3.

Arbitrability of disputes – IPR matters, labour issues, antitrust cases, Fraud, property issues,
consumer issues (case laws under each of these heads and present position)

IPR MATTERS

Arbitration of IP disputes has inherent advantages of saving time and costs and ensuring
confidentiality while also maintaining long-term business relations (see here). In India, arbitration
will be especially useful in light of the enormous pendency of judicial cases. However, arbitrability
of any subject-matter is dictated by a country’s public policy. In India, what forms part of arbitrable
subject-matter is determined as per the test laid down in the Booz Allen Case, expanded upon by the
Ayyasami Case. The following two categories of disputes are thereby inarbitrable in nature: Disputes
involving the adjudication of actions in rem as opposed to actions in personem, such as, disputes
relating to criminal offences, guardianship matters etc. (hereinafter, the first test of arbitrability);
Disputes arising out of a special statute, which are reserved for exclusive jurisdiction of special
courts, such as, matters reserved for small causes courts1 (hereinafter, the second test of arbitrability).
(See here and here) These tests evince that arbitrability is dependent upon the nature of the claim
made in a dispute, i.e., whether the claim is in rem or statutory in nature. This principle should guide
the arbitrability of IP disputes too. Before understanding the arbitrability of IP disputes, it is essential
to understand the functioning of IP regime in India. The scope of this article is limited to analysing
arbitrability of patent, copyright and trademark regimes. These regimes allow a “statutory
monopoly” to be given to the creator of an intangible asset, conferring an exclusive right to exploit it.
There are corresponding statutory remedies to enforce this right. For instance, there exist statutory
remedies for infringement of copyright, trademark and patent. As per the statute, these remedies must
be granted by civil courts. The statutory mention of courts, as a forum to grant these remedies,
creates the first hurdle in arbitrating IP disputes. The Supreme Court of India has not conclusively
settled the issue of arbitrability of IP disputes. In the Ayyasami Case, patents, trademarks and
copyrights were listed in the category of inarbitrable disputes. However, the main issue before the
court was of arbitrability of fraud (discussed here and here). Thus, categorization of IP disputes as
inarbitrable was only obiter dictum. Therefore, this decision cannot be read to bar arbitrability of IP
disputes. Both the aforementioned tests of arbitrability have been used to hold IP disputes
inarbitrable. In the Mundipharma Case, the issue was whether a claim of ‘copyright infringement’
was arbitrable. The Delhi High court held the dispute to be inarbitrable given that infringement of
copyright is a statutory claim, having definite statutory remedies that are to be granted exclusively by
civil courts. This ruling thus seems to echo the second test of arbitrability that bars arbitrability of
disputes arising out of special statutes which are reserved exclusively for civil courts. Subsequently,
in the SAIL Case [Suit No. 673/2014], a claim of ‘trademark infringement’ was held to be
1
Natraj Studios Private Ltd v. Navrang Studios & Another, 1981 AIR 537
inarbitrable by Bombay High Court reasoning, “the rights to a trademark and remedies in connection
therewith are matters in rem and by their very nature not amenable to the jurisdiction of a private
forum chosen by the parties”. Accordingly, the dispute was held to be inarbitrable on the basis of the
first test of arbitrability that makes actions in rem inarbitrable. The Eros Case brought about the first
winds of change to this negative trend. The Respondent was granted a copyright license to distribute
the Petitioner’s films. The license contained an express negative covenant which prohibited the use
of copyrighted films upon termination of contract. Respondent violated this term. Thus, the
Petitioner initiated arbitration for ‘violation of the contractual covenant’ – a claim although sourced
purely in contract, still required an infringement of copyright to be established.

The Bombay High Court held for the first time that it would be too broad, impractical and against all
commercial sensibilities to hold that the entire realm of IP disputes is inarbitrable. Accordingly, the
case rightly noted the nuance that that IP disputes arising purely out of contracts are arbitrable
because they are actions in personam, i.e. “one party seeking a specific particularized relief against a
particular defined party”. Thus, the case applied the first test of arbitrability. The court went a step
ahead to state that, a finding of infringement had to be made for proving such a contractual breach
and that an arbitrator was empowered to make such a finding of infringement as ‘infringement’ can
only be in personam. Thus, an infringement claim could now be determined by arbitration. 2However,
even when the dispute is in personam, the second test of arbitrability can be applied, to hold the
disputes arising out of special statutes as inarbitrable. This test was refuted in EROS reasoning that
the statute nowhere provides that the court is an ‘exclusive’ forum, and thus, arbitration should be
allowed. We argue that the holding of inapplicability of the second test was correct. The second test
is applied where there is an underlying public policy objective in keeping disputes in the hands of
courts. For instance, labour disputes are made inarbitrable by Industrial Disputes Act, 1947, for the
reason that a public fora can address the power imbalance prevalent between employers and
employees in labour disputes. However, in such IP disputes, similar considerations are not always in
play. Thus, the EROS decision rightly refuted the second test of arbitrability. Since the Eros and
Euro Kids cases, other IP disputes that are purely born out of such negative covenants in contracts
have also been upheld as being arbitrable.3

