Calcutta High Court Appoints Arbitrator to Resolve Development Agreement Dispute — Lipika Ghosh vs Great Island Development Company
Background and Overview
The Calcutta High Court recently adjudicated a petition filed under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking constitution of an Arbitral Tribunal to resolve disputes stemming from a registered development agreement executed on 27.06.2019. The matter — Lipika Ghosh Vs Great Island Development Company And Ors. — touched upon several intertwined issues: an alleged shortfall in payment of the owner's monetary allocation, a developer's failure to secure the contemplated building plan sanction, an earlier civil suit that had been unconditionally withdrawn, and competing arguments regarding whether the arbitration clause remained alive and enforceable.
The Court allowed the petition, appointed a nominee arbitrator on behalf of the non-participating respondents, and directed the constitution of a three-member Arbitral Tribunal — leaving all substantive and preliminary questions open for determination before that forum.
Facts of the Case
The Property and the Parties
The petitioner, Lipika Ghosh, held co-ownership rights over a parcel of bastu land measuring approximately 5 cottahs 8 chittaks, together with structures erected thereon, situated within Ward No. 45 of the Howrah Municipal Corporation, under the jurisdiction of P.S. Jagacha, District Howrah. The property had originally vested in Siddheswar Dutta and Sankari Prasad Dutta pursuant to a registered deed of sale dated 05.08.1967. Following the demise of the original owners and their heirs, ownership devolved jointly upon the petitioner and the proforma respondents, whose names were duly mutated in the relevant municipal and settlement records.
The Development Agreement
Respondent No. 1 — Great Island Development Company — approached the co-owners with a proposal for redevelopment of the property through construction of a multi-storied residential building. Consequently, a registered development agreement dated 27.06.2019 was executed between the parties. A registered power of attorney was simultaneously granted in favour of Respondent No. 1 to facilitate development of the property and disposition of the developer's allocated units.
Under the terms of the development agreement, the developer was contractually obligated to:
- Obtain municipal sanction for a G+4 storied building
- Upon obtaining such sanction, pay a sum of ₹33,34,000/- as the petitioner's owner's allocation
- Complete construction within two years from the date of building plan approval
At the time of execution, Respondent No. 1 paid ₹2,00,000/- to the petitioner. Thereafter, two further payments of ₹50,000/- and ₹1,00,000/- were made vide separate cheques dated 27.08.2021 and 28.08.2021 respectively — aggregating to a total disbursement of ₹3,50,000/-.
Emergence of Disputes
Disputes surfaced when, contrary to the agreed obligation, Respondent No. 1 procured sanction only for a G+2 storied structure, proceeded with construction thereunder, and handed over possession of the completed flats to purchasers. The petitioner alleged that notwithstanding completion of the project and sale of all units, the balance owner's allocation of ₹29,84,000/- remained entirely unpaid.
The petitioner further alleged that the developer was fully aware from the outset that sanction for a G+4 structure could not be obtained, yet entered into the agreement to the detriment of the property owners. On 31.05.2023, the petitioner issued a legal notice demanding payment. Respondent No. 1 replied on 23.06.2023, citing its inability to secure sanction beyond a G+2 structure and attributing delays to administrative disruptions caused by the Covid-19 pandemic.