Holding

The NCDRC lacks jurisdiction to refer consumer disputes for consensual adjudication outside the Arbitration Act, and such awards must be treated as arbitration awards subject to challenge under the applicable arbitration statutes.

Summary

The Supreme Court examined the practice of the National Consumer Disputes Redressal Commission (NCDRC) referring consumer disputes to a retired judge for "consensual adjudication" and then treating the award as its own order. It held that the Consumer Protection Act, 1986 does not empower the Commission to delegate its adjudicatory function to a third person outside the framework of the Arbitration Act. Consequently, such awards cannot be automatically deemed orders of the Commission; they must be treated as arbitration awards if the parties consented, and may be challenged under the Arbitration Act, 1940 or the Arbitration and Conciliation Act, 1996. The Court set aside the Commission’s final orders in the appealed matters and remitted the cases back to the Commission for proper adjudication, allowing parties to file objections to the awards. It also directed the Commission to discontinue the practice of referring matters for consensual adjudication de hors the Arbitration Act.

Issues considered

Whether the NCDRC has jurisdiction under the Consumer Protection Act, 1986 to refer disputes to a third person for consensual adjudication outside the Arbitration Act.
Whether the award of such a third person can be treated as an order of the Commission.
Whether parties may challenge such awards under the Arbitration Act, 1940 or the Arbitration and Conciliation Act, 1996.
Whether the practice of the Commission abdicating its adjudicatory function is permissible.

Legislation cited

Subjects

Consumer ProtectionNCDRCConsensual adjudicationArbitrationJurisdictionSection 22Abdication of function

Judgment

A SKYPAK COURIERS LTD. ETC. ETC.
v.
TATA CHEMICALS LTD. ETC. ETC.

MAY 12, 2000

B [G.B. PATTANAIK, DORAISWAMY RAJU AND S.N. VARIAVA, JJ.]

Consumer protection Act, I986:

National Consumer Disputes Redressal Commission-Referring matters
C to third person for consensual adjudication dehors the Arbitration Act-
Then making the awards given by such third person rule of the court by
passing orders based on the awards-Held, reference to a third person is not
supposed to be an arbitration but a consensual aqjudication-Commission
is not applying its own mind or aqjudication on disputes-It is merely
D putting its imprimature on decisions given by third parties-By doing this
it is abdicating its own fanctions and duties-Such a procedure is unwarranted
·, and u'!}ustified-Commission directed to forthwith discontinue such a practice
-As regards the present cases disposed by Commission on the basis of the
award by third person, reference being by consent to be treated reference to
arbitrator under Arbitration Act-Awards to be treated as awards by
E arbitrators-It will be open to parties to challenge the awards on such
grounds as are available under Arbitration Act, I940 and/or the Arbitration
and Conciliation Act, I996-final orders passed by Commission set aside-
Matters remitted to Commission for decision accordingly.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2500 of
F 1994.

From the judgment and Order dated 7.2.94 of the National Consumer
Disputes Redressal Commission, New Delhi in O.P. No. 66of1992.

WITH
G Civil Appeal No. 4029of1994
WITH

Civil Appeal No. 2339 of 1996

WITH
H 324
SKYPAK COURIERS LTD. v. TATA CHEMICALS LTD. 325
Civil Appeal No. 4049 of 1996 A
wrrn
Civil Appeal No. 171of1997

F.S. Nariman, R.F. Nariman, Harish N. Salve, Jitendra Sharma, R.
Sundaravaradan, N.N. Goswami, Raju Ramachandran, Bhimrao N. Naik, M.N. B
Krishnamani, Sr. Advs., N. Ganpathy, R.C. Mishra, Dr. Meera Agarwal, Ramesh
Chandra Mohra, G. Venkatesh Rao, K.V. Mohan, M.K. Dua, Sunil Kapoor,
Santhosh K. Sethi, R.D. Upadhyay, Krishan Venugopal, Ms. Bina Madhawan,
P.H. Parekh, S.C. Sharda, K.C. Dua, Tarun Dua, Y.P. Mahajan, L.N. Rao, Roy
Abraham, Ms. Baby Krishnan, Tara Chandra Sharma, Ms. Sushma Suri and C
S. Uday Kumar Sagar for the appearing parties.

The following Order of the Court was delivered :

All these Civil Appeals are being disposed of by this common Order.
It is clarified that at this stage this Court is not going into the facts of any
case but is only dealing with the propriety of the procedure. Followed by the D
National Consumer Disputes Redressal Commission (hereinafter for sake of
convenience called the 'Commission') in all these matters.