LABOUR ISSUES

In India, the Arbitration and Conciliation Act, 1996 does not address the question of which
categories of disputes are capable of resolution by arbitration, and those that are not. Instead, this
question has arisen before and been decided by Indian courts, in a variety of different contexts. In
recent times, Courts have determined arbitrability claims in the context of fraud
2
International Media Ltd. v. Bhaskar Vidyapeeth Shikshan Sanstha (2015) 4 Bom CR 73
3
Deepak Thorat v. Vidli Restaurant Limited, 2017 SCC OnLine Bom 7704
(see here and here), disputes arising out of and implicating trusts and disputes concerning
shareholder and intellectual property litigation. Despite the consistent attention the issue of
arbitrability in India has generally received, there has been little commentary on the specific issue of
whether labour and industrial disputes are arbitrable under the Arbitration and Conciliation Act,
1996. This issue warrants specific commentary for two reasons. First, two High Courts have been
faced with this very question and have independently arrived at the conclusion that industrial and
labour disputes are not arbitrable. Second, these judgements call into question the rising practice of
inserting arbitration clauses in employment agreements and are therefore instructive for practitioners.
In this post I first begin by discussing the cases that have dealt with and decided the arbitrability of
labour disputes. I argue that these cases reach the right conclusion. I also address the potential these
cases have for theorizing about arbitrability, that departs from the dominant paradigm currently used
to address that question. The arbitrability of labour disputes first arose in Kingfisher Airlines v.
Captain Prithvi Malhotra and others (“Captain Prithvi Malhotra”)4. This case arose out of various
labour recovery proceedings instituted by pilots and other staff members of the now defunct
Kingfisher Airlines. The proceedings were instituted before the specially empowered labour courts
for recovery of unpaid wages and other salary benefits. In these proceedings, Kingfisher Airlines
contested the jurisdiction of the labour court by relying on the arbitration clause in the employment
agreements. To that end, Kingfisher filed an application invoking Section 8 of the Arbitration and
Conciliation seeking reference to arbitration in terms of the employment agreements. The labour
court rejected the application and retained jurisdiction over the proceedings. Kingfisher thereafter
moved the Bombay High Court to challenge the correctness of the order passed by the labour court.
The Bombay High Court affirmed the order of the labour court and held that labour disputes were not
arbitrable under the Arbitration and Conciliation Act, 1996. The Court holds that the inquiry is not
solely whether the claim being urged is in personem or in rem (as was held by the Supreme Court
in Booz Allen & Hamilton v. SBI Home Finance 5), but whether the resolution of the claim has been
exclusively reserved for adjudication by a particular court or tribunal for public policy reasons. The
Court holds that the resolution of labour and industrial disputes has been reserved for resolution
before the judicial fora constituted under the Industrial Disputes Act, 1947. By drawing upon the
preamble of the Act as well as the scheme of resolution of labour disputes, the Court holds that
strong public policy reasons support such a conclusion. The Court in Captain Prithvi Malhotra goes
further than merely determining the arbitrability of labour disputes. It examines the scheme of the
Industrial Disputes Act, 1947 and concludes that the Act provides for a unique process for arbitration
of collective labour claims. It therefore concludes that if there were to be adjudication of labour and
4
https://indiankanoon.org/doc/194196045/
5
https://indiankanoon.org/doc/188958994/
industrial claims outside of the courts and tribunals constituted under the Act, the reference to and
resolution by arbitration would have to be governed by the specific provisions of the Industrial
Disputes Act, 1947 (and the attendant rules made thereunder) and not the Arbitration and
Conciliation Act, 1996. The Court therefore concludes two crucial issues: claims under the Industrial
Disputes Act, 1947 are not arbitrable under Arbitration and Conciliation Act, 1996 and by extension,
where it is arbitrable, it must be in conformity with the requirements and procedure under the
Industrial Disputes Act. It is therefore important to remember that labour and industrial claims are
not per se non-arbitrable, but are instead only arbitrable in the manner and to the extent permitted by
the Industrial Disputes Act, 1947.

