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As per case facts, Army Welfare Housing Organisation (AWHO) and Sumangal Services Pvt. Ltd. (Sumangal) entered into an agreement for land development and housing project construction. Sumangal began constructing Phase
...II without approved plans, leading to a stop-work order from municipal authorities. Sumangal warned AWHO of legal consequences and threatened to demobilize if no clear instructions were given. AWHO subsequently cancelled the contract. Sumangal filed a civil suit, and AWHO initiated arbitration proceedings. The Supreme Court appointed an arbitrator, who issued an interim order allowing AWHO to complete the construction at Sumangal's risk, which Sumangal challenged. Subsequently, a board of three arbitrators was constituted, and they rendered an award. The central legal question arose as to whether the arbitrators committed legal misconduct by ignoring specific terms of the contract, particularly Clause 130 related to the architect's certification for cost completion, and by wrongly applying principles of frustration of contract and determining the responsibility for obtaining building plan sanctions. Finally, the Supreme Court found that the arbitrators failed to apply the correct legal principles by disregarding essential contract clauses and their own jurisdiction regarding interim orders. Consequently, the Court set aside the award pertaining to the cost of completing the balance work (Claim No. 2) but upheld the award regarding the title, ownership, and possession of the land (Claim No. 1).
Bench
Applied Acts & Sections
Section 17
–The Arbitration And Conciliation Act, 1996
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