Two remedies, one dispute: why the Calcutta High Court shut both the suit and the arbitration.

Two Remedies, One Dispute: Why the Calcutta High Court Shut Both the Suit and the Arbitration

When Smt. Rita Banerjee and her co-applicant booked a luxury apartment in Kolkata in 2016, they paid about Rs. 94 lakhs toward a total price of Rs. 2.73 crores. The developer, S.E. Builders & Realtors Limited, kept demanding installments at short intervals. The buyers found the pace impossible. They asked for cancellation and a full refund. The developer agreed to refund only Rs. 31 lakhs, deducting about Rs. 63 lakhs as cancellation charges, GST, and service tax. The Banerjees considered this deduction illegal. They first complained to the West Bengal Housing Regulation Authority in October 2020. They got no hearing date. The developer sent a cheque for Rs. 31 lakhs, which the buyers accepted without prejudice. Still no response from the authority. So they filed a civil suit in the Calcutta High Court for recovery of the deducted Rs. 63 lakhs. The developer then applied to refer the dispute to arbitration based on a clause in the contract. The Court dismissed both the suit and the arbitration application. The reason: once you elect a remedy under RERA, you cannot switch to a civil suit or arbitration for the same dispute.

The apartment that triggered a legal deadlock

The dispute began with a provisional allotment letter dated 29 June 2016 for a residential apartment in a project called "S.E. The Residency" in Kolkata. The buyers signed the General Terms and Conditions, which included Clause 26 — an arbitration clause. They paid about Rs. 94 lakhs in installments. Then the developer demanded more money at short intervals. The buyers found this financially unworkable. They wrote to the developer on 28 August 2019, requesting cancellation and a full refund. The developer responded on 11 September 2019, agreeing to cancel but offering only Rs. 31 lakhs after deducting about Rs. 63 lakhs as cancellation charges, GST, and service tax. The buyers considered this deduction illegal. They accepted the cheque of Rs. 31 lakhs "without prejudice" on 11 October 2019.

On 7 October 2020, the buyers filed a complaint under Section 31 of the Real Estate (Regulation and Development) Act, 2016 before the West Bengal Housing Industrial Regulation Authority. The complaint sought a direction to the developer to refund the deducted amount. The authority did not fix any hearing date. The complaint remained pending. Frustrated, the buyers filed a civil suit (CS No. 57 of 2022) in the Calcutta High Court, Original Side, on 24 January 2022, seeking recovery of about Rs. 63 lakhs. The developer then filed an application (GA No. 3 of 2022) under Section 8 of the Arbitration and Conciliation Act, 1996, asking the Court to refer the dispute to arbitration.

What each side argued

The buyers argued that the arbitration clause was illegal because the prescribed form of agreement under Rule 9 read with Annexure A of the West Bengal Real Estate (Regulation and Development) Rules, 2021 does not provide for arbitration. They also argued that RERA disputes involving penal provisions under Sections 59-70 of the RERA Act are non-arbitrable. They cited Army Welfare Housing Organization v. Col. R. Ganesan (2021 SCC OnLine Mad 16554) to argue that arbitrators cannot impose punishment and imprisonment under RERA.

The developer argued that the arbitration clause was valid and enforceable. They cited Priyanka Taksh Sood v. Sunworld Residency Pvt. Ltd. (2022 SCC OnLine Del 4717) to argue that where no RERA proceeding has been initiated, Section 8 arbitration is not barred. They also cited Pallab Ghosh v. Simplex Infrastructures Limited (2024 SCC OnLine Gau 751) to argue that parties can choose arbitration instead of RERA. They further argued that the buyers had already accepted the refund cheque of Rs. 31 lakhs, and that the suit was an abuse of process.

The real question the Court had to answer

Justice Krishna Rao framed the core issue: whether the civil suit was maintainable given the pending RERA complaint, and whether the arbitration application could succeed. The Court examined the interplay between the RERA Act, the arbitration clause, and Section 79 of RERA which bars civil court jurisdiction.

The Court first addressed the validity of the arbitration clause. It held that the arbitration clause was not per se illegal or void. Clause 33 of Annexure A of the WB RERA Rules permits additional terms not in derogation of the Act. So an arbitration clause can exist in a real estate agreement. The Court noted that Section 88 of RERA says the Act is in addition to, and not in derogation of, other laws. Section 89 gives RERA overriding effect. But the arbitration clause itself was not invalid.

Then came the decisive point. The Court relied on Imperia Structures Ltd. v. Anil Patni (2020) 10 SCC 783, where the Supreme Court held that Section 79 of RERA bars civil court jurisdiction for allottees. The Court also relied on Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd. (2023) 6 SCC 401, which held that when a special Act creates a dispute resolution framework with overriding effect, an arbitration agreement cannot derogate from it.

The Court applied the doctrine of election of remedy. The buyers had already filed a complaint under Section 31 of RERA before the West Bengal Housing Regulatory Authority. That complaint was still pending. Having elected that remedy, they could not file a civil suit for the same dispute. And because the suit itself was not maintainable, the arbitration application under Section 8 also failed — you cannot refer a dispute to arbitration when the suit itself is barred.

THE PLAY: If you are an allottee who has already filed a complaint under Section 31 of RERA, do not file a civil suit for the same dispute — the Court will dismiss both the suit and any arbitration application, leaving you only with your pending RERA complaint.

The doctrine that mattered: election of remedy

The ratio decidendi is straightforward: where an allottee has already elected a remedy by filing a complaint before the RERA authority under Section 31, the allottee cannot subsequently file a civil suit for recovery of money arising from the same dispute, and the parties cannot be referred to arbitration. This is not because the arbitration clause is invalid. It is because the RERA Act, through Section 79, bars civil court jurisdiction for matters that the Authority, Adjudicating Officer, or Appellate Tribunal is empowered to determine. And once you choose the RERA forum, you cannot switch to another forum for the same dispute.

The Court also clarified an important point: the buyers' argument that arbitrators cannot impose punishment and penalty under Chapter VIII of RERA did not apply here, because the buyers only sought monetary recovery, not punishment or penalty. The nature of relief sought matters when evaluating arbitrability of RERA disputes.

Why this matters in practice

For advocates advising real estate buyers: if your client has already filed a RERA complaint, do not file a civil suit for the same dispute. The Court will dismiss both the suit and any arbitration application. Your client will be left only with the pending RERA complaint. The same applies if your client is a developer facing a RERA complaint — you cannot force the buyer into arbitration if they have already chosen the RERA forum.

For CFOs and founders of real estate companies: this judgment confirms that RERA is the primary forum for disputes between allottees and promoters. If an allottee files a RERA complaint, you cannot compel arbitration. But if the allottee has not filed any RERA complaint, the arbitration clause in your agreement remains enforceable. The key is timing and election.

For startup founders in proptech or legal tech: this case highlights the importance of understanding the hierarchy of remedies. The RERA Act creates a comprehensive framework. Arbitration clauses in real estate agreements are not dead, but they are subordinate to the RERA regime once a party elects that remedy.

The bottom line

If you have already filed a RERA complaint, you cannot file a civil suit or compel arbitration for the same dispute — your remedy is the RERA authority, and only the RERA authority.