 A similar question arose five years later in Rajesh Korat v. Innoviti (“Rajesh Korat”) before the
Karnataka High Court. In this case, when an application for reference to arbitration was made before
the labour courts, the application was allowed and parties were referred to arbitration in terms of the
arbitration agreement (in contrast to Captain Prithvi Malhotra where the labour court rejected the
application and retained jurisdiction). The reasoning in Rajesh Korat greatly resembles the reasoning
in Captain Prithvi Malhotra. The Court concludes that there are strong and compelling public policy
reasons to ensure that labour and industrial disputes are exclusively resolved by courts and tribunals
under the Industrial Disputes Act. In Rajesh Korat, the Court goes slightly further in concluding that
the Industrial Disputes Act is a self-contained code, and to that extent the Arbitration and
Conciliation Act, does not have any application to matters governed by the Industrial Disputes Act.
Although it does not expressly address this question, Rajesh Korat impliedly endorses the
proposition that any arbitration of labour disputes would have to be in conformity with the procedure
under the Industrial Disputes Act, 1947 and not the Arbitration and Conciliation Act, 1996.

ANTITRUST CASES

In Mitsubishi Motors v Soler,6 the US led the worldwide migration to the arbitrability of competition
disputes. Up till that time, most, in not all, jurisdictions around the globe considered these matters
strictly for the courts. The Supreme Court in Mitsubishi began by noting the “healthy regard for the
federal policy favoring arbitration” as well as, in respect to international matters, the growth of
American business and trade will not be encouraged if “we insist on a parochial concept that all
disputes must be resolved under our laws and in our courts.” In holding antitrust claims arbitrable
(claims “encompassed within a valid arbitration clause in an agreement embodying an international
commercial transaction”), the Court (per Justice Blackmun) observed with remarkable prescience in
1985 “[t]he controversies that international arbitral institutions are called upon to resolve have
increased in diversity as well as in complexity. Yet the potential of these tribunals for efficient

6
473 US 614 (1985)
disposition of legal disagreements arising from commercial relations has not yet been tested.”Thus,
the Supreme Court was willing to embrace this “experiment” and courts will have to “shake off” any
hostilities to arbitration and essentially get with international notions of progress in trade and
commerce. In the commercial area, although there is always room to improve, we have certainly seen
since 1985 a robust development for increased efficient disposition of these claims in arbitration,
including antitrust/competition claims as will be discussed. Also, at the time of Mitsubishi,
antitrust/competition advocates were concerned about ceding private enforcement authority to
.arbitrators, while the arbitration bar, by virtue of language in the opinion allowing courts to have a
“second look,” was unsure just what the case would mean to the very cornerstone of arbitration,
party autonomy in deciding how they want their disputes resolved. More on that below as well. Since
that seminal case, cases around the world have followed suit if not extended Mitsubishi, most notably
Eco Swiss China Time v Benetton Int’ in the EU. Furthermore, Mitsubishi has been unremarkably
construed to cover US domestic as well as international disputes. Now, in looking back more than
thirty years later, Mitsubishi, in addition to its landmark ruling on arbitrability, strikes me on fresh
reread as making certain corollary points which are of significant importance to the arbitration and
competition law practitioner today. The first observation on reflection is the discussion regarding the
concern that antitrust cases are too complex to be left in the hands of arbitrators. The cases “require
sophisticated legal and economic analysis, and thus are alleged to be ‘ill-adapted to strengths of the
arbitral process, i.e., expedition, minimal requirements of written rationale, simplicity, resort to basic
concepts of common sense and simple equity. “The Court’s dismissal of this concern was powerful.
Precisely because these cases can be so complex is reason to favor arbitrability as “it is often a
judgment that streamlined proceedings and expeditious results will best serve their needs that causes
parties to agree to arbitrate their disputes; it is typically a desire to keep the effort and expense
required to resolve a dispute within manageable bounds that prompts them mutually to forgo access
to judicial remedies.” Thus, we see today many arbitral institutions have adapted to complex cases
in their rules and the push for expedition in spite of complexity, as well as arbitrator selection of
individuals who are comfortable if not expert in the competition arena for example. Antitrust cases
many times are economic theory driven and most institutional rules as well as soft law rules such as
the IBA Rules on Taking of Evidence in International Arbitration (“IBA Rules”) allow for creative
and liberal use of expert testimony in the proceeding. This was recognized by the Court as well as the
reference to a kind of “anyway” the cases in arbitration will most likely be vertical issues and not
horizontal price fixing cartel cases. It was arbitration’s “adaptability” and “access to expertise” that
swayed the Court on the over-complexity argument. The second point that strikes me on a Mitsubishi
reread are the concerns raised by the Soler party against arbitration that the private treble damage
procedure is too important to the business fabric to be thus relegated and, furthermore, the arbitration
process cannot be counted on enforce competition policy with arbitrators, many times foreign and
many times chosen from the business community.” Just as just as ‘issues of war and peace are too
important to be vested in the generals, . . . decisions as to antitrust regulation of business are too
important to be lodged in arbitrators chosen from the business community – particularly those from a
foreign community that has had no experience with or exposure to our law and values.’

