Authority: High Court at Calcutta
Order Date: 10 July 2026 (Reserved on 23 June 2026)
Case Overview
- Petitioner: Great Island Development Company (co‑owner of a 5 cottah 8 chittak parcel in Ward 45, Howrah Municipal Corporation, Jagacha).
- Respondent No.1: Unnamed developer who entered into a registered development agreement dated 27 June 2019, granting a power of attorney to facilitate development and sale of the developer’s allocation.
- Under the agreement, respondent was to obtain sanction for a G+4 building, pay Rs 33,34,000 as the petitioner’s owner’s allocation, and complete construction within two years of plan sanction.
- Payments made by respondent: Rs 2,00,000 at execution; Rs 50,000 on 27 August 2021; Rs 1,00,000 on 28 August 2021.
- Dispute: Respondent obtained sanction only for a G+2 building, completed construction, handed over flats, and allegedly failed to pay the balance owner’s allocation of Rs 29,84,000. Petitioner alleges respondent knew G+4 sanction was unattainable and entered agreement to prejudice owners.
- Petitioner issued a legal notice on 31 May 2023; respondent replied on 23 June 2023 citing Covid‑19 disruptions.
- Petitioner also alleged false disclosure in income‑tax return, lodged representations before tax authorities and police, and instituted Title Suit No. 134/2024 before the Civil Judge (Junior Division), 6th Court, Howrah, seeking declaratory and injunctive reliefs. The suit was withdrawn and dismissed as not pressed on 18 March 2025.
- Arbitration clause (Clause XIII) provides for disputes to be referred to arbitration under the Arbitration and Conciliation Act, 1996.
- Petitioner invoked the clause by notice dated 3 April 2025, nominating Mr. Jyoti Prakash Chatterjee as her arbitrator; notice received by respondents on 4 April 2025. Respondents did not appoint an arbitrator within the stipulated period.
- Respondent’s arguments: (i) petition barred by Order XXIII Rule 1 CPC because earlier suit was withdrawn without liberty to institute fresh proceedings; (ii) doctrine of frustration applies as G+4 sanction was not obtained, so balance payment obligation has not accrued.
- Petitioner’s counsel argued that the arbitration agreement is a collateral, independent covenant that survives alleged frustration or breach, and that the present petition is distinct from the withdrawn suit (different reliefs and quantum).
- Respondent relied on Supreme Court decision in HPCL Bio‑Fuels Ltd. v. Shahaji Bhanudas Bhad (2024 SCC OnLine SC 3190) to claim bar under Order XXIII Rule 1, but the court distinguished that case because the earlier proceeding was also an arbitration‑related application, whereas here it was a civil suit.
- The court held that the present petition is solely for constitution of an arbitral tribunal; it is premature to decide on merits or res judicata defenses. The arbitration agreement remains valid and enforceable.
- The court rejected the respondent’s claim of frustration, noting that construction of G+2 and sale of units have already occurred, and the remaining issues are arbitrable.
- The court observed that the arbitration agreement has not been contested and that the failure of the respondent to appoint an arbitrator satisfies the jurisdictional requirement of Section 11(6).
Final Outcome
- The court appointed Mr. Rohit Das, Advocate (Mob No. 9831916012), as the nominee arbitrator for the respondent.
- Both arbitrators, Mr. Jyoti Prakash Chatterjee and Mr. Rohit Das, are directed to meet at the earliest and appoint a presiding arbitrator, thereby constituting a three‑member Arbitral Tribunal as per Clause XIII of the development agreement.
- Remuneration of the Arbitral Tribunal shall be governed by the Fourth Schedule to the Arbitration and Conciliation Act, 1996, or as fixed by the arbitrators in consultation with the parties.
- All questions of arbitrability, admissibility, limitation, and other substantive issues are left open for determination by the constituted arbitral tribunal.
- The parties are directed to appear before the learned arbitrators within four weeks from the date of communication of this order.
- The petition under Section 11(6) is allowed.
Topics: Arbitration, Real Estate Development Dispute