ADR Mechanisms and Redressal of Consumer Grievances

Lately Alternate Dispute Redressal mechanisms (ADRs) are extremely popular for resolving disputes. The cheapness, expediency and lack of courtroom hustle are main reasons for the popularity of these mechanisms. The conventional courtroom battles are always chosen as the last resort to any dispute. Before initiating a legal action, every available civil remedy is taken up in India. This shows the ingrained idea of amicable settlements. Most of the time, legal actions result in enmity between parties. These ideas have now taken formal shape and in present time known as the Alternate Dispute Redressal Mechanisms.

The main ADR mechanisms are Negotiation, Mediation, Arbitration and Conciliation. Among these four, Arbitration and Mediation are important and useful for resolving consumer disputes. Among these mechanisms, the arbitration and mediation are two alternate methods which can help in resolving a consumer dispute. While the Consumer Protection Act, 2019 (hereinafter the Act) provides for the organized mediation under the guidance of consumer forums, the SC has totally excluded the arbitration as a method for resolving these disputes. This article will review the use of mediation and arbitration in the field of consumer protection.

The Section 37(1) of the Act provides for the settlement of the consumer disputes cases through mediation subjected to two conditions, first being if the district forum thinks the case being fit for the settlement and second being the parties shall agree for such settlement.[1] While it is too early for assessment of advantages of the settlement stage to the existing consumer setup, there are some apprehensions in the mind of consumer activists as well as the general public for settlement provision. As already discussed above, consumers generally try to settle the cases on their own and through other social mediums in India. So, it prima facie seems futile to add an extra stage when consumers are already looking to the formal legal systems as the last resort to maintain the earlier status quo. Also, there are other issues regarding settlement through mediation. The Act provides for establishing a consumer mediation cell in the districts and the mediators shall be chosen as the requirements would be prescribed by the government. The mediators would be chosen from among the members of the district and could also sometimes act prejudicial to the interest of the consumers while trying to settle the dispute. It could be detrimental to a party and that party could also succumb to the pressure of another party along with the mediator. For a mediation settlement to be successful, it is very important that it is ensured that the mediator does not have any prejudicial interest in the case. Only then a fair settlement can be assumed.

Mediation is a better way to resolve the consumers dispute but may not be suitable for India but it is too early to argue on the efficacy of mediation as consumer mediation cells are yet to be constituted. Moreover, the Act restricts the parties’ power to appeal against a dispute settled through the mediation.[2] Section 41 restricts such appeals. Despite some issues, the mediation process could still prove to be a success but for that it is very important that Legislation and Judiciary should work in tandem to fulfill some important responsibilities towards achieving the goal of creating a viable mediation strategy vis-a-vis the consumer matters.

While the mediation is a less formal alternative to tedious court process, a more formal alternative which can also be used to settle the consumer matters is Arbitration. The benefits of settlement by arbitration is that the arbitration in India is dealt according to the provisions of Arbitration and Conciliation Act 1996 while currently there is no formal law to deal with the aspects of the mediation in India. As the act only provides for settlement through mediation, adjudication through arbitration is a question to be answered by courts through interpretation. There are various judgements of the SC and NCDRC where this point of arbitrating the consumer disputes is raised.

The SC in the case of Emaar MGF Land Limited v. Aftab Singh[3]observed that the consumer disputes are non- arbitrable. It held that the consumer act provides level playing field to unequal parties i.e., consumers and corporations so the disputes cannot be resolved through arbitration. The SC’s reasoning is based on the premise that all the disputes cannot be resolved through arbitration, only those disputes which are of private nature and do not involve a matter of public policy can only be allowed to be resolved through arbitration. Moreover the act has nowhere used the word ‘judicial authority’ and merely allowed the forums the status of commissions. So, the section 8(1) of the Arbitration and Conciliation Act after the 2015 amendment cannot be said to include consumer forums too.[4]

This is current legal stand while the arbitration as an alternative to consumer court process is also not preferable with the point of view of social structure. The consumers are more often than not are in vulnerable position with respect to the big corporations and companies. It is not feasible for two unequal parties to settle the dispute amicably without detriment to the interests of a vulnerable party. Furthermore, this issue gets complicated by the fact that unlike mediation, arbitration is a more formal settlement process that often involves lawyers. Involvement of lawyers can also twist the bargaining power of the consumer.

There also raises the issue that if the arbitration is allowed to resolve consumer disputes subject to arbitration agreement by the consumer forums, all the corporations and e-commerce companies will start making the arbitration clause as a default clause in the standard form contracts and will never allow the consumer to go to forums to get compensation and settle the dispute by paying nominal compensations. It could lead to the position of consumers back to the pre-consumer protection law era when the traders and companies have limitless bargaining power and the liability of defective goods and services used to be on the consumers.

While the alternate dispute resolution mechanisms are helpful in resolving private disputes amicably, there are chances that perhaps the ADR mechanism may not be useful in resolving consumer disputes. The basic premise in all the alternative dispute resolution mechanisms is the equal bargaining power of the parties which is generally absent in consumer matters. Only those consumer matters where there is inequality are more often than not are taken at the forums and to again put them to mediation may only result in delaying the justice. But there is no gainsaying in the efficacy of mediation without sufficient time and data. The arbitration is more disputable in respect of consumer matters as the arbitration cannot be allowed in all types of cases and it can cause great loss to the consumers if allowed. Moreover, the main objective of the consumer act that is to protect the interests and rights of consumers can be jeopardised if the arbitration agreements are allowed through consumer forums.

[1] The Consumer Protection Act, 2019, § 37(1)

[2]The Consumer Protection Act, 2019, § 41

[3]Emaar MGF Land Limited v. Aftab Singh, 2018 SCC OnLine SC 2378

[4] Arbitration and Conciliation Act, 1996, § 8(1)


Submitted by: Yashendra

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