2026 INSC 1176 Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

Civil Appeal Nos. 9817- 9818 of 2024

Shreeram Builders … Appellant

versus

Upendra Kantilal Thanawala and others … Respondents

J U D G M E N T

SANJAY KUMAR, J

1. Yet again, the saga of an arbitral award sailing into rough seas.

Finding affirmation under Section 34 of the Arbitration and Conciliation

Act, 1996

1

, the arbitral award was set aside in appeal under Section 37

thereof. Hence, these appeals.

2. The origin of this lis is sourced in the ‘Agreement for Development’

dated 06.08.2003, executed by Upendra Kantilal Thanawala and his son,

Vishal Upendra Thanawala, along with Pankaj Kantilal Thanawala, and

his sons, Kunal Pankaj Thanawala and Niket Pankaj Thanawala, viz., the

respondents, with Shreeram Builders, the appellant firm, and its partners,

Ramesh Amrutlal Mehta, Deepak Ramesh Mehta and Alpa Ketan Mehta.

Clause 61 therein provided for adjudication of disputes arising between

1

For short, ‘the Act of 1996’

2

the parties, in respect of the said agreement, by way of arbitration under

the provisions of the Act of 1996. It further provided that each party shall

appoint an arbitrator and they would, in turn, elect an umpire, and the

decision of the arbitrators would be binding. Upo n termination of the

agreement dated 06.08.2003 by the respondents under legal notice dated

09.04.2008, the parties took recourse to this clause and nominated their

respective arbitrators, who elected an umpire. The arbitral tribunal

comprised Justice S.D. Pandit (retired), the umpire; P.S. Mudholkar, a

retired judge, the arbitrator named by the appellant and its partners; and

V.P. Patil, a retired judge, the arbitrator named by the respondents.

Ramesh Amrutlal Mehta, the partner, and Vyomesh Kantilal Thanawala

were examined by the appellant and its partners and documents were

marked in evidence. Upendra Kantilal Thanawala was examined by the

respondents and documentary evidence was also adduced by them.

3. The majority arbitral award dated 10.12.2011 was pronounced by

Justice S.D. Pandit and P.S. Mudholkar while the dissenting award of the

same date was delivered by V.P. Patil . The majority award held in favour

of the appellant and its partners, the claimants in the arbitral proceedings,

and declared that the termination of the a greement dated 06.08.2003 by

the notice dated 09.04.2008 was illegal. It further held that the claimants

were entitled to specific performance of the said agreement on depositing

₹10,91,30,164/- within 3 months. Upon the said deposit , the respondents

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were directed to execute a sale deed in respect of their 2/9

th

share in the

properties in Schedules A, B and C of the ‘Statement of Cl aims’, excluding

their share in the bungalow and the garden; a room in Chawl No. 1; and

the open courtyard of the said room, adjacent to the said bungalow. The

sale deed was to be executed by them within a month from the date of

deposit and liberty was given to the claimants to get the same executed

through Court, if they failed to do so. The sum of ₹10,91,30,164/- was

directed to be paid to the respondents only after execution of the sale

deed. The respondents’ counter-claim was dismissed. Both parties were

directed to bear their own costs. By his dissenting award, V.P. Patil

dismissed the claim and the counter-claim, both with costs.

4. While so, the respondents filed an application under Section 33(4)

of the Act of 1996 praying for an additional award to be passed on the

ground that the majority award failed to consider Clauses 1 and 3 of the

agreement dated 06.08.2003, while quantifying the amount to be paid to

them by the appellant and its partners. This application was filed by them

in February, 2012, and they sought condonation of the delay of 27 days in

doing so. However, by order dated 18.02.2012 , Justice S.D. Pandit and

P.S. Mudholkar dismissed the application, holding that it was barred by

limitation, in terms of the prescription of 30 days in Section 33(4) of the

Act of 1996. They also noted that no valid reason had been offered for the

delay. Costs of ₹35,000/- were imposed upon the respondents.

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5. Dissatisfied with the m ajority award dated 10.12.2011, both sides

filed applications under Section 34 of the Act of 1996 before the learned

Principal District Judge, Thane. The appellant and its partners filed Civil

Miscellaneous Application No. 35 of 2012 while the respondents filed Civil

Miscellaneous Application No. 76 of 2013. In the first instance, the learned

Principal District Judge, Thane, by common order dated 29.03.2017, held

in favour of the appellant and its partners and allowed Civil Miscellaneous

Application No. 35 of 2012 while dismissing Civil Miscellaneous

Application No. 76 of 2013. Aggrieved thereby, the respondents filed

Arbitration Appeal Nos. 38 and 39 of 2018 before the Bombay High Court

under Section 37 of the Act of 1996. By order dated 26.06.2019, a learned

Judge disposed of the appeals, recording the consent of both sides to

have the matter decided afresh by the learned Principal District Judge,

Thane. The order dated 29.03.2017 was, accordingly, set aside and the

matter was remitted for fresh consideration.

6. However, in the second round, both parties proved unsuccessful, as

the learned Principal District Judge, Thane , dismissed both applications ,

vide judgment dated 25.01.2020, and upheld the majority award in its

entirety. This judgment was again subjected to challenge by both sides

before the Bombay High Court. Arbitration Appeal (ST.) No. 5662 of 2020

was filed by the appellant while Arbitration Appeal (ST.) No. 93127 of 2020

was filed by the respondents. By judgment dated 05.03.2024, a learned

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Judge of the High Court held in favour of the respondents and allowed

their Arbitration Appeal (ST.) No. 93127 of 2020. In consequence, the

majority award dated 10.11.2011 and the order dated 18.02.2012 were set

aside. In the result, the appellant’s Arbitration Appeal (ST.) No. 5662 of

2020 was disposed of on the ground that it did not need to be considered.

Aggrieved by this turn of events, the appellant is before this Court.

7. By order dated 12.08.2024, as clarified thereafter, this Court

directed the parties to maintain status quo as regards the shares in the

subject land. This order was extended until further orders on 30.09.2024.

8. Facts relevant to this adjudication need to be recounted at length.

We are concerned with three parcels of land in Village Panchpakhadi,

Taluka & District Thane. The first parcel is an extent of 12,826 square

yards in Survey Nos. 371, 373 to 409 (Land A); the second parcel is an

extent of 1,265 square yards in Survey No. 108, Hissa No. 1 (Part) , along

with 555 square yards in Survey No. 108, Hissa No. 2 (Part) (Land B); and

the last parcel comprises 195 square yards in Survey No. 524 (Land C).

These three adjoining parcels of land form a compact parcel, admeasuring

16,414.23 square yards (13,723 square meters). Land A belonged to two

brothers, Govindlal Jugaldas Thanawala and Maneklal Jugaldas

Thanawala. While so, Maneklal relinquished his right, title and interest

therein in favour of his brother, Govindlal, who then became its absolute

owner. Govindlal died intestate on 10.06.1936, survived by his widow,

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Leelavati, and three sons, Kantilal, Prabhulal and Madhukant. Leelavati

and her sons acquired Land B under registered sale deed dated

09.01.1942. Thereafter, in 1962, they acquired Land C under a registered

sale deed. Various structures, such as chawls, buildings, sheds and a

bungalow, were constructed on the lands. L eelavati relinquished her right,

title and interest in the lands in favour of her sons. They, accordingly,

became joint owners, each entitled to a 1/3

rd

share therein. Registered

partition deed dated 31.03.1974 was executed by them, allotting 1/3

rd

share to each brother. However, no actual partition was effected on the

ground by metes and bounds.

