Calcutta High Court
Santosh Gupta And Ors vs Subrata Sanyal And Ors on 4 August, 2025
Author: Shampa Sarkar
Bench: Shampa Sarkar
OC 51
ORDER SHEET
AP-COM/933/2024
IN THE HIGH COURT AT CALCUTTA
COMMERCIAL DIVISION
ORIGINAL SIDE
SANTOSH GUPTA AND ORS
VS
SUBRATA SANYAL AND ORS
BEFORE:
The Hon'ble JUSTICE SHAMPA SARKAR
Date: 4th August, 2025.
Appearance:
Mr. Abhilash Chatterjee, Adv.
Mr. Akash Adak, Adv.
. . .for the petitioners.
Mr. Bratin Kr. Dey, Adv.
. . .for the respondent no.1.
Mr. Animesh Das, Adv.
Mr. Dipankar Ghosh, Adv.
. . .for the respondent nos. 2 to 5.
The Court:
1. This is an application for appointment of an Arbitrator in terms of
Clause 28 of the development agreement dated February 26, 2019,
which was entered into between the predecessor of the petitioners and
the predecessor in interest of the respondent no.1. The respondent no.2
to 5 were also signatories to the said agreement being co-sharers of the
plot in question in respect of which the development agreement had
been entered into.
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2. The development agreement is a registered document. Clause 28 of the
said arbitration agreement is quoted below:
“That during the pendency of the legal works or construction
work in connection to Development Agreement and General
Power of Attorney created between the Owners and the
Developer then the matter of disputes to be referred to two
Arbitrators for speedy solution and each of the Arbitrator will
be appointed by the Owners and the Developer respectively.
That if the Parties are not satisfied by the Arbitration
proceedings and Award then the Owners and the Developer
have right to challenge the same before the Complement
Authority. The said Arbitration proceeding to be governed by
the Arbitration and Reconciliation Act 1996.”
3. The schedule of the property has been described in the agreement. The
petitioners were to develop the property and construct a residential
building. Disputes cropped up between the parties when the petitioners
came to know that as the sole heir of Tanmoy Sanyal and the donee of
Tanmoy Sanyal’s share in the land in question, was trying to negotiate
with Mr. Jayanta Chowdhuri and Labanya Chowdhuri and induct the
Chowdhuris as developers. At such juncture, the petitioners invoked
arbitration by a notice dated March 20, 2023 which was duly received
by the respondents. The respondent nos. 2 to 5 are also owners of the
land in question. It also appears that the petitioners moved the learned
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Commercial Court at Rajarhat for necessary interim protection and the
said proceedings had been disposed of on September 4, 2024.
4. Mr. Dey submits that the application is not maintainable before the
Court as the concerned subject Clause is not a binding arbitration
agreement. The said clause is not clear. It is submitted that third party
interest had been created in favour of Jayanta Chowdhuri and Labanya
Chowdhuri, who had been inducted as developers and as such, the
present development agreement had lost its force. Further submission
is that the Chowdhuris should be added as parties to this proceeding.
5. Having considered the arbitration clause, this Court finds that the
parties agreed that “matters of dispute” would be referred to two
arbitrators and each of the parties will appoint an arbitrator. In my
view, the respondent no.1 cannot take advantage of inartistic drafting of
the arbitration clause and the endeavour of the Court should be to give
complete meaning to the said clause. The law as laid down in Enercon
(India) Limited and other Vs. Enercon GMBH and Another reported
in (2014) 5 SCC 1 is that, if a detailed semantic and syntactical
analysis of words in a commercial contract led to a conclusion that
flouted business common sense, the agreement must be made
workable, so as to yield to business common sense.
6. Relevant paragraphs of Enercon (India)(Supra) are quoted below :-
“52. Dr Singhvi then submitted that leaving aside the question
of unworkability of the arbitration clause for the moment, the
intention of the parties in the instant case may be determined
from the following clauses of IPLA:
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“17. Governing law
17.1 This agreement and any dispute of claims arising out of
or in connection with its subject-matter are governed by and
construed in accordance with the law of India.
18. Disputes and arbitration
18.1 All disputes, controversies or differences which may
arise between the parties in respect of this agreement
including without limitation to the validity, interpretation,
construction performance and enforcement or alleged breach
of this agreement, the parties shall, in the first instance,
attempt to resolve such dispute, controversy or difference
through mutual consultation. If the dispute, controversy or
difference is not resolved through mutual consultation within
30 days after commencement of discussions or such longer
period as the parties may agree in writing, any party may
refer dispute(s), controversy(ies) or difference(s) for resolution
to an Arbitral Tribunal to consist of three (3) arbitrators, of
whom one will be appointed by each of the licensor and the
licensee and the arbitrator appointed by the licensor shall
also act as the presiding arbitrator.
18.2 ***
18.3 The proceedings in such arbitration shall be conducted
in English. The venue of the arbitration proceedings shall be
in London. The arbitrators may (but shall not be obliged to)
award costs and reasonable expenses (including reasonable
fees of counsel) to the party(ies) that substantially prevail on
merit. The provisions of the Indian Arbitration and
Conciliation Act, 1996 shall apply.
