The court found the arbitral award flawed due to perverse reasoning regarding lease validity and imposed obligations, allowing the petitioner to recover funds and damages for contractual breaches and misleading conduct.

ORDER

This petition has been filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for brevity, hereinafter referred to as “the Act”) against the arbitral award dated 31.05.2025 passed by the sole Arbitrator.

2. The case of the petitioner is that the respondent is the absolute owner of 20 residential flats in a project known as 'Sobha Serene'. After negotiation, the petitioner and the respondent entered into a lease deed dated 12.07.2019 in respect of all the 20 flats. The lease was for a period of five years commencing from 11.07.2019 to 30.06.2024. The monthly rent was fixed at Rs.5,40,000/- calculated at the rate of Rs.27,000/- per flat. The petitioner has to use the properties as service apartments and the petitioner was also given the right to sub-lease the apartments to the tenants identified by the petitioner. The petitioner has to do the furnishing and fittings, which are described in the Annexure-A. The petitioner must also pay the refundable security deposit of a sum of Rs.32,40,000/- to the respondent at the time of handing over of vacant possession or the termination or expiry of the lease period, whichever is earlier. The agreement also contained an arbitration clause at Clause 23, where it was agreed that all disputes/differences arising out of the lease deed will be referred to and resolved through arbitration.

3. Pursuant to the above agreement, the petitioner paid the interest free refundable security deposit of a sum of Rs.32,40,000/-. The petitioner also paid a sum of Rs.3,18,600/- including TDS towards brokerage commission. The petitioner purchased the furniture and fixtures for all the 20 flats inclusive of the hardware items worth Rs.1,77,086/-. Thus the petitioner had invested huge sums in the project for the development of the flats as service apartments.

4. The petitioner received a legal notice dated 31.08.2019 from M/s Sobha Developers Limited about a joint venture agreement entered into between Sobha Developers Limited and the respondent and that there were certain disputes amongst them and it was pending adjudication before the Arbitral Tribunal (for short, “the AT”). It was further stated that an interim order was passed by the AT on 27.12.2016 restraining the respondent from in any manner selling or creating any encumbrance in the properties. A copy of the interim order was also annexed along with the notice.

5. On receipt of the above notice, a notice was given by the petitioner to the respondent on 28.09.2019 seeking clarification on the order of injunction and further sought for the refund of all the costs incurred by the petitioner in connection with the renovation of the flats. Though this notice was delivered to the respondent on 01.10.2019, no reply was forthcoming and the entire investment made by the petitioner got locked into this project. The petitioner felt that they were cheated and hence gave a police complaint before the concerned jurisdictional police. The respondent was called for enquiry and he conceded to the fact that an interim order was in fact passed by the AT, and the respondent therefore agreed for termination of the lease deed and also undertook to return back the security deposit of a sum of Rs.32,40,000/- on or before 30.01.2020. Based on this undertaking, the petitioner also stopped renovation of the flats and was expecting the respondent to honour the undertaking by refunding the amount and taking back possession of the flats.

6. The respondent issued a notice dated 14.09.2020 by making baseless allegations and in this notice, the respondent rescinded to any liability that arose from the lease deed and refused to return back the amount lyin