9. Prabhulal died intestate on 27.03.1997, survived by his widow,

Gunvanti, and two sons, Mrugesh and Hiren. Madhukant died intestate on

or about 13.12.1999, survived by his widow, Sumati, a son, Hemal, and a

daughter, Kamal Pillay. Kantilal died intestate on or about 03.09.2002,

survived by three sons , Upendra, respondent No. 1; Pankaj, respondent

No. 2; and Vyomesh; and a daughter, Shweta Shreyas Shah. Sh e

relinquished her interest in favour of her brothers on 01.07.2003. In effect,

Kantilal’s 1/3

rd

share devolved upon his three sons in equal measure.

10. Earlier, as a partition was not made my metes and bounds, Kantilal

had made an application on 14.10.1983 to the District Inspector of Land

Records (DILR), Thane, seeking partition of the property . The DILR

passed order dated 24.10.1983, partitioning the lands into three equal

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parts. Assailing the said order, Prabhulal filed a writ petition before the

Bombay High Court. By order dated 29.10.1983 passed therein, the

DILR’s order came to set aside and the DILR, Ulhasnagar, was directed

to take up the matter. He submitted his report on 14.01.1985 to the

Consolidation Officer, Thane. While so, Kantilal and Madhukant made an

application to the Collector, Thane, for partition of the property by metes

and bounds. Thereupon, the Collector, Thane, passed order dated

30.04.1987. However, assailing the said order, Prabhulal filed an appeal

before the Additional Commissioner, Konkan Division, but the same was

dismissed. Thereafter, upon his death, his heirs filed a writ petition

challenging the order dated 30.04.1987 passed by the Collector, Thane.

This writ petition was pending at the time this litigation started. Prabhulal’s

widow, Gunvanti, along with her sons, Mrugesh, and Hiren, filed Special

Civil Suit No. 650 of 1995 before the learned Civil Judge (Senior Division),

Thane, against Kantilal, Madhukant, their family members and others, for

specific performance of the partition deed dated 31.03.1974. Thereafter,

the appellant, as the power-of-attorney of the respondents and

Madhukant’s heirs, filed Special Civil Suit No. 1 19 of 2005 before the

learned Civil Judge (Senior Division) against Prabhulal’s heirs seeking an

injunction restraining them from repairing the bungalow.

11. While so, Civil Suit No. 445 of 2008 was filed by Chandru

Nebhandas Mirani, Ashwin Laxmikant Vasavda and Mehul Laxmikant

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Vasavda against the brothers, Upendra , Pankaj and Vyomesh; Hemant

Madhukant Thanawala; and others, including the appellant and its partner,

Ramesh Mehta, seeking specific performance of an agreement to sell

2/3

rd

undivided share in the property, said to have been executed in their

favour on 26.10.1983. Upendra and Pankaj were arrayed therein as

defendant Nos. 5 and 3 respectively while the appellant and Ramesh

Mehta were shown as defendant Nos. 7 and 9. In the said suit, Upendra

and Pankaj specifically took the stand in their written statement that, by

the agreement dated 06.08.2003, they and their sons, Vishal Upendra

Thanawala, Kunal Pankaj Thanawala and Niket Pankaj Thanawala, had

given the right of development and had agreed to sell the property to

defendant No. 7, viz., the appellant.

12. We may also note that, by agreement dated 11.02.2003, Vyomesh

agreed to sell his undivided 1/9

th

share in the property to the appellant. He

executed deed of conveyance dated 21.08.2008 in its favour, transferring

his 1/9

th

share. Similarly, on 29.09.2003, the legal heirs of Madhukant

executed an agreement in favour of the appellant for development of their

undivided share in the property. On 02.04.2009, they executed a deed of

conveyance transferring their undivided 1/3

rd

share in the property to the

appellant. We may also note that the appellant claims to have acquired

about 44.44% of the larger property comprised in Lands A, B and C from

the other family members of the respondents. Be that as it may.

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13. As noted earlier, the arbitration proceedings centred on the

agreement dated 06.08.2003. One of the main issues considered by the

arbitral tribunal was the status of this agreement, that is, whether it was a

development agreement or an agreement to sell. The majority award held

it to be an agreement to sell while the dissenting award held otherwise.

The learned Principal District Judge, Thane, upheld the majority award

and affirmed the finding therein that the agreement was an agreement to

sell and was not just for development. However, in appeal under Section

37 of the Act of 1996, the Bombay High Court reversed that finding and

opined that it was nothing more than a development agreement. Notably,

it was recorded on the first page of the agreement that the agreement

value was ₹2,28,75,000/ - and that the document had suffered stamp duty

of ₹2,29,000/-. The stamp duty, therefore, came to 1% of the agreement

value. One of the factors that weighed with the High Court to hold that the

agreement was a development agreement and not an agreement to sell

was the fact that stamp duty of 1% was payable only on development

agreements as an agreement to sell had to suffer stamp duty of 5% of the

value. The High Court, accordingly, opined that, as the subject agreement

had suffered only 1% stamp duty, it was clearly intended to be a

development agreement only.

14. However, we are not persuaded to agree that this fact was sufficient

to categorise the agreement as a development agreement. As is wont to

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happen, attempts are made by parties to a document to escape the rigour

of paying higher stamp duty and in the course of that endeavour various

measures are adopted, including portra yal of the document as something

other than what it is actually intended to be. Naming the document as a

development agreement and paying commensurate stamp duty may,

thus, be a means of escaping the higher stamp duty applicable to an

agreement to sell. The settled legal position is that the nomenclature of a

document would not be decisive as to its nature. In Sasan Power Limited

vs. North American Coal Corporation (India) Limited

2

, this Court held

that it is the rights and obligations created under an agreement that

determine its legal character. Thus, it is the contents of the agreement that

would determine its actual nature. Hence, the stamp duty did not conclude

the issue and the agreement had to be examined, not only for its import

but also what it entailed in the context of the arbitration proceedings.