Following that, one of the most respected appellate judges Frank Easterbrook on the US Court of
Appeals for the 7th Circuit noted in Baxter Int’l v Abbott Labouratories, 7 the very minimal review of
the national courts if the arbitration process is going to work or be given a chance to work, as implied
strongly by Mitsubishi. “Legal errors are not among the grounds that the Convention gives for
refusing to enforce international awards” Judge Easterbrook noted and “Mitsubishi did not
contemplate that, once arbitration was over, the federal courts would throw the result in the waste
basket and litigate the antitrust issues anew.   That would just be another way of saying that antitrust
matters are not arbitrable.” And to the same effect are cases across the Atlantic, perhaps the most
notable being Thales v Euromissile in the Paris Court of Appeal in 2004, where the court refused to
consider a competition law infringement allegedly that “creve les yeux,” but was not even examined
for better or for worse by the “yeux” of the arbitrators. The court followed Eco Swiss and French
procedural rules and refused to set aside the award.

FRAUD

The decision of the Indian Supreme Court in A. Ayyasamy v. A. Paramasivam (‘Ayyasamy’) 8 has
been previously discussed on this blog here, and here. This post seeks to analyse the distinction
between arbitrability of fraud concerning India-seated arbitrations and foreign-seated arbitrations
created as a result of this judgment. The court in World Sport Group Ltd. v. MSM Satellite (‘World
Sport’)9 had concluded that disputes involving fraud are arbitrable (without making a differentiation
between mere allegations of fraud and serious allegations of fraud as made in Ayyasamy), so far as
foreign-seated arbitrations are concerned. However Ayyasamy declares that serious allegations of
fraud are inarbitrable in India-seated arbitrations, thus creating an artificial difference concerning
arbitrability of fraud between foreign-seated and India-seated arbitrations. While all disputes
involving fraud are arbitrable for foreign-seated arbitrations, serious allegations of fraud are
inarbitrable for domestic arbitrations. The argument that it is more legitimate to interfere in domestic
awards than in foreign awards might be plausible, but has not been fleshed out by the court either. §8
and 45 provide for the powers of the Indian courts to refer disputes to arbitration, when there exists
an arbitration agreement concerning the dispute prescribing for India-seated and foreign-seated
7
315 F 3d 829 (7th Cir.2003),
8
[(2016) 10 SCC 386]
9
[(2014) 11 SCC 639]
arbitrations respectively. The difference in the language of §§8 and 45 of the Indian Arbitration and
Conciliation Act, 1996, where the latter allows for more interference than the former, can be argued
as a source of this differentiation similar to the rationale in the case of Swiss Timing Ltd. v.
Organising Committee10. However there is a difference between the issues of court interference in
the determination of arbitrability and determination of whether a particular dispute is arbitrable. The
former is a procedural enquiry, while the latter is substantive. The difference in the language of the
aforementioned sections can at best be a source of the procedural enquiry, i.e. for the argument that
courts can decide arbitrability of the dispute before making a reference under §45, as against under
§8; but not for the substantive enquiry. Though the difference in the substantive enquiry resulting
from the difference in the languages of §§ 8 and 45 has been undertaken in previous cases as well.
[See, Shin-Etsu Chemicals Co. v. Aksh Optifibre Ltd. 11 Kalpana Kothari v. Sudha Yadav,12 Chloro
Controls India (P) Ltd. v. Severn Trent Water Purification Inc. 13 India Household & Healthcare Ltd.
v. LG Household & Healthcare Ltd.14 Sundaram Brake Linings v. Kotak Mahindra Ltd.15 If anything,
the difference in language demanded explanation from the bench in World Sport, when it expanded
the ambit of arbitrability under §45 in comparison with §8. This is because even assuming that the
difference in language can be a source of the substantive enquiry as well, language of §45 is more
permissible than that of §8 (allowing for greater interference in foreign-seated arbitrations), leading
to a reverse conclusion from the present position of law. Chandrachud J. in his concurring opinion in
Ayyasamy indeed misses the opportunity to notice this flaw. In the course of his opinion, he draws
attention to the difference in the language of §8 of the Act, and the corresponding provision in the
UNCITRAL Model Law, the latter also allowing the courts to decline reference to arbitration when
the AA is “null and void, inoperative and incapable of being performed”. This leads the court to
conclude that §8, as against the provision in UNCITRAL Model Law, is mandatory in nature (though
the conclusion reached by the court in Ayyasamy does not seem to be in accordance with this
peremptory language). §45 mirrors the language of UNCITRAL Model Law, yet ironically, the court
concludes that the ambit of arbitrability while making a reference under §8 is narrower than §45
(while the court does not state so explicitly, though the legal position after the pronouncement of
Ayyasamy is exactly this).