With the Industrial Revolution and development in the International
Trade & Commerce, there has been a substantial increase of business and E
trade, which resulted in a variety of consumer goods appearing in the market
to cater to the needs of the consumers. The modem methed of advertisement
in media, influence the mind of the consumers and notwithstanding the
manufacturing defect or imperfection in the quality, a consumer is tempted to
purchase the goods. There has been possibility of deficiency in the services
rendered. For the welfare of such consumer and to protect the consumers F
from the exploitation to provide protection of the interest of the consumers,
the Parliament enacted the Consumer Protection Act, and the Act itself makes
provision for the establishment of Commissions for settlement of the consumer
disputes and matters connected therewith. The Commissions under the Act,
are quasi judicial bodies and they are supposed to provide speedy and simple G
redressal to consumer disputes and for that purpose, they have been
empowered to give relief of a specified nature and in an appropriate way, to
award compensation. On a detailed scrutiny of the different provisions of the
Act and bearing in mind the powers conferred on the Commissions it is
indeed difficult to conceive that such Commissions would be authorised to
refer the disputes for a consensual adjudication, merely because .to arrive at H
326 SUPREME COURT REPORTS [2000] SUPP. I S.C.R.

A a decision, it would be necessary to take evidence in the proceedings. In the
absence of any provision in the Act itself, authorising the Commission to
refer a pending proceeding before it, on receipt of a complaint from a consumer,
for being settled through a consensual adjudication, the conclusion is
irresistible that the Commissions under the Consumer Protection Act do not
B have the jurisdiction to refer the dispute for a consensual adjudication and
then make the said decision of the so-called consensual arbitrator, an order
of the Commission itself. Even it there exists an arbitration clause in an
agreement and a complaint is made by the consumer, in relation to certain
deficiency of service, then the existence of an arbitration clause will not be
a bar to the entertainment of the complaint by the Redressal Agency,
C constituted under the Consumer Protection Act, since the remedy provided
under the Act is in addition to the provisions of any other law for the time
being in force. Now let us see what procedure has been adopted by the
Commission.

In all these matters the Commission has passed Orders referring the
D concerned matter to consensual adjudication by a retired Judge. For sake of
convenience a typical Order (as passed in Civil Appeal No. 2500 of 1994) is
reproduced below:-

ORDER

After hearing both sides we suggested to parties that since
E
evidence will have to be taken and the questions of facts determined
after scrutiny of various documents and the oral evidence, it is best
that both sides agree to the matter being adjudicated upon consensually
by a retired Judge of the Supreme Court. Both parties have submitted
before us that they are agreeable to the course suggested by us.
F Accordingly both sides consented before us that the dispute forming
the subject matter of this Original Petition may be referred to Mr.
Justice V.D. Tuli:apurkar, retired judge of the Supreme Court oflndia
who is residing in Bombay. Both parties to this dispute have their
offices in Bombay and so it would be convenient to have the
adjudication conducted by a retired Judge who is in Bombay. The
G
records of the case will be transmitted by the Registry to Mr. Justice
V.D. Tulzapurkar at his address in Bombay in Samta Building, General
Bhonsale Marg, Near Sachivalaya, Bombay. Mr. Justice Tulzapurkar
may stipulate the terms and conditions to be completed by the parties
as to his remuneration and expenses of the adjudication proceedings.
H We make it clear that this is not an arbitration under the Arbitration
SKYPAK COURIERS LTD. v. TATA CHEMICALS LTD. 327
Act, but only a consensual adjudication which will be binding on both A
parties. The award of Mr. Justice Tulzazpurkar will be sent to this
Commission after the arbitration proceedings are completed so that
final orders in the matter may be passed by this Commission in
accordance with the terms of the said award.

We request Mr. Justice Tulzapurkar to enter on the reference at B
his earliest convenience and to complete the proceedings of
adjudication preferable within a period of three months from the date
of his entering on the reference. Both the parties will be at liberty to
adduce all their oral and documentary evidence in the course of the
adjudication proceedings. Post this case after receipt of the original C
award from Mr. Justice Tulzapurkar."

In some of these matters, it has been contended before us that such
Orders were passed even though the parties did not consent. We, however,
for the purposes of this decision, are proceeding on the basis that all such
Orders were consent Orders and had been agreed to by the parties. To be D
noted that the reference to a third person is not supposed to be an arbitration
but a consensual adjudication.