15. Significantly, the first paragraph of the said agreement, after naming

the five Thanawalas, stated that they would be referred to as the ‘ Vendors

of the one part’. The appellant firm and its three partners, viz., Ramesh

Amrutlal Mehta, Deepak Ramesh Mehta and Alpa Ketan Mehta, were

referred to as the ‘Purchaser’, but the word ‘ Purchaser’ was then cut out

and, by hand, the word ‘Developers’ was inserted. However, this

correction was not initialled by whoever had made the same. Further, in

2

(2016) 10 SCC 813

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the rest of the document, the appellant and its partners continued to be

referred to as the ‘Purchaser’ and no corresponding corrections were

made. We then find that the title to Lands A, B and C was traced out in

great detail, dating back to the initial s ale deed executed on 23.05.1921,

whereunder the two brothers, Govindlal and Maneklal, had purchased

Land A. Details of the lineage of the Thanawalas and how the property

devolved thereafter were also set out at great length. These details took

up paragraphs ‘A’ to ‘Z’ of the agreement. Paragraph R noted that Kantilal

and his sons, Upendra and Pankaj, had entered into a Memorandum of

Understanding (MoU) on 15.03.2002 with Ramesh Mehta and Deepak

Mehta, the appellant firm’s partners, in respect of their share in the

property. As regards the five Thanawalas who constituted the ‘Vendors’,

paragraph ‘W’ stated that Upendra and Pankaj had 8/90

th

share each and

Vishal, Upendra’s son, was entitled to 2/90

th

share while Kunal and Niket,

Pankaj’s sons, had 1/90

th

share each. In effect, their shares put together

came to 20/90

th

or 2/9

th

undivided share in Lands A, B and C.

16. Paragraph ‘CC’ recorded that the ‘ Purchaser’ had approached the

‘Vendors’ with an offer to develop the said property by constructing a

shopping, commercial and residential complex thereon. Paragraph ‘DD’

recorded that the ‘Vendors’ had agreed to allow the ‘Purchaser’ to develop

their share in the said property, excluding (1) the bungalow and the garden

in front of and behind the bungalow and (2) Room No. 1 in Chawl No. 1

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adjacent to the bungalow; and also the open space in front of and behind

Chawl No. 1. Description of the area to be excluded was set out in the

Second Schedule. The area and description of all the other structures on

the property, leaving out the excluded area, were set out in the Third

Schedule. The property, leaving out the excluded area but including all

other structures and buildings thereon, was referred to as ‘the property

agreed to be developed’. Paragraph ‘EE’ stated that the ‘Purchaser ’ had

agreed to take from the ‘Vendors’, the right to develop their share in the

property agreed to be developed and the ‘V endors’ had agreed to give to

the ‘Purchaser’ the right to develop their share in the property agreed to

be developed. Paragraph ‘FF’ stated that the ‘Vendors’ and the

‘Purchaser’ had surveyed the property and found that the undivided share

of the ‘Vendors’ in the property agreed to be developed would measure

3,049.57 square meters or thereabouts. Paragraph ‘GG’ stated that the

‘Vendors’ and the ‘Purchaser’ had negotiated the terms and conditions for

development of the share of the ‘Vendors’ in the property agreed to be

developed and had agreed to enter into the said agreement. The terms

agreed upon by the parties were set out thereunder from Clauses 1 to 64.

Three schedules were appended to the agreement .

17. Clause 1 recorded that the ‘V endors’ agreed to give and the

‘Purchaser’ agreed to take from them the right to develop their undivided

2/9

th

share in the total Floor Space Index (FSI) available for the property

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agreed to be developed at the time of sanctioning of the plan of the

proposed project by the municipal authorities. The undivided share was

computed at 3049.57 square meters or thereabouts and the ‘Vendors’ and

‘Purchaser’ jointly calculated the net FSI available for the 2/9

th

share of

the ‘Vendors’ to be around 25,000 square feet. Clause 2 stated that the

net available FSI of 25,000 square feet was arrived at after deducting the

FSI that would be applicable for the excluded area. Clause 3 is of

relevance and is extracted hereunder: -

‘3. That the Vendors and the Purchaser agree that the said development

right shall be given to the Purchaser at the price/consideration of Rs.

915/- (Nine Hundred and Fifteen) per square feet. That as per the same

the total consideration for these presents is Rs.2,28,75,000/- (Rupees

Two Crores Twenty Eight Lakhs and Seventy Five Thousand Only). That

the said total consideration is calculated on the basis of the total available

F.S.I. on the undivided 20/90

th

share of the property agreed to be

developed being 25,000 square feet. That in the event of any additional

F.S.I. being available on account of any change in the rules, laws and

regulations for computing F.S.I. at the time of the sanctioning of the plan

or on account of any arithmetical error in calculating the said F.S.I., the

consideration payable will proportionately increase and in the event of

there being any decrease in the F.S.I. being available at the time of the

sanctioning of the plan on account of any change in the rules, laws and

regulations for computing F.S.I. or on account of any arithmetical error in

calculating the said F.S.I., the consideration payable will proportionately

decrease. The Purchaser and the Vendors agree, that any change in the

relevant rules, regulations and laws for computing the F.S.I. available

after the sanctioning of the plan shall operate to the benefit or prejudice

of the Purchaser and the consideration for these presents shall not be

affected thereby and the Vendors shall not claim any benefit therefrom.’

18. Clause 4 stated that, in the event of the ‘Purchaser’ constructing

basements in the proposed project, the ‘Purchaser’ shall pay to the

‘Vendors’ a further sum of ₹5,00,000/- as a one time and full and final

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consideration for the same, over and in addition to the amount payable

under Clause 3. This sum of ₹5,00,000/- was to be added to the last

instalment payable to the ‘Vendors’ by the ‘Purchaser’. It was agreed by

and between the ‘Vendors’ and the ‘Purchaser’ that the said payment was

not to be claimed by the ‘Vendors’ if the ‘Purchaser ’ did not actually

construct basements and it would be within the sole discretion of the

‘Purchaser’ whether or not to construct basements. Clause 5 recorded

that the ‘Purchaser’ had, simultaneously with the execution of the

agreement, paid to the ‘Vendors’ a sum of ₹55,00,000/- as earnest money.

The balance consideration

of ₹1,73,75,000/-, out of the total consideration

of ₹2,28,75,000/-,

was to be paid as per Clauses 6 and 7.

19. Clause 6 stated that the balance consideration of ₹1,73,75,000/-

would be paid by the ‘Purchaser’ to the ‘Vendors’ in ten equal instalments

of ₹17,37,500/- each. The payment was to be made in one of the following

manners, whichever was earlier in point of time: (i) all the instalments

would be paid within 30 months from the date of the commencement

certificate, or (ii) all the instalments would be paid within 30 months from

the date of the sanction of the plan by the municipal corporation, or (iii)

the first instalment shall be paid on 30.04.2005, the second instalment

shall be paid on 01.08.2005, the third instalment shall be paid on

01.06.2006 and, thereafter, successive instalments shall be payable on

the first day of each fourth successive month. Clause 7 provided for the

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‘Purchaser’ issuing individual cheques in favour of each of the ‘Vendors’,

proportionate to their respective shares in the property agreed to be

developed. It further recorded that it was agreed by and between the

‘Purchaser’ and the ‘Vendors’ that, in the event of there being any default

in payment of instalments or amounts, as mentioned therein, the ‘ Vendors’

shall cause to be served upon the ‘Purchaser’ a notice in writing, giving

the details of the default and calling upon the ‘Purchaser’ to remedy the

same within 15 days of receipt of the notice. It was also recorded by and

between the ‘Vendors’ and the ‘Purchaser ’ that the payments due, as

above, shall be the essence of these presents and time shall be the

essence of these presents.

