Consumer's Shield, Not Developer's Gag: Calcutta High Court Holds Developer's Own Claims Remain Arbitrable Even After Buyers Win Refund Before Consumer Forum, Reads Hemalatha Devi as Confined to Consumer Disputes

A real-estate developer applied under Section 11(6) of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator under a 2014 plot sale agreement, while the buyers, during the pendency of that application, had obtained a final order from the District Consumer Commission directing refund of Rs. 18.41 lakh with 9% interest. The Court held that after Interplay and Krish Spinning the referral court is confined to the prima facie existence of the arbitration agreement and the timeliness of the Section 11 application; arbitrability and all other objections are for the tribunal under Section 16 (Paras 23–26, 41). Reading Emaar MGF, M. Hemalatha Devi and Citicorp together, the consumer's statutory election makes only consumer disputes – the consumer's own grievances – non-arbitrable at the developer's instance; it does not extend to the developer's independent claims (such as the 40% deduction under the refund clause), which no consumer forum can adjudicate, since a contrary view would turn a bilateral arbitration agreement into a unilateral one (Paras 35–40). Which disputes fall in which class is a question of arbitrability for the tribunal, which is bound not to adjudicate any consumer dispute (Paras 40–41, 44). Treating the unilateral appointment clause as unenforceable (Perkins Eastman; CORE), the Court appointed a sole arbitrator for disputes 'other than Consumer disputes', expressly leaving the consumer forum's order and its execution untouched (Paras 49–51, 55).

Key Proposition: A consumer's election of the statutory consumer forum renders non-arbitrable only the consumer's own disputes; the developer's independent claims under the same agreement, which the consumer forum has no jurisdiction to decide, remain arbitrable, and sorting the two classes is a question of arbitrability for the arbitral tribunal under Section 16, not for the referral court under Section 11.

Background / Synopsis :

Under an Agreement for Sale dated 23 July 2014, the petitioner agreed to sell Plot No. B-42 in its 'Mega City Plaza's Project Panchojannya' (Mouza Dharsa Moktarpur, North 24 Parganas) to the respondents for Rs. 42.50 lakh; Clause 7 provided for refund with a 40% deduction towards service charges, and Clause 18 provided for arbitration with the petitioner appointing the arbitrator (Para 3).

The plot was substituted with one at Mouza Jagadishpur and the price revised to Rs. 43,31,250, which the respondents paid in full by November 2017 (Paras 4–5).

In November 2018 the deal fell through; each side blames the other. The petitioner refunded Rs. 19,90,250 between November 2018 and June 2020 (Paras 5–6).

In January 2020 the respondents set criminal law in motion (Rajarhat PS Case No. 47 of 2020, now charge-sheeted under IPC ss.418, 420, 467, 468, 120B); the directors obtained anticipatory bail on depositing Rs. 5 lakh (Paras 7–8, 17).

On 5 October 2020 the petitioner invoked arbitration, claiming that after the 40% deduction only Rs. 1,08,500 remained payable; the respondents refused on 5 November 2020, and this Section 11 application was filed in 2021 (Paras 9–10, 45).

During its pendency the respondents filed C.C. No. 245 of 2022 before the District Consumer Commission, Barasat, which by an ex parte final order dated 22 April 2025 directed refund of Rs. 18.41 lakh with 9% interest, Rs. 50,000 compensation and Rs. 5,000 costs; review was rejected on 15 September 2025 and execution is pending (Para 12).

Issues For Consideration :

• Whether, in a Section 11 application, the Court can refuse to appoint an arbitrator because the respondents, as consumers, elected the consumer forum and obtained a final order.
• Whether the consumer's election renders every dispute under the agreement non-arbitrable, or only consumer disputes.
• Whether the objections of settlement, adjudication by the consumer forum, consumer election and pending criminal proceedings bar the reference.
• Whether the unilateral appointment clause can be enforced.

Submissions Of Parties :

• Petitioner (Developer):

The dispute concerns the circumstances of cancellation and the amount refundable under Clause 7, which is contractual and arbitrable; criminal proceedings do not exclude arbitration (Para 13).

Cancellation of the agreement does not extinguish the arbitration clause (Para 14).

The respondents filed the consumer complaint in 2022 without disclosing this pending application; the ex parte order did not consider Clauses 7 and 18 and cannot defeat the agreed procedure (Para 15).

• Respondents (Buyers):

The petitioner neither conveyed nor delivered the plot, admitted its inability by e-mails of 2017–2018 and promised full refund; the 40% deduction is an afterthought (Para 17).

The dispute has been adjudicated by the consumer forum; the petitioner's remedy is a statutory appeal (Cicily Kallarackal); the consumer remedy is additional and the choice of forum is the consumer's (T.K.A. Padmanabhan; Emaar MGF; Citicorp; M. Hemalatha Devi) (Para 18).

A private agreement cannot override a statutory mechanism once invoked (Harcharan Dass Gupta); the petitioner sat on the application for five years and revived it only to stall execution (Paras 18–19).

Court's Observations & Analysis :

• Re: Issue (i): Scope of the referral court

Section 11(6A) confines the referral court to the existence of an arbitration agreement; Vidya Drolia's 'deadwood' power did not survive Interplay and Krish Spinning, which leave arbitrability, limitation of claims and accord and satisfaction to the tribunal (Paras 23–26).

Execution of the agreement and Clause 18 are undisputed – the respondents annexed the agreement themselves; the application was filed within three years of invocation and refusal (Paras 21, 45).

