The court upheld the validity of the termination due to consistent defaults in payment, affirmed the independence of the annual license fee obligation, and recognized the respondent's entitlement to the balance of the advance development cost.

YOGESH KHANNA, J.

1. This petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred as ‘the Act’) has been filed by the petitioner for quashing of the impugned arbitral tribunal award dated 27.06.2017 as also the order dated 08.09.2017 and further to restrain the respondent to create any third party interest in respect of the Asset Area 3 in the Hospitality District (hereinafter referred as ‘the subject land’) which are subject matter of the agreements between the parties.

2. The subject land in question viz Asset Area 3 belong to the Government of India which has been leased to the Air India, who in turn had licensed the same to the respondent for development, who in turn had given it to the petitioner for construction of Five Star Hotel. The term of the license was initially for 26 years and it was renewable for further period of 30 years. The petitioner and the respondent had entered into two agreements namely a) Agreement for Development and b) Infrastructure Development Service Agreement (in short IDSA), both dated 26.02.2010.

3. The learned senior counsel for the petitioner submitted both these agreements were terminated by the respondent on 16.07.2015 on the ground the petitioner had defaulted for three years in payment of the license fee and has also failed to pay the advance development cost amount.

4. Mr. Sandeep Sethi, the learned senior counsel appearing on behalf of the petitioner has primarily raised four grounds to challenge the impugned majority award passed by the learned arbitral tribunal as follows:-

(a) The termination is not valid in view of the express finding of the learned arbitral tribunal that the respondent was holding excess amount as security deposit which they were not entitled to collect from the petitioner;

(b) the finding of the learned tribunal that the payment of annual license fee was an independent obligation despite there being a security deposit placed with the respondent for securing the payments of the annual license fee, is contrary to the terms of the Article 3.2 of the Development Agreement;

(c) learned tribunal erred in grant of the balance development cost in favour of the respondent despite holding the advance development cost is not payable post termination and without the respondent proving the expenses to the extent of the advance development cost if ever incurred by the respondent; and lastly

(d) the impugned award was beyond the statutory period of 12 months as prescribed under Section 29(A) (i) and beyond the permitted six months period provided under Section 29 (A) (iii) of the Act.

5. I now deal with the above contentions raised by the petitioner. Since the first two contentions are connected hence are being taken up together.

6. It is the case of the petitioner the impugned award holding the termination of the development agreement and IDSA on the ground of non-payment of the license fee and annual development cost is perverse in view of the specific finding by the learned tribunal that on the date of the termination the respondent was holding an excess amount as security deposit which they were not entitled to collect from the petitioner.

7. It is submitted if the claims of the respondent on such accounts were to be taken together with interest of 34.62 Crores it would come to a total of 95,88,96,668/- as mentioned in the second cure notice dated 26.03.2015 and this amount was less than the excess security viz 128.97 Crores accepted by the respondent from the petitioner. Thus, even as on the date of the termination, the outstanding amount of 95 Crores could very well be adjusted against the excess security deposit, hence, the termination on the ground of non-payment / default in payment of the annual license fee and advance development cost was absurd and violative of the fundamental policy of India and is liable to the set aside.

8. It was also argued by the learned senior counsel for the petitioner the learned tribunal erred in holding