20. Clause 9 recorded that the ‘Vendors’ had, simultaneously, with the

execution of these presents, handed over possession of their undivided

2/9

th

share in the property agreed to be developed to the ‘Purchaser’. It

further recorded that the ‘Vendors’ would not hand over the possession of

the bungalow and the garden in front of and behind the bungalow and

Room No. 1 in Chawl No. 1, adjacent to the bungalow, to the ‘Purchaser’.

It also recorded that ‘ Vendors’ had handed over possession of all other

structures and buildings on the property agreed to be developed, as set

out in the Third Schedule, to the ‘Purchaser’ and the ‘Purchaser’ would be

free and entitled to use and occupy the property agreed to be developed

to do all things necessary and deemed fit and proper by the ‘Purchaser’

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for the purpose of development of the property agreed to be developed.

Clause 10 affirmed that the ‘Vendors’ confirmed that possession of their

undivided 2/9

th

share in the property agreed to be developed was handed

over to the ‘Purchaser’ and the ‘Purchaser’ had entered thereon for the

development thereof.

21. Clause 11 required the ‘Purchaser’, after entering into possession

of the property agreed to be developed but before commencement of the

construction, to either enter into an agreement with the heirs of Prabhulal

and, thereafter, develop the entire property or develop only the property

agreed to be developed, along with the shares of the heirs of Madhukant

apart from the shares of Vyomesh and his son, Rohan Vyomesh

Thanawala. Clause 12 stated that, in the event the ‘Purchaser’ was unable

to enter into an agreement with the heirs of Prabhulal, the ‘Vendors’ would

consent to the partition of the property agreed to be developed and the

terms and conditions of the agreement would be construed as if entered

into with respect to the partitioned share of the ‘Vendors’ and the

‘Purchaser’ would be free to take all necessary steps for effecting the said

partition/subdivision and the ‘Vendors’ would not raise any objection to the

partition/subdivision. The ‘Purchaser’ was required to bear the entire

expenses of the said partition. The ‘ Vendors’ agreed that, in the event of

partition or subdivision of the property agreed to be developed, they would

take their share of the property agreed to be developed joined, physically

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and notionally, with the heirs of Madhukant along with Vyomesh and his

son, Rohan.

22. Clause 13 also spoke of the partition/subdivision of the property.

Clause 14 recorded that it was agreed by and between the ‘V endors’ and

the ‘Purchaser’ that, in any event, the ‘Purchaser’ would, before

commencement of construction, physically separate or cause to be

separated/partitioned/subdivided by metes and bounds, the share of the

‘Vendors’ in the property agreed to be developed and separate/demarcate

the same by the use of visible signs and allocate the same to the

‘Vendors’. It further stated that the ‘Purchaser’ would, after the said

partition/subdivision and before commencement of construction, intimate

to the ‘V endors’, in writing, that the partition has been e ffected and the

share of the ‘Vendors’ had been allocated to them and describe in writing

the visible signs by which the share of the ‘Vendors’ was separated. It was

agreed that, after the said partition/subdivision, the ‘Purchaser ’ would be

free to carry out the development as per the sanctioned plan and the

provisions of these presents. It was also agreed between the ‘ Vendors’

and the ‘Purchaser’ that from the date of the said partition/subdivision, the

share of the ‘Vendors’ in the property agreed to be developed shall be

physically and legally separate for all practical purposes and the

partition/subdivision of the share of the ‘ Vendors’ before commencement

of construction would be the essence of the contract.

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23. Clause 15 provided that, immediately after issuance of the

commencement certificate, the ‘Purchaser’ would create security in favour

of the ‘ Vendors’ for payment of the instalments and amounts, as payable

under the provisions of these presents. The ‘Purchaser’ was required, at

any time after issuance of the commencement certificate but before

commencement of construction, to create a mortgage over the proposed

shopping, commercial and residential complex to be built on the property

agreed to be developed by executing a deed of mortgage. This deed of

mortgage was to be registered by the ‘ Purchaser’ before commencement

of construction and the stamp duty payable thereon was to be paid by the

‘Purchaser’ and the ‘Vendors’ in the ratio of 75% and 25% respectively.

The ‘Purchaser’ was required to mortgage to the ‘Vendors’ specific units

in the proposed shopping, commercial/residential complex to be built on

the property agreed to be developed. The choice of units to be mortgaged

was with the ‘Vendors’. Insofar as the residential units were concerned,

only units between the 3

rd

and 6

th

floor were to be mortgaged. The

mortgage was to be created equally over the shopping, commercial and

residential units and not exclusively over any one of them. It was also

made clear that the ‘Purchaser’ would have no right to sell, transfer or, in

any way, charge or encumber the mortgaged units and the ‘ Vendors’

would release the units mortgaged to them proportionately upon payment

of each instalment as mentioned in the se presents. The ‘Purchaser’ could

19

sell or transfer the units mortgaged to the ‘Vendors’ only after they were

released by them. The ‘Vendors’ also agreed that they would not sell,

mortgage, charge, encumber or create any lien or third- party interest on

the mortgaged units as long as the ‘ Purchaser’ was regularly making

payment of the monies payable under these presents.

24. Clause 16 required the ‘Vendors’ to make out a marketable title to

the undivided 2/9

th

share of the property agreed to be developed, free from

any encumbrance and from any doubt. The ‘Vendors’ agreed to indemnify

the ‘Purchaser’ against any claim in respect of their undivided 2/9

th

share

of the property agreed to be developed. Clause 17 required the

‘Purchaser’ to apply to the municipal authorities for change of use, viz.,

from industrial to commercial/residential and the ‘ Purchaser’ was to bear

the entire expenses incurred therefor. Clause 18 provided that the

‘Purchaser’, as the attorney of the ‘Vendors ’ and in their name and on their

behalf, was to prepare plans of the said shopping, commercial and

residential complex and submit the same to the municipal corporation for

approval. All expenses in that regard were to be borne by the ‘Purchaser’.

25. Clause 19 recorded that, simultaneously with the signing of these

presents, the ‘ Vendors’ had also executed an irrevocable general power

of attorney in favour of Ramesh Mehta and Deepak Mehta, the partners,

authorizing them to jointly or severally carry out the work of development.

Clause 20 recorded that the ‘ Vendors’ assured, promised and represented

20

to the ‘Purchaser’ that they were in adverse possession of some portion

of land towards the ‘nallah’ side of the property and the ‘Purchaser’ was

at liberty to get the said land regularized by the competent authority at its

sole cost and expense for which the ‘ Vendors’ had no liability. The

‘Vendors’ further stated that that they had 2/9

th

share in the said land also

and the ‘Purchaser’ could purchase, @ ₹450/- per square foot, the FSI

granted to the ‘Vendors’ in respect of the said land and any FSI granted in

lieu of balconies, stilts, basements, etc., or any additional FSI granted in

respect thereof. The said amount was to be paid to the ‘Vendors’ by the

‘Purchaser’ as and when the said adverse possession was regularized by

the competent authority and not otherwise.

