Section 34 limits interference with arbitral awards to root perversity; plausible denial of specific performance upheld despite illegal termination, as developer not ready to deliver essential redeveloped area without regulatory conditions.

JUDGEMENT :

SOMASEKHAR SUNDARESAN, J.

Context and Factual Background:

1. This is a Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”) challenging an Arbitral Award dated October 1, 2019, as modified further on October 17, 2019 passed by a Learned Arbitral Tribunal comprising a sole arbitrator (“Impugned Award”).

2. Petitioner No.1, Shri Mahavir Developers (“Developer”) along with its Partners, Petitioner Nos.2 to 11 are aggrieved by the Impugned Award, which holds in favour of Respondent No. 1, Shri Mahavir Jaina Vidyalaya, a Public Charitable Trust (“Trust”) of which, Respondent Nos.2 to 5 are Trustees (“Trustees”). Respondent No.6 and 7 are former Partners of the Developer.

3. The Developer and the Trustees had executed a Memorandum of Understanding dated April 9, 2005 (“MOU”) followed by a Development Agreement dated April 30, 2007 (“Development Agreement”), by which, development rights were granted to the Developer over property owned by the Trust situated in Gowalia Tank, Mumbai (“Subject Property”). The Developer was to pay a consideration of Rs.3.69 Crores for grant of the development rights and contracted an obligation to construct a new Hostel Building (“Hostel”) and a Jain Derasar (“Temple”) with an area of not less than 32,000 square feet (“Agreed Area”) in place of the existing Hostel Building which includes six shops, and the Temple. The Developer was to also reconstruct three tenanted buildings located on the Subject Property. The parties had agreed that the development would be carried out under Regulation 33(7) of the Development Control and Promotion Regulations 2034 (“DCR”).

4. Clause 19 of the MOU allowed the Trust to terminate the MOU if the Developer were to breach the terms or were unable to construct and develop the Subject Property. Clause 6.2 of the MOU also provided the Developer with a license and a right to enter upon the Subject Property in furtherance of the agreement between the parties. The Development Agreement, which elaborated the MOU in greater detail, recorded the Developer's obligation to construct the Hostel, including six shops, and the Temple having an area of not less than the Agreed Area, excluding staircase and lift area. The construction of the Hostel was to be given the highest priority and simultaneously the Developer could develop the three tenant occupied buildings without diluting the priority for constructing the Hostel. The Development Agreement made it clear that under no circumstances would the area of the Hostel building be reduced from the Agreed Area of 32,000 square feet.

5. Since the parties had agreed to further the development under Regulation 33(7) of the DCR, the parties also negotiated the framework by which they would handle the situation arising out of the rehabilitation area certified by the Municipal Authorities in lieu of the Hostel building falling below 32,000 square feet – this would affect the 50% incentive Floor Space Index (“FSI”) that the Developer would be entitled to. Therefore, the parties a