Section 22 of the Consumer Protection act provides that the Commission
shall have the powers of a Court. These powers would include the power to
call for documents and take evidence either by itself or on Commission. E
However, the final adjudication has to be by the Commission. For purposes
of this Order we will presume, without laying down any law in this behalf, that
the Commission may even refer disputes to Arbitration/Conciliation. However,
such reference to Arbitration could only be under the provisions of the
Arbitration Act, 1940 or the Arbitration and Conciliation Act, 1996. There is
no provision in law and we consider it an unhealthy practice for Courts/ F
Commission/Tribunal to abdicate their duties and functions and to delegate
adjudication of disputes before them to thlrd parties. The adjudication can
only be by the concerned Court/Commission/Tribunal. For an effective
adjudication the Commission/Court must address itself to the evidence,
documents., respective case of the parties, including submission on their G
behalf and then give a finding on that basis. Facts set out hereafter shows/
suggests that that has not happened.

In all these matters awards have been given by the persons to whom
the matters were referred. In some of these matters one or other of the parties
• filed objections to the award. In some cases objections were not filed and/ H
328 SUPREME COURT REPORTS [2000] SUPP. I S.C.R.

A or were not allowed to be filed. In all these cases the objections have not been
considered and the Commission has proceeded to pass orders based on the
Award. For sake of convenience the Order passed in Civil Appeal No. 2500
of 1994, Which is typical of Orders passed, is reproduced hereinbelow:-

"The dispute between the parties forming the subject matter of this
B complaint petition was referred for consensual adjudication to Justice
Sri V.D. Tuli.apurkar, former Judge of the Supreme Court of India with
the stipulation that the award passed by the adjudicator will be final
and binding as between the parties. The award has been passed by
Justice Sri Tulzapurkar and it has been forwarded to this Commission
c in accordance with the terms of our order wherein it was stated that
after the completion of the adjudication proceedings the award may
be forwarded to this Commission for its being incorporated into the
Order of this Commission. We direct that there will be an order in the
original petition in terms of the directions contained in the award."

D Mr. Venugopal, for the Respondent in Civil Appeal No. 2500 of 1994,
sought to support this practice. He relied upon certain English authorities
{which need not be reproduced) wherein it is held that parties could agre_e to
abide by the decision/adjudication of a third person and that the opinion of
the third person would then be final and binding on the parties. There can
E be no dispute with such a proposition. However, if a party does not abide
by the decision then the only remedy would be to file a suit to enforce the
agreement of the parties and the decision. There is no provision in law nor
could any authority be shown to us, that adjudication of matters before a
Court/Commission/Tribunal can be entrusted to a third party/individual and
the decision of the third person then made a decree or Order of a Court/
F Commission/Tribunal. Of course, an Award made by an Arbitrator can be and
is made a decree of a Court. But that is under the provisions of the Arbitration
Act and not dehors the Act. As seen above the Commission is referring
matters to third persons for consensual adjudication dehors the Arbitration
Act. It i.s then making those awards the rule of the Court by passing Orders
based on the award. The Commission is not applying its own mind or
G adjudication on the disputes. It is merely putting its impremanitive on decisions
given by third parties. By doing this it is addicating its own functions and
duties. Such a procedure is unwarranted and unjustified. It cannot be allowed
to continue. Accordingly the Commission is directed to forthwith discontinue
with such a practice.
H The question then arises as to what is to happen in all these cases. As
SK YPAK COl)RIERS LTD. v. TATA CHEMICALS LTD. 329
The question then arises as to what is to happen in all these cases. As A·
stated above, we have proceeded on the basis that all parties had consented
to their matters being referred to third persons. All parties have participated
in the proceedings before the third persons. Awards have been passed. In our
view, it would be inequitable to now set at naught all the awards and relegate
the parties back to the original proceedings. In our view, the reference being B
by consent, must now be treated as reference to Arbitration under the
Arbitration Act. The awards must be treated as awards of Arbitrators.

In such a situation, it will be open for parties to challenge the awards
on such grounds as are available under the Arbitration Act, 1940 and/or the
Arbitration and Conciliation Act, 1996. Thus, in our view, it would not be C
correct for the Commission not to allow parties to file objections and/or not
to consider objections which had been filed.

As stated above, in all these cases, the Commission has not considered
the objections to the award or not allowed the parties to file objections. We,
therefore, set aside the final orders of the Commission in all these matters and D
remit all these matters back to the Commission. We direct that the Commission
shall permit the parties, who have not filed their objections, to file their
objection to the award within a period of 4 weeks from today. Replies, if any,
to the objections to be filed within 4 weeks thereafter. The Commission shall
then consider the submissions/objections of the respective parties and then
give a decision. With this direction all these Appeals stand disposed of. E
It is clarified that this order will not act as a precedent to reopen matters
where parties have accepted or acted upon the final decision of the Commission
and/or in cases where parties have not challenged the final order of the
Commission.
F
R.P. Appeals disposed of.