26. Clause 22 recorded that the ‘Purchaser’ was entitled to commence,

carry out and complete the construction of the proposed project in

accordance with the sanctioned plan; and to sell the flats, shops, garages,

or other units in the proposed project to prospective purchaser s and to

appropriate the proceeds thereof. The ‘Purchaser’ was empowered to

register the documents related to such transfer/sale with the concerned

Sub-Registrar. Clause 26 recorded that the ‘Vendors ’ and the ‘Purchaser’

agreed that all the taxes, rates, cesses, penalties, whatsoever, etc., in

respect of the property agreed to be developed till 31.03.2002 would be

paid by the ‘Vendors’ and, thereafter, i.e., from 01.04.2002, the ‘Purchaser’

would be liable to pay all the taxes, rates, cesses, penalties, whatsoever,

21

etc., on their own account to the concerned authorities in respect of the

property agreed to be developed. It was also made clear that the ‘ Vendors’

would bear the taxes, rates, cesses, penalties, whatsoever, in respect of

the property set out in the Second Schedule, i.e., the bungalow and Room

No. 1 in Chawl No. 1, which were in their possession. Clauses 28 and 29

provided that all the building material, rubble from the existing buildings

and structures, set out in the Third Schedule, would belong to the

‘Purchaser’ and would be removed by the ‘Purchaser’ at its own cost and

expense. The ‘Purchaser’ was to clear the site and construct the project

after demolition of the existing buildings and structures. The cost of such

demolition was to be paid by the ‘ Purchaser’ alone at its own risk and on

its own account. Clause 33 recorded that Vendors 1 and 2 had their factory

and garage upon the property agreed to be developed, shown in the Third

Schedule, and it was agreed that the said factory and the garage would

be relocated and adjusted within the area of the property agreed to be

developed at the cost and expense of the ‘ Purchaser’. It was also stated

that Vendors 1 and 2 would, after the commencement certificate was

issued to the ‘Purchaser’ and after actual payment of two instalments to

the ‘Vendors’, shift/relocate the said factory and garage out of the property

agreed to be developed at their own cost and expense.

27. Clause 35 provided that the ‘Purchaser ’ shall construct a compound

wall enclosing the property agreed to be developed to safeguard it. The

22

‘Purchaser’ was to bear the expense thereof. Clause 36 provided that the

‘Purchaser’ shall form and register a cooperative shopping, commercial

and residential society and the ‘Vendors’ shall sign and execute the

application for registration and the other papers necessary for formation

and registration of the society. This society of flat/shop purchasers was to

be registered under Section 10 of the Maharashtra Ownership of Flats

(Regulation of the Promotion of Construction, Sale, Management and

Transfer) Rules, 1964. Clause 37 required the ‘ Vendors’ to execute a deed

of conveyance along with the other owners (responsibility of negotiating

with the other owners being the sole responsibility of the ‘Purchaser’ and

the ‘Vendors’ had no responsibility for the same) for the undivided 2/9

th

share in the property agreed to be developed, in favour of the ‘Purchaser ’

or their nominees, including the cooperative society of the shop/flat

purchasers in the shopping, commercial and residential complex. All the

costs, charges and expenses of such deed or other documents required

to be signed by the ‘Vendors’, including stamp duty and registration

charges, were to be borne by the ‘Purchaser ’. The ‘Purchaser’ also had

the right to execute the said deed of conveyance as the certified attorney

of the ‘ Vendors’ but such deed of conveyance was not to be executed till

payment of all the instalments and amounts due under these presents.

Clause 38 stated that it would be the responsibility of the ‘Purchaser’ to

form and register the cooperative shopping, commercial and residential

23

society of flat/shop purchasers and the ‘Vendors ’ would not be concerned

with or be responsible for the same.

28. Clause 40 contained a declaration by the ‘Vendors’ while Clause 41

was the declaration of the ‘Purchaser’. Clause 47 stated that,

notwithstanding anything contained in the agreement or in any other

agreement between the ‘Purchaser’ and the ‘Vendors’ or between the

‘Purchaser’ and other owners and, specifically, with the heirs of

Madhukant and/or with Vyomesh, the ‘Purchaser’ declared that neither the

firm nor its partners had any right, title, claim or interest over the bungalow

and the gardens in front of and behind the bungalow and Room No. 1 in

Chawl No. 1 adjacent to the bungalow. The ‘Purchaser ’ declared that it

would not, in any way, interfere with the possession and right of the

‘Vendors’ over the said bungalow and the garden in front of and behind

the bungalow and Room No. 1 in Chawl No. 1 adjacent to the bungalow

and shall not in any way attempt to partition or develop the same. It was

further recorded that the ‘Purchaser’ gave up, released and relinquished

all rights, title or interest in the said bungalow and the garden in front of

and behind the bungalow and Room No. 1 in Chawl No. 1. Clause 51

recorded that the present agreement would be in supersession of all prior

agreements between the parties, including the MoU dated 15.03.2002,

and all rights between the parties, inter se , under any prior agreement

would come to an end and stand forfeited. Clause 53 stated that, in the

24

event of there being any default in payment of any of the instalments or

amounts, under any and/or all of the provisions of these presents in the

stipulated time as aforesaid, the present agreement would come to an end

and all rights given to the ‘Purchaser ’ under this agreement would

automatically come to an end. Clause 54 stated that, in the event of

paragraph 53 above applying and in the event there was no construction

carried out by the ‘Purchaser’ on the share of the ‘Vendors’ on the date of

such default, the ‘Vendors’ would not be liable to pay the ‘ Purchaser’ any

amount towards the value of any structure/building constructed on the

share of the other owners and the ‘ Vendors’ would only be liable to repay

to the ‘Purchaser’ the consideration paid to them by the ‘Purchaser’

without interest. It was further recorded that, on the date on which the

‘Vendors’ paid the said amount, the ‘Purchaser ’ would transfer to the

‘Vendors’, the divided and regulated possession of their share of the

property agreed to be developed. The ‘Vendors’ were to enter upon their

share, as above, only after payment of the amount and not before that.

Clauses 55 and 56 spoke of a situation where construction was carried

out by the ‘Purchaser ’ on the land that fell to the share of the ‘Vendors'.

29. Clause 61 stated that, in case of any disputes, doubts or differences

arising between the parties in respect of any of the terms and conditions

of these presents or in respect of the interpretation of any of the terms and

conditions of these presents or in respect of any other matter, cause or

25

thing whatsoever not contained herein or otherwise provided for, the same

shall be referred to arbitration for adjudication, subject to the provisions of

the Indian Arbitration Act, 1996, or any other statutory modifications or

enactments thereof, for the time being in force. It further provided that

each party shall appoint one arbitrator and such arbitrators shall, in turn,

elect an umpire and the decision of the said arbitrators shall be binding

upon all the parties. Clause 63 confirmed that it was agreed by and

between the ‘Purchaser’ and the ‘Vendors’ that payment of instalments

under these presents on the due dates shall be the essence of the

agreement. This was again reiterated in Clause 64, wherein it was agreed

by and between the ‘Purchaser ’ and the ‘Vendors’ that time shall be the

essence of this agreement.

