Consumer Forums Told To Do Their Job

They have been appointing arbitrators for consensual adjudication', says M J Anthony

The Supreme Court has told consumer forums to put an end to the practice of appointing arbitrators. The Consumer Protection Act does not provide for arbitartion, but the forums have been appointing arbitrators for consensual adjudication. It has done so at times without the consent of parties to a dispute. This fact was brought out in a batch of appeals before the Supreme Court last week.

There is an increasing emphasis these days on alternative dispute resolution (ADR) and this was recognised by the recently enacted Arbitration and Conciliation Act. However, the Consumer Protection Act, 1986, does not have any provision for arbitration as a method to resolve disputes. Though the agreement for sale or service might contain a clause of arbitration, once the consumer forum is moved, the arbitration clause is supposed to be frozen.

In cases where one party has not been willing to go in for arbitration, it has been persuaded to do so for the sake of expedience. However, when the arbitration award goes against the party, it approaches the consumer forum again, challenging the validity of the award. This seems to be happening quite often, going by the number of appeals before the Supreme Court.

The consumer forums perhaps suspected infirmity in their orders. Therefore, they did not call the reference of the disputes to arbitration, but to consensual adjudication (though some denied their consent). Arbitration was possible only by following the procedure set out in the Arbitration Act, 1940 or the new Arbitration and Conciliation Act, 1996.

The device used by consumer forums, including the apex bodies, bypassed the rules set out in the arbitration law.

This was justified by arguing that the parties could agree to abide by the decision of the mediator and his decision would be final and binding.

But the hitch is that when a court or the tribunal is seized of a matter, it cannot be entrusted to a third person. No law provides for that course of action. The detailed examination of the evidence led by the disputing parties is normally the function of the specialised tribunals, but in these cases, they have been left to the adjudicator, who is in fact an arbitrator created by the consumer forum.

Moreover, normally an award of the arbitrator has to come back to the court for making it a decree of the court. There are certain procedures to be followed in this context. The consumer forums have shortcircuited all these procedures for the sake of convenience.

The Supreme Court chastised the consumer forums for not applying their own mind on the dispute brought before them. It is merely putting its impramatur on decisions given by third parties. By doing this, it is abdicating its own functions and duties. Such a procedure is unwarranted and unjustified. It cannot be allowed to continue, the judgment said.

In the cases decided by the arbitrators, the Supreme Court has allowed the discontented parties to challenge the awards as if they were made under the arbitration laws.

Therefore, the cases will now go back to the consumer forums for hearing objections from the parties to the awards. The forums have to consider the objections and then give the reasoned decisions. But this can be done only in those appeals which are now before the Supreme Court and not in the old cases in which awards have been implemented.

The present judgment has pointed out a lacuna in the law, which has not been attended to before. It might be argued that arbitration should be allowed even if the dispute is before the consumer forums. It might be speedier, more satisfying and less costly and prevent lawyers from swarming consumer forums. But this Supreme Court judgment indicates the need for an amendment to the Consumer Protection Act to provide for the ADR mechanism.