Subsequent Possession Of Property Does Not Extinguish Allottee’s Right To Seek Compensation For Delay: Supreme Court

Case Name: T.K.A. PADMANABHAN v. ABHIYAN COOPERATIVE GROUP HOUSING SOCIETY LTD. THROUGH ITS SECRETARY
Petition No.: Civil Appeal No. 10724 of 2016
Neutral Citation: 2026 INSC 649
Date of Judgment: 04.06.2026
Coram: Honourable Mr. Justice Vikram Nath & Honourable Mr. Justice V. Mohana
Relevant Statutes & Provisions: Sections 2(1)(d), 2(1)(o), 3, and 12(4) of the Consumer Protection Act, 1986; Section 8 of the Arbitration and Conciliation Act, 1996.

INTRODUCTION

The Hon’ble Supreme Court, in a significant reaffirmation of the primacy of consumer protection law, has held that the mere existence of an arbitration clause in an agreement between the parties does not, by itself, oust the jurisdiction of a consumer forum. The Court has further clarified the mandatory and protective character of the proviso to Section 12(4) of the Consumer Protection Act, 1986 (hereinafter ‘the 1986 Act’), which expressly prohibits the transfer of an admitted consumer complaint to any other court, tribunal, or authority set up under any other law for the time being in force. Emphasising that the 1986 Act is a beneficial legislation intended to provide a simple, inexpensive, and expeditious remedy to consumers, the Court reaffirmed that the statutory remedy thereunder is an additional remedy, preserved under Section 3 of the Act, and cannot be displaced by a private contractual arrangement.

FACTS

The Appellant became a member of the Respondent, Abhiyan Cooperative Group Housing Society Ltd., in January 2003 and paid the full consideration towards allotment of a flat. An agreement was executed between the parties on 27.02.2004. Alleging delay in handing over possession of the flat, the Appellant filed a consumer complaint in 2005 before the District Consumer Forum-VII, New Delhi claiming compensation for the said delay. After the complaint was admitted and notice was issued, the Respondent filed an application under Section 8 of the Arbitration and Conciliation Act, 1996, seeking reference of the dispute to arbitration on the basis of an arbitration clause in the agreement. The District Forum allowed the application and referred the parties to arbitration. Both the State Commission and the National Consumer Disputes Redressal Commission affirmed this position. The National Commission additionally dismissed the revision petition on the ground that the Appellant was not a ‘consumer’ at the time of filing the complaint, since he had already taken possession of the flat without protest. The Appellant thereupon approached the Hon’ble Supreme Court.

ISSUES

Whether the consumer complaint filed by the Appellant could have been referred to arbitration without adjudication on merits?
Whether the National Commission was justified in dismissing the revision petition on the ground that the Appellant was not a consumer?

ARGUMENTS OF THE PARTIES

The Appellant submitted that a consumer complaint cannot be referred to arbitration merely on the basis of an arbitration clause in the agreement between the parties. He contended that since the complaint had already been admitted and notice had been issued to the Respondent, the District Forum was obligated to decide the complaint on merits in accordance with the 1986 Act, and was not empowered to relegate the matter to an arbitral forum.

The Respondent supported the concurrent orders passed by the consumer fora and contended that since the agreement between the parties contained an arbitration clause, the consumer fora committed no error in referring the dispute to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996. It was further submitted that the existence of the arbitration clause was a valid basis for ousting the jurisdiction of the consumer forum, and that the orders below were consistent with law.