30. This being the long and short of the agreement dated 06.08.200 3,

the claimants’ contention before the arbitral tribunal was that, in all,

₹1,59,22,000/-, out of the total sale consideration of ₹2,28,75,000/-, had

been paid by them to the respondents. In addition, they claimed that a

sum of ₹1,71,971/- was paid by them to the Gujarat Finance Corporation

to settle the respondents’ liability and, earlier, they had paid ₹19,50,000/-

to Kantilal, which the respondents had agreed to reimburse to them. They

also claimed that they paid ₹ 3,00,000/- to one Jariwala to meet the

respondents’ liability. They asserted that they had sent cheques for

₹34,75,000/- to the respondents in October, 2007, but they were not

26

encashed. They claimed that they were ready and willing to pay the

balance sale consideration to the respondents, after deducting the

amounts paid, for transfer of their 2/9

th

share in the property, possession

of which was already delivered to them. In the alternative, they raised a

claim for damages of ₹41,46,49,688/-.

31. Contesting these claims before the arbitral tribunal, the respondents

raised the issue of limitation. They also asserted that the claimants had

committed breach of various clauses of the agreement dated 06.08.2003.

They denied that the claimants were in possession of their 2/9

th

share in

the property. They denied that the claimants had paid ₹19,50,000/- to

Kantilal and that they had agreed to reimburse the same. They also denied

payment by the claimants of ₹1,71,971/- to Gujarat Finance Corporation

and of ₹3,00,000/- to Jariwala. Their main contention was that the subject

agreement was merely for development and was not an agreement to sell

their share to the claimants. The respondents raised a counter-claim for

compensation of ₹110,70,00,000/- along with costs of ₹20,00,000/-.

32. The majority award noted that the nomenclature of a document was

not conclusive proof of the nature of transaction therein and undertook

detailed analysis of the terms and conditions in the agreement dated

06.08.2003. It was noted that there was no separate defined property,

whereupon the development was to be carried out and it was observed

that, had the transaction been only for development, the agreement would

27

have described the developments to be carried out by the claimants. It

was further noted that the respondents had agreed to give their 2/9

th

share

to the claimants and the consideration therefor was to be calculated on

the basis of the FSI. Referring to Clause 3 of the agreement, it was

observed that, if the transaction was only for development and the

claimants were only developers, then the benefit or prejudice on account

of a change in the FSI Rules ought not to go to the claimants as it would

ordinarily be given to the owners. It was opined that Clause 3 indicated

that the transaction was for sale and not for development. It was observed

that, had it been only a development agreement, then the question of

satisfying the claimants about marketable title to the property would not

arise and indemnifying the claimants in that regard would also not arise.

33. It was further noted that, if the property was given to the claimants

only for development, the agreement would have provided for possession

thereof to be returned after completion of the development but there was

no such clause. Further, as Clause 22 of the agreement envisaged sale

of the flats, shops and other units in the proposed project to be built by the

claimants without any portion of the sale consideration being paid to the

respondents or even their approval or consent being required for such

sale or transfer, it was opined that this clause demonstrated that it was an

agreement to sell. Similarly, the liability for payment of taxes, rates, cesses

etc. being with the claimants after the cut-off date, 31.03.2002, was held

28

to be a further indication in this regard. It was noted that, as per Clauses

36 and 37, the deed of conveyance was to be executed by the

respondents in favour of the purchasers or their nominees, including the

co-operative society to be formed at the cost of the claimants, and no

stipulation was made as to any additional amount being paid to the

respondents therefor, apart from the consideration of ₹2,28,75,000/- that

was agreed upon. Reference was made to Clause 50, which provided that

the claimants would continue all pending cases/litigation/proceedings, in

relation to the property agreed to be developed, at their own risk and cost,

and it was observed that this clause would not have been agreed to by

the respondents had they intended to remain the owners. It was observed

that this clause showed that the claimants, being the purchasers, were to

take on the responsibility of fighting pending litigation relating to the

property which they would not have taken on, if they were not the owners.

34. Reference was then made to the stand of Upendra and Pankaj in

Civil Suit No. 445 of 2008, wherein they had candidly asserted, by way of

their written statement, that they had agreed to sell the property to

defendant No.7 therein, viz., Shreeram Builders, claimant No.1. It was

opined that this admission would be binding upon them and reference was

made to the decision of this Court in Union of India vs. Moksh Builders

and Financiers Ltd. and others

3

, wherein it was observed that an

3

AIR 1977 SC 409

29

admission by a party would be substantive evidence of the fact admitted,

irrespective of whether the said party appeared in the witness box and

whether such party was confronted with that statement. The respondents’

contention that the admission must necessarily be made in the same

proceedings was rejected. It was further held that, as the sons of Upendra

and Pankaj, respondent Nos. 3 to 5 herein, were out of India, the stand

taken by Upendra and Pankaj would be binding on them also.

35. It was noted that, though the respondents denied the payments

made by the claimants, Upendra admitted in his cross- examination that

the claimants had paid ₹80,000/- and ₹2,00,000/- towards municipal

taxes. He also admitted that nearly ₹19,00,000/- was paid by the

claimants to meet their needs. Adverting to the contention of the

respondents that time was the essence of the contract, in terms of the

payments being made within the stipulated timeframes, it was observed

that, as the respondents accepted belated payment of six instalments at

the very outset, without raising any objection and without issuing a notice

under Clause 7, they could not rely on the time stipulation. It was noted

that the respondents had not offered to return the monies received by

them from the claimants under the agreement even after the purported

termination thereof.

36. Dealing with the breaches of the agreement alleged by the

claimants, it was noted that out of the consideration of ₹2,28,75,000/-, the

30

respondents admitted receipt of ₹55,00,000/- by way of earnest money

and as regards the payment of balance amount of ₹1,73,75,000/-, it was

noted that the claimants had paid the initial six instalments and the

respondents received the same. It was noted that payment of those six

instalments was with delay , but the respondents neither raised a protest

nor received the instalments without prejudice to their rights arising out of

the agreement. The contention of the respondents that the delayed

payment of these instalments amounted to a breach was rejected, as

Clause 7 of the agreement specifically provided for a notice being given

to the claimants in the event of a breach, calling upon them to remedy the

same within 15 days. It was observed that the respondents never issued

any such notice despite the delay in the payment of those six instalments

and the same could not be taken to be a breach. It was further noted that

only the cheques given for the 7

th

to 9

th

instalments had been returned but

even at that stage, no notice was given in writing under Clause 7. It was,

therefore, opined that the claimants had not committed any default in

terms of Clauses 5 to 7. It was, accordingly, concluded that termination of

the agreement dated 06.08.2003 by way of the legal notice dated

09.04.2008 was not justified and the same would have no legal

consequences or validity.

