1. Parties entered into an agreement regarding land development and sale, leading to a dispute over contract nature, contractual breaches, and specifically requested performance and alternate damages under the Arbitration Act. (Para 2 , 8 , 9 , 10 , 11 , 12 )
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2026 Supreme(SC) 1308
SUPREME COURT OF INDIA
SANJAY KUMAR, SANJEEV SACHDEVA, JJ.
Shreeram Builders – Appellant
Versus
Upendra Kantilal Thanawala and others – Respondents
Civil Appeal Nos. 9817- 9818 of 2024
Decided On : 29-10-2026
Advocates appeared:
For the Appellant(s) : Mr. Darius Khambata, Sr. Adv. Mr. Kunal Vajani, Adv. Mr. Kunal Mimani, AOR Mr. Kartikey Bhatt, Adv. Mr. Prashant Alai, Adv. Mr. Abhinav Rana, Adv. Mr. Amitoj Chadha, Adv.
For the Respondent(s): Mr. Shyam Diwan, Sr. Adv. Mr. Aniruddha Joshi, Sr. Adv. Mr. Nivit Srivastava, Adv. Mr. Siddharth Dharmadhikari, Adv. Mr. Samrat Krishnarao Shinde, AOR Mr. Aditya Krishna, Adv. Mr. Pratyush Kalro, Adv. Ms. Anshula Laroiya, Adv. Mr. Yashvardhan Singh, Adv. Ms. Shambhavi Kanade, Adv.
For the Appellant(s) : Mr. Darius Khambata, Sr. Adv. Mr. Kunal Vajani, Adv. Mr. Kunal Mimani, AOR Mr. Kartikey Bhatt, Adv. Mr. Prashant Alai, Adv. Mr. Abhinav Rana, Adv. Mr. Amitoj Chadha, Adv.
For the Respondent(s): Mr. Shyam Diwan, Sr. Adv. Mr. Aniruddha Joshi, Sr. Adv. Mr. Nivit Srivastava, Adv. Mr. Siddharth Dharmadhikari, Adv. Mr. Samrat Krishnarao Shinde, AOR Mr. Aditya Krishna, Adv. Mr. Pratyush Kalro, Adv. Ms. Anshula Laroiya, Adv. Mr. Yashvardhan Singh, Adv. Ms. Shambhavi Kanade, Adv.
An arbitral tribunal must decide in accordance with the terms of the contract under Section 28(3) of the Arbitration and Conciliation Act, 1996. It cannot rewrite contractual terms, impose new payment rates, or grant alternative reliefs, as such actions are patently illegal and contrary to public policy.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 28(3), 34 and 37 - Arbitral award - Setting aside - Contract terms - An arbitral tribunal is mandated to decide in accordance with the terms of the contract - When the terms are clear and explicit, the tribunal cannot rewrite the contract or supplant existing terms with new ones - Such an approach is patently illegal and violates the statutory mandate of Section 28(3). (Paras 59, 61)
(B) Public Policy - Grant of alternative relief - An award that grants primary relief of specific performance and, in the alternative, awards damages if the primary relief is set aside, is contrary to the established tenets of arbitral awards and opposed to public policy. (Para 60)
(C) Interpretation of Documents - Nomenclature - The nomenclature of a document is not decisive of its nature - The legal character of an agreement is determined by the rights and obligations created under it and its actual contents. (Para 14)
Facts of the case:
An agreement was executed for the development of land, specifying a sequenced performance of obligations including a payment schedule and the subsequent execution of a conveyance deed. The developer failed to adhere to the payment timeline and did not secure the necessary sanctioned plans. The arbitral tribunal granted specific performance, unilaterally increased the rate of consideration due to land price escalation, and adjusted payments from a prior agreement that had been expressly superseded. The High Court set aside the award.
Findings of Court:
The majority award was patently illegal as it ignored the contractual sequence of obligations and the express supersession clause. The tribunal exceeded its jurisdiction by rewriting the contract and granting alternative relief of damages.
Issues: Whether the arbitral award violated Section 28(3) of the Arbitration and Conciliation Act, 1996, by rewriting the contractual terms and whether such a modification rendered the award patently illegal.
Ratio Decidendi: An arbitral tribunal cannot substitute the express terms of a contract with its own terms, nor can it grant relief that creates a new contract. If the award ignores explicit conditions precedent and modifies agreed-upon financial terms without a contractual basis, it is perverse and contrary to the fundamental policy of Indian law.
Result: Appeals disposed of; the setting aside of the majority award is affirmed, and the respondents are directed to refund the consideration paid with 9% simple interest per annum.
Legal Category Hierarchy
- arbitration and conciliation
- contract law
-
constitutional law
- article 142 complete justice (Para 62)
Table of Contents
2. Claimants asserted specific performance rights claiming agreement was for sale; respondents contended it was a development agreement only, alleging the claimants committed breach of payment and time-essence clauses. (Para 30 , 31 , 36 )
3. The Arbitral Tribunal rewritten the contract by disregarding its specific terms, payment schedules, and supersession clauses, while also awarding damages without foundation and misinterpreting the agreement's nature. (Para 32 , 33 , 52 , 53 , 57 , 58 , 59 , 60 , 61 )
4. An arbitral award that contravenes the express terms of a contract or creates new terms essentially constitutes patent illegality and violates the fundamental policy of Indian law. (Para 47 , 48 , 50 , 52 )
5. The court set aside the arbitral award and, exercising jurisdiction under Article 142, directed the refund of all consideration received by the respondents with 9% simple interest. (Para 62 )
6. Can an arbitral tribunal award damages or specific performance contrary to the express terms of the underlying contract?