The reference of any matter, dispute or claim or arbitration
pursuant to this Section 18 or the continuance of any
arbitration proceedings consequent thereto or both will in no
way operate as a waiver of the obligations of the parties to
perform their respective obligations under this agreement.”
7. Interpreting the arbitration clause in the said agreement, the Hon’ble
Apex Court held that it was a well-recognized principle of arbitration
jurisprudence in almost all jurisdictions, especially, those following the
Uncitral Model Law, that Courts should play a supportive role in
encouraging arbitration, by following the practice of least intervention
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by Courts. Upon considering the principles behind the enactment of the
law, the Hon’ble Apex Court found that an arbitration clause could not
be frustrated on the ground that it was un-workable and any obvious
omission could be set right by Court. The clause which was being
considered by the Hon’ble Apex Court is quoted below :-
“18 Disputes and arbitration
18.1 All disputes, controversies or differences which may arise
between the parties in respect of this agreement including without
limitation to the validity, interpretation, construction performance
and enforcement or alleged breach of this agreement, the parties
shall, in the first instance, attempt to resolve such dispute,
controversy or difference through mutual consultation. If the
dispute, controversy or difference is not resolved through mutual
consultation within 30 days after commencement of discussions or
such longer period as the parties may agree in writing, any party
may refer dispute(s) for resolution to an Arbitral Tribunal to consist
of three 93) arbitrators, of whom one will be appointed by each of
the licensor and the licensee and the arbitrator appointed by the
licensor shall also act as the presiding arbitrator.
18.2 * * *
18.3 The proceedings in such arbitration shall be conducted in
English. The venue of the arbitration proceedings shall be in
London. The arbitrators may (but shall not be obliged to) award
costs and reasonable expenses (including reasonable fees of
counsel) to the party(ies) that substantially prevail on merit. The
provisions of the Indian Arbitration and Conciliation Act, 1996
shall apply.
The reference of any matter, dispute or claim or arbitration
pursuant to this Section 18 or the continuance of any arbitration
proceedings consequent thereto or both will in no way operate as a
waiver of the obligations of the parties to perform their respective
obligations under this agreement.”
8. The issue before the Hon’ble Apex Court was unworkability of the
arbitration clause on the ground that there was a confusion with regard
to venue and the governing law.
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9. The endeavour of the referral Court should be to give a logical meaning
to the clause, so that business commonsense prevails. This is a
development agreement. The parties entered into an agreement to
develop the property. It was a business transaction. It is alleged that
during the pendency of the development agreement, when steps were
taken by petitioners, the respondent no.1 was gifted the property by the
one of the signatories, without informing the petitioners. In turn, the
respondent no.1 negotiated with other parties and inducted them as
developers by executing another agreement. Thus, the fact that there is
a live dispute between the parties is evident and the arbitration clause
indicates that the parties had decided to refer their disputes to two
arbitrators, one to be chosen by each party. If the parties were
aggrieved by the decision of the arbitrator or the proceeding before the
arbitrator, the parties also reserved the right to approach the competent
authority. It has also been stated that the arbitration proceeding will be
conducted as per the Arbitration and Conciliation Act, 1996. Thus, the
intention of the parties to refer their disputes to arbitration is clear.
10. Under such circumstances, there is no reason for this court to hold
that this is not a binding arbitration agreement. The referral court is to
examine whether there is any existence of an arbitration agreement.
The issues raised by Mr. Dey, that, the development agreement has
become non-functional or inoperative and stood terminated by the
subsequent development agreement, is an issue of novation which has
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to be decided by the learned arbitrator. The predecessors of the
petitioners and the respondent No. 1 were non-signatories but the heirs
can claim under the said agreement and the agreement shall be binding
on the heirs. Death of a party does not discharge the arbitration
agreement. Secondly, the issue of jurisdiction of the learned arbitrator
and arbitrability of the disputes should be raised before the learned
arbitrator. Thirdly, the issue of creation of third party rights will be
decided by the learned arbitrator. Whether the subsequent developers
are necessary parties or proper parties to the proceeding before the
learned arbitrator, must be decided by the learned arbitrator. Fourthly,
even if the petitioners need to challenge the subsequent development
agreement, they can do so in the statement of claim in addition to all
other reliefs emanating from the development agreement.
11. Learned advocate for the respondent nos.2 to 5 also has objections
with regard to the petitioners claim. However, these are factual aspects
which have to be raised before the learned arbitrator. All issues are left
open, to be agitated by the parties before the learned arbitrator.
12. Let this matter appear on 18th August, 2025, under the heading ‘To
Be Mentioned’ for appointment of a learned arbitrator.
13. This Court is of the view that the application is not maintainable in
the commercial division. The agreement between the parties is with
regard to development of a residential building and the dispute does not
fall within the definition of a commercial dispute.
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14. The department is directed to make necessary conversion. The
learned advocate for the petitioners will take necessary steps.
(SHAMPA SARKAR, J.)
SP/b.pal