JUDGEMENT AND ANALYSIS

Regarding the first issue, the Court at the outset emphasised that the 1986 Act is a beneficial legislation intended to provide a simple, inexpensive, and expeditious remedy to a consumer who complains of defect in goods or deficiency in service. Section 3 of the 1986 Act makes the position explicit: “the remedy under the Act is in addition to and not in derogation of any other remedy available under law”. The Court observed that the existence of another forum or another mode of adjudication does not, by itself, exclude the jurisdiction of the consumer fora. Tracing a consistent line of precedent, the Court relied upon Fair Air Engineers (P) Ltd. v. N.K. Modi (1996) 6 SCC 385, Secretary, Thirumurugan Cooperative Agricultural Credit Society v. M. Lalitha (2004) 1 SCC 305, and National Seeds Corporation Ltd. v. M. Madhusudhan Reddy (2012) 2 SCC 506, each of which consistently held that the availability of an alternative statutory remedy is not a bar to the maintainability of a consumer complaint. The Court found the position put beyond doubt by Emaar MGF Land Ltd. v. Aftab Singh (2019) 12 SCC 751, wherein it was categorically held that even where an agreement contains an arbitration clause, the consumer forum is not denuded of its jurisdiction to entertain and decide a consumer complaint, the reason being that the 1986 Act creates a special and additional remedy for consumers and the jurisdiction so conferred cannot be displaced merely by reference to an arbitration agreement between the parties.

The Court further held that the matter must be examined in the light of the proviso to Section 12(4) of the 1986 Act. The Court observed that Section 12 of the 1986 Act contemplates a statutory sequence: at the threshold, the District Forum considers whether the complaint deserves to be admitted, and once admitted and allowed to be proceeded with, the forum is required to deal with it in the manner provided under the Act. The proviso to Section 12(4) contains a clear legislative restraint, it provides that where a complaint has been admitted by the District Forum, it shall not be transferred to any other court, tribunal or authority set up by or under any other law for the time being in force.

The Court was emphatic that the significance of this proviso lies not merely in its text, but in the statutory policy it reflects; a private contractual clause cannot be permitted to defeat the continued operation of a statutory remedy which Parliament has expressly made additional to other remedies under Section 3. Reading Sections 3 and 12(4) harmoniously, the Court held that Section 3 preserves the additional character of the consumer remedy, while Section 12(4), after admission of the complaint, gives procedural effect to that protection by preventing its diversion to another forum, ensuring that an admitted consumer complaint is not rendered illusory by compelling the consumer to begin afresh before another forum or authority. The Court accordingly held that the approach of the District Forum and the State Commission in referring the admitted complaint to arbitration did not give due effect to this scheme of the 1986 Act.

Regarding the second issue, the Court found an additional and independent infirmity in the National Commission’s order. The principal issue before the National Commission was whether the District Forum and the State Commission were justified in referring the complaint to arbitration. The National Commission, however, bypassed this central jurisdictional question entirely and dismissed the revision petition on the ground that the Appellant was not a consumer at the time of filing the complaint, since he had already taken possession of the flat without protest. The Court held that this reasoning cannot be sustained.

The Appellant’s complaint was not for delivery of possession simpliciter, his grievance was that there had been a delay in handing over possession and that he was entitled to compensation for such delay. A claim for compensation for delayed possession necessarily arises from the period prior to actual delivery of possession. The subsequent receipt of possession cannot, by itself, extinguish the right of the allottee to seek adjudication of a claim for compensation for the alleged delay. The Court observed that questions of whether there was in fact any delay, whether such delay was attributable to the Respondent, whether the Appellant had accepted possession unconditionally, and whether any compensation is payable are all matters requiring adjudication on merits, none of which had been examined at any stage, and these issues could not have been concluded at the threshold by holding that the Appellant ceased to be a consumer merely because possession had been delivered before the complaint was filed.

CONCLUSION

The Supreme Court allowed the appeal and set aside the orders of the National Commission, the State Commission, and the District Forum. The Consumer Complaint was restored and directed to be placed before the District Consumer Disputes Redressal Commission, Dwarka, for decision on merits. The Commission was directed to decide the complaint preferably within one year from the date of receipt of the order. The judgment is a significant affirmation of the principle that a private arbitration clause cannot override the special and additional statutory remedy available to a consumer under the 1986 Act, and that once a consumer complaint is admitted, the mandatory bar under the proviso to Section 12(4) operates to prevent its transfer or diversion to any other forum.