No. Under Section 28(3) and the fundamental policy of Indian law, an arbitrator must decide in accordance with the contract terms. Rewriting or ignoring explicit terms to grant relief not provided for by the contract constitutes patent illegality and is open to judicial interference. (Para 47 , 50 , 52 , 60 , 61 )
7. What is the scope of a court's interference under Section 34 of the Arbitration and Conciliation Act given the 'patent illegality' standard?
Interference is permissible if the award is patently illegal, contrary to the fundamental policy of Indian law, against justice or morality, or constitutes a perverse interpretation of contract terms that no reasonable person could have arrived at, such as creating a new contract for the parties. (Para 45 , 46 , 48 , 49 , 50 )
8. Does the appellate jurisdiction under Section 37 extend to testing the arbitral award on the same grounds as Section 34?
Yes. Appellate jurisdiction under Section 37 is coterminous with and as broad as the jurisdiction of the court deciding objections under Section 34, allowing the appellate court to test the award on the merits of the legality and contractual adherence. (Para 44 )
JUDGMENT :
SANJAY KUMAR, J.
1. Yet again, the saga of an arbitral award sailing into rough seas. Finding affirmation under Section 34 of the Arbitration and Conciliation Act, 19961[For short, ‘the Act of 1996’] , the arbitral award was set aside in appeal under Section 37 thereof. Hence, these appeals.
2. The origin of this lis is sourced in the ‘Agreement for Development’ dated 06.08.2003, executed by Upendra Kantilal Thanawala and his son, Vishal Upendra Thanawala, along with Pankaj Kantilal Thanawala, and his sons, Kunal Pankaj Thanawala and Niket Pankaj Thanawala, viz., the respondents, with Shreeram Builders, the appellant firm, and its partners, Ramesh Amrutlal Mehta, Deepak Ramesh Mehta and Alpa Ketan Mehta. Clause 61 therein provided for adjudication of disputes arising between the parties, in respect of the said agreement, by way of arbitration under the provisions of the Act of 1996. It further provided that each party shall appoint an arbitrator and they would, in turn, elect an umpire, and the decision of the arbitrators would be binding. Upon termination of the agreement dated 06.08.2003 by the respondents under legal notice dated 09.04.2008, the parties took recourse to this clause and nominated their respective arbitrators, who elected an umpire. The arbitral tribunal comprised Justice S.D. Pandit (retired), the umpire; P.S. Mudholkar, a retired judge, the arbitrator named by the appellant and its partners; and V.P. Patil, a retired judge, the arbitrator named by the respondents. Ramesh Amrutlal Mehta, the partner, and Vyomesh Kantilal Thanawala were examined by the appellant and its partners and documents were marked in evidence. Upendra Kantilal Thanawala was examined by the respondents and documentary evidence was also adduced by them.
3. The majority arbitral award dated 10.12.2011 was pronounced by Justice S.D. Pandit and P.S. Mudholkar while the dissenting award of the same date was delivered by V.P. Patil. The majority award held in favour of the appellant and its partners, the claimants in the arbitral proceedings, and declared that the termination of the agreement dated 06.08.2003 by the notice dated 09.04.2008 was illegal. It further held that the claimants were entitled to specific performance of the said agreement on depositing Rs.10,91,30,164/- within 3 months. Upon the said deposit, the respondents were directed to execute a sale deed in respect of their 2/9th share in the properties in Schedules A, B and C of the ‘Statement of Claims’, excluding their share in the bungalow and the garden; a room in Chawl No. 1; and the open courtyard of the said room, adjacent to the said bungalow. The sale deed was to be executed by them within a month from the date of deposit and liberty was given to the claimants to get the same executed through Court, if they failed to do so. The sum of Rs.10,91,30,164/- was directed to be paid to the respondents only after execution of the sale deed. The respondents’ counter-claim was dismissed. Both parties were directed to bear their own costs. By his dissenting award, V.P. Patil dismissed the claim and the counter-claim, both with costs.
4. While so, the respondents filed an application under Section 33(4) of the Act of 1996 praying for an additional award to be passed on the ground that the majority award failed to consider Clauses 1 and 3 of the agreement dated 06.08.2003, while quantifying the amount to be paid to them by the appellant and its partners. This application was filed by them in February, 2012, and they sought condonation of the delay of 27 days in doing so. However, by order dated 18.02.2012, Justice S.D. Pandit and P.S. Mudholkar dismissed the application, holding that it was barred by limitation, in terms of the prescription of 30 days in Section 33(4) of the Act of 1996. They also noted that no valid reason had been offered for the delay. Costs of Rs.35,000/- were imposed upon the respondents.
5. Dissatisfied with the majority award dated 10.12.2011, both side
