Arbitration Can't Affect Consumer Forum Orders, Party Can Pursue Independent Claims: Delhi High Court

The Calcutta High Court has ruled that arbitration proceedings cannot affect orders passed by consumer forums, clarifying that developers can pursue independent contractual claims through arbitration even after consumers have chosen the statutory remedy.

"Nothing done in arbitration can affect an order of a consumer forum, which may be challenged or enforced only under the consumer legislation. Any award remains subject to Section 34 of the Act," Justice Gaurang Kanth observed.

The court clarified that while a developer cannot force consumers to arbitrate their grievances against their choice of forum, it can pursue independent claims that the consumer forum has no jurisdiction to decide.

The court delivered the ruling while appointing advocate Sankar Prashad Dalapati as the sole arbitrator to adjudicate disputes other than consumer disputes between Leisure Country Club and Resorts Private Limited and Asim Kumar Ray.

The dispute arose from an agreement for sale dated July 23, 2014, for a plot in Mega City Plaza's Project Panchojannya, initially priced at ₹42.50 lakh. The original plot was later replaced with another, and the consideration was revised to ₹43.31 lakh, which the purchasers paid in instalments by November 2017.

Disputes arose over the plot's location, registration and refund. The developer invoked the arbitration clause on October 5, 2020, but the purchasers declined the proposed appointment on November 5, 2020.

Meanwhile, the purchasers approached the District Consumer Disputes Redressal Commission in North 24 Parganas, Barasat. On April 22, 2025, the commission passed an ex parte order directing the developer to refund ₹18.41 lakh with 9% interest, pay ₹50,000 as compensation and ₹5,000 towards costs. The commission found deficiency in service and unfair trade practice. The developer's review application was rejected on September 15, 2025.

The court distinguished between the purchasers' consumer grievances and the developer's independent contractual claims. It held that the developer could not refer the purchasers' consumer disputes to arbitration against their wishes. However, it could pursue its own claims through arbitration if they fell outside the consumer forum's jurisdiction.

Explaining why the consumers' choice of forum could not bar every dispute under the agreement, the court observed:

"A contrary view would lead to an anomalous result. If a consumer'selection of the statutory forum were to render the arbitration agreementunenforceable in respect of every dispute under the contract, theagreement would bind only the developer, and the developer alonewould be deprived of the forum to which both parties had agreed for thedetermination of its own claims. Neither the consumer legislation northe decisions noticed above contemplate that an arbitration agreementshould be converted into a unilateral one. The consumer's statutoryprotection is a shield for the consumer's claims. It does not immunisethe consumer against independent claims of the other party which noconsumer forum can adjudicate," the court observed.

The arbitral tribunal must determine which claims qualify as consumer disputes and which can be arbitrated. It must also decide objections that claims have been settled, are time-barred or are barred by res judicata or the consumer forum's decision.

The court made clear that arbitration cannot be used to reopen the consumer forum's order or replace the statutory appeal process. Nothing in the order can suspend, dilute or affect the commission's decision, the developer's obligations under it or the pending execution proceedings.

The court also held that the developer could not unilaterally appoint the sole arbitrator under the agreement. Although that appointment mechanism was invalid, the arbitration agreement itself remained valid.

Finding that the arbitration agreement had been validly invoked, that the parties had failed to agree on an arbitrator, and that the application was filed within time, the court allowed the application under Section 11(6) of the Arbitration and Conciliation Act, 1996.

It appointed advocate Sankar Prashad Dalapati as the sole arbitrator to decide disputes other than consumer disputes arising from the agreement, leaving the merits of the claims and counterclaims to the tribunal.

For Petitioner: Advocates Mrinal Kanti Mukherjee, Madhusudan Mukhopadhyay, 

For Respondents: Indradeep Pal, Sougata Pal, Mustafi Rahaman