Even In The Presence Of Arbitration clause, Consumer Has Choice To Avail Remedies Under the Consumer Protection Act

The present appeal arose aggrieved by the order made by the National Consumer Disputes Redressal Commission (NCDRC) which had ordered Ms Citicorp Finance (India) Limited (appellant) to refund Rs. 13,20,000/- along with interest and cost to Mr. Snehasis Nanda (respondent). The contention emanated from an agreement for the sale of property between Mr. Nanda (respondent) and a borrower, where the borrower had borrowed a home loan from the appellant. A part of this loan was paid directly by the appellant to Mr. Nanda's bank to settle his outstanding loan on the property. Mr. Nanda also lodged a consumer complaint for non-payment of the balance sale consideration by the appellant under a so-called Tripartite Agreement.

The Supreme Court granted the appeal, setting aside the Impugned Order of the NCDRC.The Court held that Mr. Nanda could not be construed as a 'consumer' of the appellant under the Consumer Protection Act, 1986, because there was no privity of contract between them.

The basic transaction was one of sale of the flat by Mr. Nanda to the borrower. Appellant's payment of Mr. Nanda's bank was requested by the borrower itself as part of the loan facility agreement between the borrower and appellant. The Apex Court observed that the Respondent has insufficient evidence to prove that there was a binding Tripartite Agreement by which the appellant became directly liable for the balance payment to Mr. Nanda (Respondent). The unstamped and unsigned document produced as the Tripartite Agreement failed to alleviate the burden of proof on the respondent.

The Apex Court further observed that the complaint was barred by the limitation since it was brought in the year 2018, whereas the cause of action had arisen during April/May 2008, and no reasons were given by the NCDRC for condoning such a delay. Furthermore, the Court observed that the borrower was a necessary party to the proceedings before the NCDRC, as the dispute essentially involved the sale transaction and loan agreement he was a part of. The seller failed to sufficiently prove this agreement against the lender.

The Apex Court's held that 'prima facie' observation in an earlier stage of proceedings is not a conclusive finding, and the consumer forum must still decide the issue on its merits.

The Court held that "Complaints under the Consumer Protection Act are subject to a limitation period of two years from the cause of action. Any delay must be adequately explained, and the forum must record reasons for condoning it."

The inclusion of necessary parties (without whom no effective order can be made) and proper parties (whose presence is needed for a complete decision) is important in such proceedings. In this case, the borrower was at least a proper party.

Thus, the Apex Court held that "Even in the presence of an arbitration clause, a consumer may still opt for recourse and has a choice to pursue remedies under the Consumer Protection Act,, as a special and beneficial statute. In the present case, however, the seller was not held to be a 'consumer' of the lender."

Coram: Justice Sudhanshu Dhulia and Justice Ahsanuddin Amanullah
Between: MS CITICORP FINANCE (INDIA) LIMITED VS SNEHASIS NANDA 2025 INSC 371
Date of Judgment: 20-03-2025