37. It was further noted that prior to the termination notice dated

09.04.2008, the claimants had sent 10 cheques for the sum of

31

₹34,75,000/- and 5 cheques for ₹17,37,500/- drawn in favour of the

respondents but the same were refused by them. This fact was held to be

sufficient to infer that the claimants had the financial capacity to pay the

balance consideration. As there was no documentary evidence in proof of

payment of ₹3,00,000/- to Jariwala, the claimants’ claim in that regard was

rejected. As regards the payment to Gujarat Financial Corporation, it was

held that the liability of Upendra and Pankaj in that regard came to

₹26,222/- and only that part of the payment by the claimants could be

attributed to them. Out of the amount of ₹19,50,000/- said to have been

paid to Kantilal, it was observed that Upendra conceded in his cross

examination that the said amount was, in fact, paid. However, the liability

of Upendra and Pankaj apropos the same was determined at ₹6,59,167/-

each and only those sums were directed to be taken into account.

38. As regards the total sum paid by the claimants to the respondents

under the agreement, it was noted that a sum of ₹1,19,18,670/- was paid

in that regard but, in addition thereto, ₹13,18,334/- out of the sum of

₹19,50,000/- paid to Kantilal, which was attributable to Upendra and

Pankaj, along with ₹26,222/- being their share in the payment to Gujarat

Financial Corporation were also added. In effect, the respondents were

stated to have received ₹1,19,18,670/- + ₹55,00,000/- + ₹13,18,334/- +

₹26,222/-, aggregating to ₹1,87,63,226/-. However, taking note of the

passage of time and escalation of land prices, it was held that the

32

claimants should pay six times the agreed rate of consideration of ₹915/-

per square foot, i.e., ₹5,490/- per square foot. Applying this rate, it was

held that the claimants had to pay, in all, ₹13,72,75,000/- and upon

deducting the sum of ₹1,87,63,226/- therefrom, the balance payable by

the claimants to the respondents was held to be ₹11,85,11,774/-.

However, as the sum of ₹1,87,63,226/- had been paid to the respondents

more than five years back, it was held that interest would have to be added

thereto at the rate of 10%. Accordingly, ₹93,81,610/- was deducted from

the total amount payable and the net amount payable by the claimants to

the respondents was quantified at ₹10,91,30,164/-. The claim in the

alternative by the claimants towards damages was for ₹41,46,49,688/-. It

was held that, in the event the findings in favour of the claimants were

reversed by a superior authority, holding that they were not entitled to

specific performance of the agreement, the damages payable to the

claimants would be ₹23,21,19,892/-. As regards the respondents ’ counter-

claim for ₹110,70,00,000/- along with costs of ₹20,00,000/-, the same was

rejected for want of supporting documents or material .

39. In the result, the claimants were held entitled to specific

performance of the agreement dated 06.08.2003 upon payment of

₹10,91,30,164/-. They were further held entitled to execution of the sale

deed in respect of the respondents’ 2/9

th

share in the property, excluding

their share in the bungalow and the garden in front of and behind the

33

bungalow and Room No. 1 in Chawl No. 1 along with the open courtyard

of the said room, adjacent to the bungalow.

40. Considering this majority award in the impugned judgment dated

05.03.2024 passed in the appeals filed by both sides, the learned Judge

of the High Court held that, as per the agreement, there were three

conditions precedent to execution of the deed of conveyance in favour of

the claimants, viz., (i) the deed of conveyance would be executed along

with conveyance deeds in relation to the properties of the other owners,

i.e., Vyomesh and Madhuk ant’s heirs; (ii) execution of the conveyance

deed would be after the project was fully constructed, and (iii) all

instalments and amounts payable under the agreement were duly paid.

The learned Judge held that none of these conditions stood fulfilled and,

therefore, the obligation to execute the conveyance deed had not arisen.

41. It was also noted that determination of the sale consideration

depended on additional amounts being added after the construction and

the consideration, therefore, remained variable. Without determination of

the full consideration payable after completion of the project, the learned

Judge opined that the majority award could not have directed execution

of the deed of conveyance in favour of the claimants. Noting that the

validity of the award had to be tested under the unamended Section 34 of

the Act of 1996, the learned Judge opined that the award was contrary to

Section 28(3) of the Act of 1996 as it was in violation of the terms of the

34

contract. Reference was made to the decision of the Bombay High Court

in Board of Control for Cricket in India vs. Deccan Chronicle

Holdings Ltd.

4

, wherein it was held that the arbitral tribunal could not

rewrite the contractual terms. The learned Judge opined that the majority

award had not interpreted the contract in a reasonable manner and

ignored the material terms thereof, whereby a jurisdictional error had been

committed. Another instance cited in this regard was the consideration of

the sum of ₹19,50,000/- said to have been paid by the claimants to Kantilal

and others under the earlier MoU. The learned Judge noted that, as per

Clause 51, the agreement dated 06.08.2003 was in supersession of all

prior agreements and, therefore, the amount paid, if any, under the earlier

MoU could not have been taken into account under the present

agreement. It was further noted that the majority award, despite granting

the relief of specific performance, had awarded the alternate relief of

damages in the event the primary relief granted was set aside and the

learned Judge held that this was not in keeping with the procedure and

amounted to violation of the fundamental policy of Indian law.

42. The learned Judge further held that the subject agreement was not

an agreement to sell but was an agreement for development only. In that

regard, he opined that the responsibility to make out a marketable title

was only in the context of satisfying the claimants that the respondents

4

2021 SCC Online Bom. 834, (2021) 4 Bom CR 481, (2021) 3 Arb LR 125

35

had the right to transfer the development right in their favour. The learned

Judge opined that the agreement had to be read as a whole and, by doing

so, no inference could be drawn that it was not a development agreement.

As regards the admission made by Upendra and Pankaj in the earlier suit,

the learned Judge opined that the legal position, on the strength of the

decision in Ramabai Shriniwas Nadgir vs. Government of Bombay

5

,

was that an admission of a party could be used against the maker only in

the same proceedings in which it is made. Pausing here for a moment, we

may note that reliance placed on this decision by the learned Judge was

misplaced, as the said decision was commented upon by the Bombay

High Court itself in Dattatraya Shripati Mohite vs. Shankar Ishwara

Mohite and another

6

and it was held that Ramabai (supra) is not an

authority in support of the view that the Court is not entitled to consider

admissions made by a party in the course of proceedings in other suits

relating to the same subject matter. This aspect was also noted by this

Court in Basant Singh vs. Janki Singh and others

7

.

43. Further, the learned Judge was also of the opinion that acceptance

of the belated payment of six instalments did not estop the Thanawalas

from raising the contention that default in that regard constituted breach

of the agreement. Reference in this regard wa s made to Clauses 52 and

5

AIR 1941 Bom 144

6

AIR 1960 Bom 153

7

AIR 1967 SC 341: 1966 SCC OnLine SC 234

36

53 of the agreement. The learned Judge opined that there was clear lack

of readiness and willingness on the part of the claimants in performing

their part of the agreement but the same had been overlooked in the

majority award. The learned Judge, accordingly, concluded that the

majority award wa s patently illegal as it struck at the root of the agreement

and shocked the conscience of the Court. The appeals were disposed of

in the light of these findings.