Held: The arbitration agreement exists, was validly invoked, and the application is within time. (Paras 45, 50)

• Re: Issue (ii): Consumer election and its reach

Emaar MGF (para 63) protects 'a person entitled to seek an additional special remedy' who opts for it; Hemalatha Devi holds that consumer disputes are non-arbitrable unless the consumer chooses arbitration and that the reasoning applies to Section 11; Citicorp restates that arbitration in 'a consumer dispute' is at the consumer's exclusive choice (Paras 28–30, 34).

These decisions rest on the consumer's grievance; the developer cannot file a consumer complaint or a counter-claim before the consumer forum, so its own claims are not consumer disputes (Paras 35–36).

A contrary view would bind only the developer and convert the arbitration agreement into a unilateral one; the consumer's protection is a shield for the consumer's claims, not an immunity against the other party's independent claims (Para 37).

Hemalatha Devi concerned a dispute that was itself the consumer's grievance viewed from the builder's side; it is binding for that proposition but not authority that independent developer claims cease to be arbitrable (Para 38).

Held: Disputes fall into two classes – consumer disputes (not referable at the developer's instance) and the developer's non-consumer claims (referable); drawing the line is for the tribunal. (Paras 39–41)

• Re: Issue (iii): Other objections

Settlement by e-mails is a plea of accord and satisfaction for the tribunal (Krish Spinning) (Para 47).

The consumer order and its res judicata or issue-estoppel effect are matters for the tribunal; nothing in the reference affects the order or substitutes for a statutory appeal (T.K.A. Padmanabhan; Cicily Kallarackal) (Paras 32–33, 42, 47).

Harcharan Dass Gupta turned on the overriding non obstante clauses of the MSMED Act; the consumer legislation is expressly additional (s.3 of the 1986 Act; s.100 of the 2019 Act) (Para 43).

Pending criminal proceedings do not oust arbitration of civil disputes; the arbitration clause itself is not alleged to be procured by fraud (Para 48).

Held: None of the objections justifies refusing appointment. (Para 50)

• Re: Issue (iv): Unilateral appointment

A clause allowing one party alone to appoint a sole arbitrator cannot be given effect (Perkins Eastman; CORE), but the arbitration agreement survives.

Held: The Court appoints the arbitrator under Section 11(6). (Para 49)

Notable Observations:

"The consumer's statutory protection is a shield for the consumer's claims. It does not immunise the consumer against independent claims of the other party which no consumer forum can adjudicate." (Para 37)

"Neither the consumer legislation nor the decisions noticed above contemplate that an arbitration agreement should be converted into a unilateral one." (Para 37)

Decision & Directions :

Application allowed; Mr. Sankar Prashad Dalapati, Advocate, appointed Sole Arbitrator for disputes (other than consumer disputes) arising out of the Agreement for Sale dated 23 July 2014. (Paras 51, 56)

Disclosure under Section 12(1) and subject to Section 12(5); fee as per the Fourth Schedule or as agreed. (Paras 52–53)

All questions on merits, including limitation, quantum and liability, left open. (Para 54)

Nothing in the order suspends, dilutes or affects the consumer forum's final order dated 22 April 2025, the petitioner's obligations under it or its execution, or the criminal proceedings. No costs. (Paras 55–56)

Legal position summarised by the Court (Para 44):

1. Under Section 11(6A), the referral court confines itself to the prima facie existence of the arbitration agreement and whether the application is within time.

2. Consumer disputes are not arbitrable at the developer's instance where the consumer has elected the statutory remedy; this protection does not extend to the developer's claims that the consumer forum cannot adjudicate.

3. Whether a dispute is a consumer dispute or an arbitrable developer claim – and objections of settlement, limitation, res judicata or prior statutory adjudication – are for the tribunal under Section 16.

4. Nothing done in arbitration can affect a consumer forum's order, which may be challenged or enforced only under the consumer legislation; any award remains subject to Section 34.

Legal Provisions Discussed & Precedents Cited :

Arbitration and Conciliation Act, 1996 – Sections 8, 11(6), 11(6A), 12(1), 12(5), 16, 34; Fourth Schedule.

Consumer Protection Act, 1986 – Section 3 and proviso to Section 12(4); Consumer Protection Act, 2019 – Section 100 (remedy in addition to other remedies).

Micro, Small and Medium Enterprises Development Act, 2006 – Sections 18(1), 18(4), 24 (distinguished).

Agreement for Sale dated 23 July 2014 – Clause 7 (refund with 40% deduction) and Clause 18 (arbitration, unilateral appointment).

Doctrines applied: kompetenz-kompetenz; minimal judicial interference at the referral stage; consumer's right of election of forum.

In re: Interplay between Arbitration Agreements under the A&C Act and the Indian Stamp Act, (2024) 6 SCC 1 – Followed.

Case Details :

• Case / Party Name: Leisure Country Club and Resorts Pvt. Ltd. v. Asim Kumar Ray & Anr.
• Case Number(s): AP 406 of 2021 (CNR WBCHCO0025402021)
• Coram / Judges: Gaurang Kanth, J. – Single Judge
• Counsel Appearances: For the Petitioner: Mr. Mrinal Kanti Mukherjee and Mr. Madhusudan Mukhopadhyay, Advocates. For the Respondents: Mr. Indradeep Pal, Mr. Sougata Pal and Sk. Mustafi Rahaman, Advocates.

Disclaimer: This summary is an editorial aid and does not form part of the judgment. Refer to the original judgment before citing.