At another level, it is suspect if Indian law should at all govern the question of arbitrability in all
foreign arbitrations, unless Indian courts also have exclusive natural jurisdiction over the dispute. If
such jurisdiction does not exist, the issue should be decided in accordance with the law of the seat or
10
[(2014) 6 SCC 677
11
(2005) 7 SCC 234
12
(2002) 1 SCC 203
13
(2013) 1 SCC 641
14
(2010) 1 SCC 72
15
(2010) 4 Comp. L.J. 345 (Mad)
the law of the place of enforcement. Hence, application of Indian law to the question of arbitrability
in foreign-seated arbitrations is in itself problematic. Indian courts, as against elsewhere in the world,
have applied the substantive law of contract to the question of arbitrability (Reliance Industries Ltd.
v. Union of India,16 Note that this judgment was passed after World Sport). Yet, in the context of
arbitrability of fraud, without making the analysis of the applicable law, courts have used Indian law
for making the determination. For instance in World Sport, the substantive law of contract was that
of England and Wales, where fraud, irrespective of its seriousness, is arbitrable (Fili Shipping v.
Premium Nafta Products,17 yet this did not find traction in the judgment of the court. Lastly, the
position as it stands right now goes against the precedent in National Insurance Co. Ltd. v Boghara
Polyfab Pvt. Ltd.18 which had explicitly denied the court the power to rule upon the question of
arbitrability at the stage of reference, ruling this to be the mandate of the arbitral tribunal under §16
of the Act. [See also, Meguin GmBH v. Nandan Petrochem Ltd. 19 (appointed arbitrator in accordance
with §11, despite involvement of issues of fraud in the dispute); SBP & Co. v. Patel Engineering
Ltd20; Arasmeta Captive Power Co. (P) Ltd. v. Lafarge India (P) Ltd.21

Both Swiss Timing and World Sport are decisions based on this reasoning, rather than arbitrability of
fraud. Ayyasamy on the other hand, licenses the court to determine the question of arbitrability and
analyse the merits of the dispute to the extent required in determining whether allegations of serious
fraud are involved. The tribunal might in fact feel obligated by such determination by the court, even
when it might think otherwise.

PROPERTY ISSUES

Generally, disputes of civil or commercial nature that can be adjudicated by a civil court can also be
settled through arbitration, unless barred expressly or by necessary implication. It is now settled that
certain categories of matters are out of the purview of arbitration, such as those that arise from, (i) a
statute enacted in accordance with public policy to be dealt by public forums (e.g. consumer
disputes), (ii) rights in rem (e.g. enforcement of mortgages) and (iii) matters for which special rights,
remedies and exclusive forums are established by special enactments (e.g. the Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002). The rationale
for dealing with such matters in public forums is set out in various judgments, specifically, in the
Booz Allen Hamilton Inc v SBI Home Finance (2011) case, which sets a benchmark in the subject of

16
2014 SCC Online SC 411
17
[2007] UKHL 40)
18
[(2009) 1 SCC 267],
19
(2007) 5 RAJ 239 (SC)
20
(2005) 8 SCC 618
21
(2013) 15 SCC 414]
arbitrability of disputes arising out of the Transfer of Property Act, 1882 (ToPA), as concern
mortgages.

