I am verifying an agreement for a property I am planning to buy. The initial phase of checking rpoerty documents is through. The agreement does have an arbitration clause wherein it mentions that incase of any disputes it will be resolved by a common arbitrator. The builder doesn't seem to be keen on making edits to the agreement saying it's the common format being used for everyone. Is it a common practice to include that clause or does is sound fishy? Does it strip me from any of my citizen rights in any way? In case of disputes can I still knock the doors of Indian law if there's a need to challenge arbitrators verdict? All in all should I go ahead?
Asked 2 years ago in Property Law from Pune, Maharashtra
How does consumer court work with arbitration law? Is it still accessible?
Asked 2 years ago
1) you must have the agreement vetted by local lawyer before you take the plunge in buying property
2) merely because there is arbitration clause in the contract does not affect you adversely
3) it does not strip you of any rights in any way
4) if you are aggrieved by award passed by arbitrator you can move court to set aside award if you have strong prima facie case on merits
The so called arbitration clause is not a regular format or the contest are not legally valid especially for the sale agreement of an immovable property.
An arbitrator has nothing to do with this transaction, especially when the arbitrator is appointed by the builder for this purpose, the respondent will not get any justice and he will stand losing a chance to approach consumer forum r civil court of law or criminal court of law seeking relief against any fraud or illegal activity by the builder.
What is the opinion of the lawyer who has given legal opinion to the genuineness of the property to purchased?
You can ask the builder to remove the arbitration clause or you may have a second opinion to purchase the property.
Thanks Ajay, T Kalaiselvan for the prompt response.
Yes I did verify the property documents/agreement with a local lawyer. The documents are genuine and have no issues there. The lawyer did shed light on the arbitration clause and explained about the mines although added saying that it is nothing illegal about it and a lot of builders add it just so that nothing affects their public reputation in case of disputes. I did ask the builder to remove arbitration but he is not willing to tamper with the agreement. Would you suggest 'not' to go with the deal since you would better know the risk factor involved?
Asked 2 years ago
1) there is no harm in going ahead with the deal merely because of the arbitration clause
2) arbitration clause will not oust jurisdiction of consumer forum
3) - An arbitration clause in a contract dos not oust the jurisdiction of Consumer Forum - 2008(1) CPC 622 N.C. -
4) -Existence of arbitrary clause in contract is not bar to file complaint under CP Act – 2010(1) CPC 498 U.P. --
5) A party cannot be non-suited only on the ground that it has not availed alternative remedy under Arbitration and
Conciliation Act – 2010(1) CPC 80 S.C.
The risk factor by incorporating such a clause in the agreement would shield the builder to cover his fraudulent acts or not keeping his promise or from violating the conditions of the contract of the sale agreement in future, should there arise one.
Nobody can expect what will happen when but the written terms will speak volumes when there is a dispute.
The arbitrator will be a person appointed by the builder, and it is natural because he is the person who has to face the flak in the future. Therefore the arbitrator appointed by him (being paid by him) will naturally support and grant an award favoring the builder (his master). This generally happens with most of the reputed finance companies across the country who with the help of the arbitrator appointed by them are openly indulging in great injustices to their customers. The poor victims are not even able to appeal against the award in the district courts.
So adopt buyer beware option when you have an opportunity.
Nothing to worry. The arbitration clause will in no way cause any hindrances of your usual legal rights.
In spite of arbitration clause you can well file case in consumer forum for deficiency in service of the builder.
Hi, arbitration clause is very good when the stake of the matter is more then 100 crores etc.
2. But for common man it is very expensive, as you have to pay the sitting fee for arbitrator and also advocate fee and it very difficult to bear the expenses.
3. Suppose if there is any dispute arise and you want to initiate arbitration proceedings then the builder is refuse to respond it then you have to move application before the High Court for appointment of Arbitrator and then you have to initiate proceedings so it will take time.
It is common to have arbitration as a method of dispute resolution. There is nothing fishy about it. Inclusion of arbitration clause in the agreement places an embargo on your right to adopt any remedy before the courts. The award of arbitrator can be challenged but the scope of challenge will be very limited, so you should not expect much from a challenge to his award. Arbitration is also an expensive affair in as much as you pay not only your lawyer but also the arbitrator.