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IN THE HIGH COURT OF DELHI AT NEW DELHI
Sanjeev Narula, J.
M/s Grand Reality Pvt. Ltd. - Appellant
Versus
Nanak Mehta - Respondent
Original Miscellaneous Petition (COMM) No. 92 of 2021
Decided On : 31-03-2022
arbitration and Conciliation act - Development agreement - Section 34 of the arbitration and Conciliation act, 1996 - [Section 34] - [Summary of acts and sections referenced and discussed by the court: The court discussed the arbitration and Conciliation act, 1996, particularly Section 34, in relation to the impugning of the award. The court also referred to the Development agreement and various clauses therein, including Clause 8, which was a key point of contention in the case. The court also highlighted Section 31(7) of the arbitration and Conciliation act, 1996, in relation to the award of interest.]
Fact of the Case:
The dispute arose from a Development agreement executed between the parties for the development of Demised Land. The Respondent failed to comply with the condition precedent of handing over the vacant physical possession of the property to the Petitioner, leading to termination of the agreement. The Petitioner sought refund of the amount paid along with interest.
Finding of the Court:
The court found that the Petitioner was in breach of the agreement by not strictly adhering to the payment schedule. The court upheld the arbitrator's finding that the Petitioner was in breach of the agreement. The court also upheld the award of interest at the bank rate as compensation for the breach by the Respondent. The court clarified that the Petitioner is entitled to interest amount with effect from 03rd april, 2018, at the rate applied under FDR No. 124525968 dated 14th august, 2018.
Issues: The issues revolved around breach of contract and the award of interest. The Petitioner challenged the findings of the arbitrator on these issues.
Ratio Decidendi: The court upheld the arbitrator's finding that the Petitioner was in breach of the agreement. The court also upheld the award of interest at the bank rate as compensation for the breach by the Respondent. The court clarified the entitlement of the Petitioner to interest amount with effect from 03rd april, 2018.
Final Decision: The court dismissed the present petition, subject to the clarification regarding the entitlement of the Petitioner to interest amount with effect from 03rd april, 2018.
JUDGMENT
Sanjeev Narula, J. - The present petition has been filed under Section 34 of the arbitration and Conciliation act, 1996 [hereinafter, the 'act'] impugning the award dated 19th March 2020 passed by a Sole arbitrator appointed for adjudicating disputes arising out of an agreement for Development dated 01st July, 2015 [hereinafter, 'agreement'] executed between the Respondent - M/s Grand Reality Pvt. Ltd. (Claimant in arbitration) and the Petitioner herein - Shri Nanak Mehta (Respondent in arbitration) for construction of Country Homes/ Villas on agricultural land (admeasuring 15 Bighas and 4 Biswas) bearing Khasra Nos. 113/ 23/2 (5-12), 24 (4-16), 25/1 (2.08), 25/2 (2-08) situated in Village Bijwasan, Tehsil Vasant Vihar, New Delhi [hereinafter, 'Demised Land'].
2. at the outset, it must be noted that vide Judgment dated 23rd December 2021 in O.M.P (COMM) 33/2021, a challenge to the impugned award, at the instance of the Respondent herein, has been rejected.
3. The facts of the case have been recounted in the aforenoted judgment and the same shall be deemed to be part of the present order. For the sake of brevity, in a nutshell, the dispute between the parties was as follows:
3.1. a Development agreement dated 01st July, 2015 was executed between the parties for development of Demised Land owned by the Respondent. In terms of the agreement, a sum of Rs. 2,04,85,000/- was paid to the Respondent (including payment of Rs. 84,50,000/- paid directly to the Bank at the behest of the Petitioner). The Respondent failed to comply with the condition precedent of handing over the vacant physical possession of the property to the Petitioner after getting the title cleared, on or before 07th april, 2016.
3.2. The Respondent sent a legal notice allegedly terminating the Development agreement. In any event, the Petitioner also terminated the Development agreement in terms of Clause 8 of the Development agreement vide legal notice dated 03rd april, 2018. In such circumstances, Petitioner contended that Respondent became liable to refund the amount received, along with interest @ 24 % p.a.
Proceedings under Section 9 of the act:
3.3. Petitioner Company preferred a petition under Section 9 of the act, [O.M.P. (I.)(Comm.) 309 of 2018 titled Grand Reality Pvt. Ltd. v. Nanak Mehta.] to preserve the sub-stratum of the Development agreement. The Court vide order dated 01st august, 2018, restrained the Respondent from creating any third-party interest or parting with the possession of the Demised Land, till the Respondent deposits a sum of Rs. 2.05 crores with the Registry of this Court in the form of Fixed Deposit Receipt (FDR). The said sum was deposited by the Respondent, as recorded in order dated 06th September, 2018.
award:
3.4. On 06th September, 2018, this Court appointed Mr. S.M Chopra, Retired additional District Judge, as the Sole arbitrator. The proceedings culminated in an award on 19th March, 2020, holding the following:
(i) The Petitioner herein shall pay to the Respondent herein Rs. 2,04,85,000/- from the proceeds of FDR No. 12452596 dated 14th august, 2018, deposited with ICICI Bank, Gurugram, with lien marked by Registrar General of the Court.
(ii) Petitioner shall pay to the Respondent interest to the extent of the difference between Rs. 2,04,85,000/- and the principal amount of the FDR of Rs. 2,05,00,000/- and the interest accrued on the said FDR till realization by the Respondent herein towards the satisfaction of the award.
(iii) In view of the lien marked in favour of the Registrar General of this Court on the aforesaid FDR, the Respondent to take appropriate steps before this Court towards the satisfaction of the award.
4. Mr. akshay Makhija, Senior Counsel for the Petitioner, states that challenge at the instance of the Petitioner is limited to the interest awarded. The findings rendered by the arbitrator qua issues no. 2, 4, 7 and 8 are challenged, which can be broadly divided into two heads of (i) Breach of Contract, and (ii) I
The main legal point established in the judgment is the court's interpretation and application of the arbitration and Conciliation act, 1996, particularly in relation to the impugning of the award an....
Arbitrators have discretion in awarding interest, and findings of breach by both parties can justify lower interest than contractually stipulated rates.
The court upheld the arbitral award, ruling that grounds for intervention under Section 34 of the Arbitration Act were not met, affirming the tribunal's discretion and findings based on evidence subm....
The court upheld the trial court's dismissal of the appeal against the arbitration award, confirming that there was no patent illegality or grounds for interference under the Arbitration and Concilia....
Arbitrator cannot award interest where contract expressly bars it, even as compensation; limited judicial interference under Sections 34/37.
The court emphasized the importance of arbitration in resolving disputes arising from the agreement between the parties.
The Ld. Arbitrator's jurisdiction, the applicability of Clause 16(2) of the Agreement, and the sufficiency of reasons provided in the award were the main legal points established in the judgment.
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