There is no provision in ToPA barring arbitration, nor do the provisions or the scheme of the act
imply that disputes are entirely incapable of arbitration and the applicability of arbitration does not
contravene the purpose and intent of the act. However, matters relating to eviction and of rent and
charges between landlord and tenant, licensor and licensee in Maharashtra are dealt under the
Maharashtra Rent Control Act, 1999 (MRCA), which confers exclusive jurisdiction on the Small
Causes Court and Competent Authority, with respect to certain “premises” as defined in section 7(9).
Though open land leases are beyond the scope of the MRCA, the act falls within the ambit of section
41 of the Presidency Small Causes Court Act (Presidency act), which is pari materia with section 26
of the Provincial Small Causes Court Act, from which the Small Causes Court derives its
jurisdiction. Thus, an exclusive forum with exclusive subject matter exists under a special enactment
in the form of the MRCA. The MRCA is specially enacted to protect the interests of tenants, while
ensuring fairness of returns to the landlords and is, therefore, subject to jurisdiction in public forums
only. While the courts have time and again affirmed the exclusivity of jurisdiction under section 41,
it has been argued and held that not all matters of lease, tenancy and license need to go to Small
Causes Court (The Royal Bank of Scotland NV v Earnest Business Services Private Limited). There
are matters pertaining to refunds of security deposits in license, sharing of profits between lessor and
lessee, claims for damages out of breach of terms of the agreement etc., which do not form a part of
“rent or charges” and are not “related to recovery of possession of immovable property” as
contemplated under section 41 of the Presidency act. Such disputes, affecting rights of parties inter se
can be allowed to be privately settled by parties opting for arbitration. Even the case of Booz Allen
has left open the scope of arbitrability in mortgage disputes, provided it does not pertain to the
enforcement of mortgage.

The concept of bifurcating reliefs based on arbitrability, is not new to the courts and has been argued
in the case of Trent Limited v Nanasaheb Govindrao Aher & Ors (2017), where relief for recovery of
possession was held to be under the exclusive jurisdiction of the Small Causes Court, while reliefs
pertaining to specific performances, arising out of lease deeds were held to be amenable to
arbitration. The question, therefore, is not whether matters under ToPA can or cannot be arbitrable,
but whether such matters ought to be subjected to arbitration. Disputes that do not fall under the
specific jurisdiction of the Small Causes Court and the MRCA and affect the rights between two
parties only and do not contravene the purposes of the MRCA and ToPA, should be allowed to be
resolved by parties privately through arbitration as, this will be in line with the spirit of arbitration,
where party autonomy is paramount. The issue is now ripe for consideration before the three-judge
bench of the Supreme Court, in the case of Vidya Drolia and Ors. v Durga Trading Corporation,
where one of the main issues is whether matters under ToPA are non-arbitrable and can be decided in
public forums only. The reference is based on the judgment of Himangni Enterprises v Kamaljeet
Singh Ahluwalia (2017), in which it was held that matters of eviction and rent of certain premises
exempted under the Delhi Rent Control Act, 1958, can be governed by ToPA, and the Arbitration
Act would, therefore, not apply to such premises without good reasons for holding so. We now wait
for the Supreme Court to lay this issue to rest.

CONSUMER ISSUES

The Supreme Court of India (Supreme Court), vide its judgment in M/s Emaar MGF Land Limited v
Aftab Singh22 has conclusively decided that if a dispute brought before the consumer forum
(consumer dispute/s) arises from an agreement which has an arbitration clause, the consumer forum
will be the appropriate forum for hearing the dispute. The decision was based on the premise that
consumer disputes are of a public nature and consequently, the remedies under the Arbitration and
Conciliation Act, 1996 (Arbitration Act) for the same are barred by implication. The Supreme Court
placed reliance on various landmark judgments on the subject of "arbitrability". It further
demonstrated how the amendments made to Section 8(1) of the Arbitration Act vide the Arbitration
and Conciliation (Amendment) Act, 2015 (2015 Amendment) did not bar the National Consumer
Dispute Redressal Commission (NCDRC) from refusing to refer the dispute to arbitration.

