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IN THE HIGH COURT OF DELHI AT NEW DELHI
VIBHU BAKHRU, J.
RAIL LAND DEVELOPMENT AUTHORITY - Petitioner
Versus
YANTTI BUILDCON PVT LTD - Respondent
O.M.P. (COMM) 9 of 2016 & IA No. 645 of 2016, O.M.P. 226 of 2015
Decided On : 02-05-2018
The court set aside the arbitral awards, finding them to be perverse and contrary to law. The court held that the project had been delayed for reasons attributable to the petitioner, and that the petitioner had not made any representation as to the available depth for construction of a basement. The court also held that the computation of the damages awarded was perverse and wholly contrary to law, and that the arbitral proceedings were vitiated by procedural irregularities.
Fact of the Case:
The petitioner, Rail Land Development Authority (RLDA), had entered into a Development Agreement with Yantti Buildcon Pvt. Ltd. (Yantti) for the development of a plot of land in Bangalore. The project was delayed, and RLDA terminated the Development Agreement. Yantti approached the courts, which appointed an Arbitral Tribunal to resolve the dispute. The Arbitral Tribunal awarded damages to Yantti, and RLDA challenged the awards under Section 34 of the Arbitration and Conciliation Act, 1996.
Finding of the Court:
The court found that the project had been delayed for reasons attributable to Yantti, and that Yantti had not made any representation as to the available depth for construction of a basement. The court also held that the computation of the damages awarded was perverse and wholly contrary to law, and that the arbitral proceedings were vitiated by procedural irregularities.
Issues: 1. Whether the project had been delayed for reasons attributable to Yantti? 2. Whether Yantti had made any representation as to the available depth for construction of a basement? 3. Whether the computation of the damages awarded was perverse and wholly contrary to law? 4. Whether the arbitral proceedings were vitiated by procedural irregularities?
Ratio Decidendi: The court held that the project had been delayed for reasons attributable to Yantti, and that Yantti had not made any representation as to the available depth for construction of a basement. The court also held that the computation of the damages awarded was perverse and wholly contrary to law, and that the arbitral proceedings were vitiated by procedural irregularities. The court relied on the terms of the Development Agreement, the minutes of the meetings held between the parties, and the evidence presented before the Arbitral Tribunal.
Final Decision: The court set aside the arbitral awards, finding them to be perverse and contrary to law. The court held that the project had been delayed for reasons attributable to the petitioner, and that the petitioner had not made any representation as to the available depth for construction of a basement. The court also held that the computation of the damages awarded was perverse and wholly contrary to law, and that the arbitral proceedings were vitiated by procedural irregularities.
VIBHU BAKHRU, J.
Introduction
1. The petitioner, Rail Land Development Authority (hereafter ‘the RLDA’) has filed the present petitions under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter ‘the Act’). In OMP (Comm) 9/2016, RLDA impugns the arbitral award dated 31.10.2015 (hereafter ‘the final award’) and in OMP 226/2015, RLDA impugns the interim award dated 13.02.2015 (hereafter ‘the interim award’) made by the Tribunal constituted of three Arbitrators, namely, Mr. S.K. Malik, Mr. R.D. Mirza and Mr. K.K. Madan (Presiding) (hereafter ‘the Arbitral Tribunal’). The interim award and the final award are, hereafter, collectively referred to as the impugned awards.
2. The impugned awards were rendered in the context of the disputes that have arisen between RLDA and Yantti Buildcon Pvt. Ltd. (hereafter “Yantti”) in connection with the Development Agreement dated 03.03.2010 (hereafter ‘the Development Agreement’). The parties had entered into the Development Agreement for commercially exploiting a plot of land admeasuring 10128.12 sq. mtr. belonging to the Indian Railways, located near the City Railway Station, Bangalore (hereafter ‘the said land’). In terms of the Development Agreement, Yantti was to develop a hotel and commercial complex on the said land and further operate and maintain the same for the specified period. In addition, Yantti was to develop and handover ten new Type-II quarters on an alternative piece of Railway land. The said land was leased to Yantti for a period of thirty years.
3. RLDA terminated the Development Agreement due to failure on the part of Yantti to complete the project within the specified time and also invoked the performance bank guarantee furnished by Yantti. By the interim award, the Arbitral Tribunal has set aside RLDA’s letter dated 08.01.2014 terminating the Development Agreement and has further directed RLDA to refund the amount received by RLDA by invoking the performance bank guarantee. The Arbitral Tribunal also directed RLDA to hand over possession of the said land to Yantti so as to enable it to carry out the development work.
4. By the final award, the Arbitral Tribunal has awarded an aggregate sum of Rs. 96.77 crores in favour of Yantti. The said sum comprises of (i) a sum of Rs. 48.01 crores in favour of Yantti on account of loss of the lease period albeit with an option to RLDA to extend the lease in respect of the land in question for a further period of five years in lieu of payment of damages; (ii) a sum of Rs. 36.87 crores on account of escalation in the cost of execution of the project and idle charges; and (iii) Rs. 11.88 crores on account of loss due to non availability of construction depth at the said land. The Arbitral Tribunal has also awarded interest at the rate of 15% per annum from the date of the final award to the date of actual payment if the awarded amount is not paid within a period of three months from the date of the final award.
5. The impugned awards are premised on the Arbitral Tribunal’s conclusion that the project had been delayed for reasons attributable to RLDA. The Arbitral Tribunal has also accepted Yantti’s claim that RLDA had misrepresented that at least 4.5 mtrs. depth would be available for construction of a basement and Yantti had founded its offer on the said misrepresentation. Since the said construction depth is not available and construction of a basement is not possible, the Arbitral Tribunal awarded a sum of Rs. 11.88 crores as damages. This has been computed on account of the difference between the estimated lease rental that would have been realized for space in the basement and the lease rental that would be realizable for other floors.
6. RLDA claims that the impugned awards are perverse and contrary to law and, thus, are liable to be set aside.
Factual background
7. Briefly stated, the relevant facts necessary to address the controversy are as under :-
8. RLDA has been constituted by the Central Government in exercise
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