The interpretation of contract clauses in Joint Venture agreements must reflect the parties' actual understanding, balancing area-sharing and revenue-sharing provisions.

JUDGMENT :

G. JAYACHANDRAN, J.

1. The appellant/ASV Constructions Private Ltd., is a limited company involved in construction activities and real estate business. The respondents are joint owners of a piece of land measuring 281 cents in Solinganallur Village on the Old Mahabalipuram Road (OMR) near Chennai.

2. For the sake of brevity, the appellant whenever convenient referred to as Constructor and the respondents as land owners.

3. In or around the year 2006, the appellant identified the land of the respondents and others located adjacent to the land of the respondent suitable for promoting it into a IT Complex. 282 cents of the respondents and 333 cents of land owned by M/s Chemisol Group and one private individual by name Smt.Savithri, totally 615.56 cents, were consolidated by the appellant for the implementation of the project. To begin, a power of attorney from the respondents in favour of one Bharat Kumar K.Kamdar, was obtained to deal with 282 cents of land owned by the respondents. Thereafter, on 20.12.2010 a reconstitution agreement was entered by the appellant with the respondents herein and with the M/s Chemisol group.

4. On 09.04.2012, a Joint Venture Agreement (JVA) between the appellant and the respondents was entered, wherein the parties agreed that in lieu of the land measuring 282 cents owned by the respondents herein, the appellant /constructor will construct 3,66,326 sq.ft + 12,688 ( premium FSL) on the 282 cents of the land and out of which 48% of the build up area ie 1,82,268 sq.ft will be given to the respondents (landlords). Two other JVA with the other land owners with similar clause were entered and the appellant commenced construction.

5. After completion of construction in the consolidated land measuring 615 cents, the other land owners have got their share in the building as per their agreement with the appellant/constructor. Whereas, the respondents herein, who have title in respect of 282 cents land and right to get 48% of the built up area, were not given the share as per terms of the agreement. Hence, the dispute arose and matter was referred to Arbitrator in terms of clause 42 of the JVA.

6. Before the Arbitrator, the land owners claimed that the agreement is not area-sharing but revenue- sharing as per the clause 5(a) and (b) of JVA. After construction in the consolidated land, the constructor had shared the area with the other landowners as per the terms of JVA and MoU dated 01.12.2012 entered with them and also sold away the portion of its share, but not shared the revenue as agreed under clause 5 of the JVA.

7. Per contra, the constructor claimed that, if the clauses in JVA read as a whole, it will prove that it was a area sharing agreement and not revenue sharing agreement. The sharing of revenue clause is an alternate to the area sharing only, in case the land owners agree as marketing strategy to authorise the constructor to sell the land on behalf of them and share the revenue at the rate of 48% : 52%. The landowners had given power of attorney to the constructor only to the extent of 52%, which is the share of the constructor and for the remaining 48% of built up area no authorisation was given to deal with the prospective buyers.

8. Further, the power of attorney given by the landowners in favour of the constructor in respect of 52% of the built up area land and building also was cancelled by the land owners. Thus, the landowners having explicitly withdrawn from revenue sharing option, the declaration