 34 of the Arbitration Act. As seen, Section 34 of the Act does not confer and automatic right nor create an automatic embargo on the exercise of the power by the judicial authority under the Act. It is a matter of discretion. Considered from this perspective, we hold that though the District Forum, State Commission and National Commission are judicial authorities, for the purpose of Section 34 of the Arbitration Act, in view of the object of the Act and by operation of Section 3 thereof, we are of the considered view that it would be appropriate that these forums created under the Act are at liberty to proceed with the matters in accordance with the provisions of the Act rather than relegating the parties to an arbitration proceedings pursuant to a contract entered into between the parties. Thus this dispute need not be referred to arbitration under Clause (12) of the agreement and the matter could be decided on merits by the State Commission itself. Appeal allowed.

Issues Involved:
1. Existence of an arbitration agreement between the parties.
2. Acquiescence to the jurisdiction of the State Commission.
3. Whether proceedings before Consumer Forums are legal proceedings and whether such forums are judicial authorities under Section 34 of the Arbitration Act, 1940.
4. Discretionary power under Section 34 of the Arbitration Act, 1940, to stay proceedings in favor of arbitration.

Detailed Analysis:

1. Existence of an Arbitration Agreement:
The primary issue was whether an arbitration agreement existed between the parties. The respondent argued that there was no consensus ad idem regarding arbitration. However, the State Commission had previously determined that Clause (12) of the quotation constituted an arbitration agreement. The Supreme Court confirmed this, stating that the conditions of the offer and counter-offer became an integral part of the contract, thus establishing an arbitration agreement between the parties.

2. Acquiescence to the Jurisdiction of the State Commission:
The respondent contended that the appellant had acquiesced to the jurisdiction of the State Commission by seeking multiple adjournments to file a counter. The Supreme Court noted that this issue was not argued before the National Commission, and thus, it could not be considered in this appeal.

3. Legal Proceedings and Judicial Authority:
The core issue was whether the proceedings before the Consumer Forums (District Forum, State Commission, and National Commission) are legal proceedings and whether these forums are judicial authorities under Section 34 of the Arbitration Act, 1940. The Supreme Court analyzed various sections of the Consumer Protection Act, 1986, including Sections 3, 10, 13, 16, 20, 24, and 25. The Court concluded that these forums possess the trappings of a civil court and are judicial authorities. The proceedings before them are legal proceedings. This was supported by previous judgments, such as The Bharat Bank Ltd. Delhi v. The Employees of the Bharat Bank and Associated Cement Companies Ltd. v. P.N. Shanna and Anr.

4. Discretionary Power under Section 34 of the Arbitration Act:
Section 34 of the Arbitration Act, 1940, allows judicial authorities to stay proceedings in favor of arbitration. However, this is not an automatic right and is subject to judicial discretion. The Supreme Court emphasized that the Consumer Protection Act aims to provide an inexpensive and expeditious remedy for consumers, which could be undermined by relegating disputes to arbitration. The Court held that while Consumer Forums are judicial authorities under Section 34, they have the discretion to proceed with matters under the Consumer Protection Act rather than referring them to arbitration, unless specific circumstances dictate otherwise.

Conclusion:
The Supreme Court allowed the appeal to the extent that the State Commission's order was set aside. The matter was remitted to the State Commission for a decision on merits according to law. The Court concluded that Consumer Forums are judicial authorities and that proceedings before them are legal proceedings. However, considering the objectives of the Consumer Protection Act, it would be appropriate for these forums to decide disputes rather than referring them to arbitration, unless the forums themselves determine otherwise based on the peculiar facts of a case.

The appeal was allowed without costs, and the matter was remitted to the State Commission for a decision on merits.

← Previous Next →