The Calcutta High Court has appointed an arbitrator to resolve a dispute arising out of a 2019 development agreement between property owner Lipika Ghosh and M/s Great Island Development Company. The Court held that the withdrawal of an earlier civil suit without liberty to file a fresh one does not, by itself, prevent a party from invoking a valid arbitration clause contained in the agreement.
Background of the Case
The dispute concerns a registered development agreement executed on June 27, 2019, for redevelopment of a property in Howrah. Under the agreement, the developer was required to obtain approval for a G+4 residential building and pay the petitioner ₹33.34 lakh as the owner's monetary allocation after obtaining the sanctioned plan.
According to the petitioner, the developer secured approval only for a G+2 structure, completed construction, sold the flats, but allegedly failed to pay the remaining ₹29.84 lakh after making partial payments. The petitioner claimed repeated requests for payment yielded no result and eventually invoked the arbitration clause contained in the agreement.
The respondents, however, argued that payment of the remaining amount was contingent upon obtaining sanction for the proposed G+4 building, which had not yet been granted. They also contended that the petitioner had earlier filed a civil suit concerning the same agreement and later withdrew it without seeking liberty to institute fresh proceedings, making the present arbitration petition not maintainable.
Court's Observations
Justice Gaurang Kanth examined whether the earlier withdrawal of the civil suit barred the present application under Section 11(6) of the Arbitration and Conciliation Act, 1996.
Rejecting the respondents' preliminary objection, the Court observed that proceedings for appointment of an arbitrator are fundamentally different from adjudication of claims.
The bench observed,
"The present proceeding is not one for adjudication of claims but merely for constitution of the arbitral forum."
The Court explained that although withdrawal of the earlier suit may provide a defence before the arbitral tribunal regarding the maintainability of individual claims, it does not invalidate the arbitration agreement itself. Questions relating to limitation, maintainability or the effect of withdrawal are matters for the arbitral tribunal to decide.
The Court also distinguished the Supreme Court's decision in HPCL Bio-Fuels Ltd. v. Shahaji Bhanudas Bhad. It held that the ruling dealt with withdrawal of an earlier Section 11 arbitration application, whereas the present matter involved withdrawal of a civil suit seeking different reliefs. Therefore, the precedent did not govern the facts of this case.
On the developer's plea that the agreement had become frustrated because approval for a G+4 building was not obtained, the Court declined to examine the merits.
The bench observed,
"Whether the respondent was justified in not obtaining sanction for a G+4 structure... are all disputes arising out of and in connection with the development agreement."
It held that these issues must be decided by the arbitral tribunal.
Court's Decision
Finding that the arbitration clause was undisputed and that the respondents had failed to appoint an arbitrator despite receiving the petitioner's notice invoking arbitration, the High Court held that the statutory requirements under Section 11(6) stood satisfied.
The Court appointed Mr. Rohit Das, Advocate, as the respondents' nominee arbitrator. It directed him and the petitioner's nominee arbitrator, Mr. Jyoti Prakash Chatterjee, Advocate, to meet at the earliest and appoint a Presiding Arbitrator so that a three-member arbitral tribunal could be constituted in accordance with the development agreement.
The Court clarified that all issues relating to arbitrability, limitation, admissibility of claims and other preliminary objections remain open for consideration before the arbitral tribunal. The parties were directed to appear before the arbitrators within four weeks, and the petition was accordingly allowed.
Case Details:
Case Title: Lipika Ghosh v. M/s Great Island Development Company and Ors.
Case Number: AP 79 of 2025
Judge: Justice Gaurang Kanth
Decision Date: 10 July 2026