The Supreme Court thoroughly analysed the jurisprudence of Section 8(1) of the Arbitration Act,
both prior to and post the 2015 Amendment, and that of the reference of consumer disputes to
arbitration. Prior to the 2015 Amendment, it was well-settled law, as laid down in Fair Air
Engineering Pvt. Ltd & Anr v N K Modi23, National Seeds Corporation Limited v Madhusudhan
Reddy & Anr24 and Rosedale Developers Private Limited v Aghore Bhattacharya & Ors 25, that even
if a dispute arose from a contract with an arbitration clause, the clause's existence will not impede a
party's right to file a complaint under the CPA before a consumer forum. The rationale of these
judgments was that Section 3 of the CPA states that the provisions of the CPA are "in addition to,
and not in derogation of any other law for the time being in force." The Supreme Court went on to
acknowledge that the 2015 Amendment had severely restricted any judicial authority's power to
refuse to refer a dispute to arbitration under Section 8(1) of the Arbitration Act or appoint an
arbitrator under Section 11(6A) of the Arbitration Act. Such refusal can be made only if the judicial
authority determines that prima facie no valid arbitration agreement exists between parties. In light of
the phrase "notwithstanding any judgment, decree or order of the Supreme Court or any Court", a

22
(Review Petition (C) Nos 2629-2630 of 2018 in Civil Appeal Nos 23512-23513 of 2017),
23
((1996) 6 SCC 385)
24
((2012) 2 SCC 506)
25
((2018) 11 SCC 337)
judicial authority may no longer determine whether various conditions are fulfilled by the arbitration
agreement (such as proper and necessary parties, multiple issues, only one of which is to be referred
to arbitration, etc.), thereby invalidating earlier precedent such as Sukanya Holdings (P) Ltd v Jayesh
H Pandya & Anr26. However, the Supreme Court also kept in mind Section 2(3) of the Arbitration
Act, which states that Part I of the Arbitration Act "shall not affect any other law for the time being
in force, by virtue of which certain disputes may not be submitted to arbitration." Accordingly, this
section clearly gives primacy to the arbitrability of a subject matter over any other provision in Part I,
including Section 8(1) and 11(6A) of the Arbitration Act. The Supreme Court has already held in
landmark judgments, such as Lucknow Development Act v M K Gupta27, that the CPA is a beneficial
legislation that provides expeditious and economical remedies to aggrieved consumers. However, in
the present case, the Supreme Court went a step further by affirming the decision of the NCDRC and
specifically stating that consumer disputes are also a subject matter wherein disputes cannot be
referred to arbitration because it pertains to rights in rem (public rights). In other words, the Supreme
Court has brought consumer disputes within the ambit of "non-arbitrable" disputes, as defined in
Booz Allen and Ayyasamy, such as disputes related to criminal law, trusts, tenancy, family law,
telecom, insolvency and winding up, IPR, and in certain cases, fraud. The Supreme Court also went
on to state that the legislative intent of the 2015 Amendment could not have been to override Section
2(3) of the Arbitration Act, and other statutes with public remedies like the CPA.

It must also be noted that at the very end of its judgment, the Supreme Court also expressed that its
decision should not be interpreted to be a bar against consumer disputes being submitted to
arbitration in general, but only a bar against arbitration when a consumer files a consumer complaint.
This judgment ensures that consumers, who often have lesser bargaining power than service
providers, are not put through the relatively cumbersome process of arbitration when there exist more
efficacious and affordable public law remedies. However, despite the Supreme Court's disclaimer
about its judgment not being a bar against consumer disputes being submitted to arbitration in
general, the judgment has not been specific about the implications that designating consumer
disputes as "non-arbitrable" might have on the execution and enforcement of awards pertaining to
consumer disputes. The Supreme Court has been amply clear that the CPA is a special legislation
with public law remedies, which deal with rights that are under the umbrella of "rights in rem" as
espoused by Booz Allen. Accordingly, such disputes fall within the ambit of Section 34(2)(b)(i),
which states that an award may be challenged if the "subject-matter of the dispute is not capable of
settlement by arbitration under the law for the time being in force". The Supreme Court has reiterated
that Booz Allen and Ayyasamy hold good for consumer disputes as well, in which case, it remains to

26
((2003) 5 SCC 531)
27
((1994) 1 SCC 243)
be seen if awards that are rendered in consumer disputes which have consensually been submitted to
arbitration, are susceptible to challenges under Section 34(2)(b)(i).