Case at a Glance
Plot buyers who had paid a developer about Rs. 43.31 lakh won a consumer complaint in 2025 directing a refund of Rs. 18.41 lakh with 9% interest, while the developer’s 2021 petition to appoint an arbitrator, claiming it could deduct 40% as service charges, was pending in the Calcutta High Court. The Court held that the consumer alone can choose between the consumer forum and arbitration for consumer disputes, but the developer’s own non-consumer claims remain arbitrable. Finding the clause letting the developer alone pick the arbitrator invalid, the Court appointed an independent sole arbitrator for disputes other than consumer disputes, without touching the consumer order, its execution or the criminal case.
Under an agreement for sale dated 23 July 2014, the buyers agreed to purchase a plot from the developer for Rs. 42.5 lakh; the plot was later substituted and the price revised to Rs. 43,31,250, paid in instalments up to November 2017. The agreement allowed a 40% service-charge deduction on cancellation and contained an arbitration clause under which the developer alone would appoint the arbitrator. In November 2018 the buyers declined to proceed, and the developer refunded Rs. 19,90,250 up to June 2020. The buyers also lodged a criminal complaint in 2020, which led to a case under cheating and forgery provisions that is pending trial.
On 5 October 2020 the developer invoked arbitration, nominated its own arbitrator and claimed that only Rs. 1,08,500 more was due after the 40% deduction; the buyers refused consent, and the developer filed this Section 11 application in 2021. In 2022 the buyers filed a consumer complaint, and on 22 April 2025 the District Consumer Commission, North 24 Parganas, found deficiency in service and unfair trade practice and ordered a refund of Rs. 18,41,000 with 9% interest, Rs. 50,000 compensation and Rs. 5,000 costs. Execution of that order is pending.
The Key Question Before the Court
Can the High Court appoint an arbitrator at a developer’s request when the buyers have already obtained relief from a consumer forum, and can a clause letting one party alone appoint the arbitrator be enforced?
The Consumer’s Shield, the Developer’s Claims
Under Section 11(6A), the referral court must “confine itself to the examination of the existence of an arbitration agreement”, following SBI General Insurance Co. Ltd. v. Krish Spinning, (2024) 07 SC CK 0049 and the seven-judge decision on the interplay between arbitration agreements and the Stamp Act. Relying on Emaar MGF Land Ltd. v. Aftab Singh, (2018) 12 SC CK 0038, M. Hemalatha Devi v. B. Udayasri and Citicorp Finance (India) Ltd. v. Snehasis Nanda, (2025) 03 SC CK 0223, the Court held that consumer disputes cannot be sent to arbitration at the developer’s instance: “The right of election rests with the consumer.” But the developer’s own claims stand on a different footing: “Such claims are not consumer disputes.” As the Court put it, “The consumer’s statutory protection is a shield for the consumer’s claims”, and “The former cannot be referred to arbitration at the Petitioner’s instance. The latter can.” Which dispute falls in which class is for the arbitral tribunal under Section 16.
The application was within time, since the invocation in October 2020 and refusal in November 2020 were followed by filing in 2021. Pendency of the criminal case did not by itself oust arbitration of civil disputes. Relying on Perkins Eastman Architects DPC v. HSCC (India) Ltd., (2019) 11 SC CK 0071 and Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV), (2024) 11 SC CK 1273, the Court held that the clause giving the developer sole power to appoint was invalid, but the arbitration agreement itself survived, so the Court made the appointment. It distinguished Harcharan Dass Gupta v. Union of India, (2025) 05 SC CK 0203, which turned on the non-obstante clauses of the MSMED Act, whereas the Consumer Protection Act is an additional remedy.
What the Court Actually Held
- At the Section 11 stage the Court only examines whether an arbitration agreement exists; arbitrability, limitation and accord and satisfaction are for the tribunal.
- Consumer disputes cannot be referred to arbitration at the developer’s instance; the right of election belongs to the consumer, but the developer’s non-consumer claims remain arbitrable.
- A clause allowing only one party to appoint the arbitrator is invalid, but the arbitration agreement survives and the Court can appoint an independent arbitrator.
- A sole arbitrator was appointed for disputes other than consumer disputes under the 2014 agreement; nothing in the order affects the consumer commission’s order of 22 April 2025, its execution or the criminal case.
Why This Judgment Matters
- Home and plot buyers keep the full benefit of consumer forum orders even when the builder’s agreement has an arbitration clause.
- It explains how builder contracts split into consumer and non-consumer disputes for arbitration purposes.
- It applies the bar on unilateral appointment of arbitrators to real estate agreements.
What Should Advocates Take Away From the Judgment?
For Buyers
- You can choose the consumer forum even if the builder’s agreement has an arbitration clause.
- A consumer order and its execution are not suspended merely because the builder seeks arbitration.
For Counsel
- Separate the developer’s own claims from the consumer’s claims when framing a Section 11 application.
- Do not rely on a clause giving one side sole power to appoint the arbitrator; ask the Court to appoint.
Key Takeaways
- The consumer elects the forum for consumer disputes.
- Developer’s non-consumer claims can go to arbitration.
- Unilateral arbitrator appointment clauses are invalid.
- Consumer order and execution remain unaffected.
Frequently Asked Questions
Can a builder force a buyer into arbitration instead of the consumer forum?
No. Following Emaar MGF Land Ltd. v. Aftab Singh, the Calcutta High Court said the right of election rests with the consumer for consumer disputes.
Then why was an arbitrator appointed?
For the developer’s own claims, which are not consumer disputes, such as its claim of a 40% service-charge deduction. Consumer disputes were excluded.
Does the arbitration stop the consumer refund order?
No. The Court said nothing in its order suspends, dilutes or affects the consumer commission’s final order or its execution.
Conclusion
The ruling shields consumers’ statutory remedies while giving developers a forum for their own contractual claims, and insists that the arbitrator be independent.
Practical takeaway: Buyers who have won in the consumer forum can pursue execution regardless of the builder’s arbitration; builders must confine arbitration to their own non-consumer claims.
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