44. This being the factual framework vis-à-vis the majority award and its

consideration under Sections 34 and 37 of the Act of 1996, we may note

that the edict of the Constitution Bench in Gayatri Balasamy vs. ISG

Novasoft Technologies Limited

8

puts it beyond the pale of doubt that

appellate jurisdiction under Section 37 of the Act of 1996 is coterminous

with, and as broad as, the jurisdiction of the Court deciding objections

under Section 34 thereof. Therefore, the High Court, in exercise of such

appellate jurisdiction, was empowered to again test the award on the anvil

of Section 34, notwithstanding its confirmation under Section 34 by the

learned Principal District Judge, Thane. However, we may also note that

Section 34 was subjected to changes by the Arbitration and Conciliation

(Amendment) Act, 2015 (Act 3 of 2016), with retrospective effect from

23.10.2015 and in that context, in Ssangyong Engineering and

Construction Company Limited vs. National Highways Authority of

8

(2025) 7 SCC 1

37

India (NHAI)

9

, this Court affirmed the view taken earlier in Board of

Control for Cricket in India vs. Kochi Cricket Private Limited and

others

10

that the amended Section 34 of the Act of 1996 would apply only

to applications filed thereunder on or after 23.10.2015. In effect, Section

34 of the Act of 1996, as amended by the Act 3 of 2016, has no application

in the present case as both sides filed their applications under Section 34

of the Act of 1996 long prior to 23.10.2015. The unamended Section 34 of

the Act of 1996 would, therefore, be applicable.

Section 34 of the Act of

1996, as it then stood, reads as under:

‘34. Application for setting aside arbitral award.—(1) Recourse to a court

against an arbitral award may be made only by an application for setting

aside such award in accordance with sub- section (2) and sub- section (3).

(2) An arbitral award may be set aside by the Court only if—

(a) the party making the application furnishes proof that—

(i) a party was under some incapacity, or

(ii) the arbitration agreement is not valid under the law to which the parties

have subjected it or, failing any indication thereon, under the law for the

time being in force; or

(iii) the party making the application was not given proper notice of the

appointment of an arbitrator or of the arbitral proceedings or was

otherwise unable to present his case; or

(iv) the arbitral award deals with a dispute not contemplated by or not

falling within the terms of the submission to arbitration, or it contains

decisions on matters beyond the scope of the submission to arbitration:

Provided that, if the decisions on matters submitted to arbitration can be

separated from those not so submitted, only that part of the arbitral award

which contains decisions on matters not submitted to arbitration may be

set aside; or

(v) the composition of the a rbitral tribunal or the arbitral procedure was

not in accordance with the agreement of the parties, unless such

agreement was in conflict with a provision of this Part from which the

9

(2019) 15 SCC 131

10

(2018) 6 SCC 287

38

parties cannot derogate, or, failing such agreement, was not in

accordance with this Part; or

(b) the C ourt finds that—

(i) the subject-matter of the dispute is not capable of settlement by

arbitration under the law for the time being in force, or

(ii) the arbitral award is in conflict with the public policy of India.

Explanation.—Without prejudice to the generality of sub- clause (ii) it is

hereby declared, for the avoidance of any doubt, that an award is in

conflict with the public policy of India if the making of the award was

induced or affected by fraud or corruption or was in violation of s ection

75 or s ection 81.

(3) An application for setting aside may not be made after three months

have elapsed from the date on which the party making that application

had received the arbitral award or, if a request had been made under

section 33, from the date on which that request had been disposed of by

the arbitral tribunal:

Provided that if the C ourt is satisfied that the applicant was prevented by

sufficient cause from making the application within the said period of

three months it may entertain the application within a further period of

thirty days, but not thereafter.

(4) On receipt of an application under sub- section (1), the C ourt may,

where it is appropriate and it is so requested by a party, adjourn the

proceedings for a period of time determined by it in order to give the

arbitral tribunal an opportunity to resume the arbitral proceedings or to

take such other action as in the opinion of a rbitral tribunal will eliminate

the grounds for setting aside the arbitral award.’

45. In Renusagar Power Co. Ltd. vs. General Electric Co.

11

, dealing

with the scope of ‘public policy’ in the context of unamended Section 34 in

the Act of 1996, this Court held that an award which is contrary to (i) the

fundamental policy of Indian law or (ii) the interest of India or (iii) justice or

morality, would be against ‘public policy ’. Thereafter, in Oil & Natural Gas

Corporation Ltd. vs. Saw Pipes Ltd.

12

, this Court held that the phrase

11

(1994) Supp 1 SCC 644

12

(2003) 5 SCC 705

39

‘public policy of India’ used in Section 34 of the Act of 1996 is required to

be given a wider meaning and that the concept of ‘public policy’ connotes

some matter which concerns public good and public interest. It wa s noted

that what is for public good or in public interest or what would be harmful

to public good or public interest has varied from time to time. Therefore,

in addition to the narrower meaning given to ‘public policy’ in Renusagar

(supra), this Court held that an award could be set aside if it was patently

illegal. In the result, this Court held that an award could be set aside if it

was contrary to: (a) fundamental policy of Indian law; or (b) the interest of

India; or (c) justice or morality; or (d) if it is patently illegal. It wa s observed

that such illegality must go to the root of the matter and should not be of

a trivial nature. It wa s held that an award could also be set aside if it is so

unfair and unreasonable that it shocks the conscience of the Court, as it

would be opposed to ‘public policy ’ and require to be adjudged void.

46. In Centrotrade Minerals & Metals Inc. vs. Hindustan Copper

Ltd.

13

, elaborating on the scope of ‘patent illegality’, this Court observed

that such patent illegality must go to the root of the matter and should be

so unfair and unreasonable as to shock the conscience of the Court and

where an arbitrator had gone contrary to or beyond the expressed law of

the contract or granted relief on a matter not in dispute, it would come

within the purview of Section 34 of the Act of 1996.

13

(2006) 11 SCC 245

40

47. In Delhi Development Authority vs. R.S. Sharma and Company,

New Delhi

14

, this Court summarized the law thus: -

‘21. From the above decisions, the following principles emerge:

(a) An award, which is

(i) contrary to substantive provisions of law; or

(ii) the provisions of the Arbitration and Conciliation Act, 1996; or

(iii) against the terms of the respective contract; or

(iv) patently illegal; or

(v) prejudicial to the rights of the parties;

is open to interference by the court under Section 34(2) of the Act.

(b) The award could be set aside if it is contrary to:

(a) fundamental policy of Indian law; or

(b) the interest of India; or

(c) justice or morality.

(c) The award could also be set aside if it is so unfair and unreasonable

that it shocks the conscience of the court.

(d) It is open to the court to consider whether the award is against the

specific terms of contract and if so, interfere with it on the ground that it is

patently illegal and opposed to the public policy of India.’

48. In Oil and Natural Gas Corporation Limited vs. Western Geco

International Limited

15

, this Court considered what would constitute

‘fundamental policy of Indian law’. Without exhaustively elaborating on the

concept, three distinct juristic principles were held to be part and parcel of

‘fundamental policy of Indian law’. The first and foremost principle was

that in every determination, whether by a Court or other authority, that

affects the rights of a citizen or leads to any civil consequences, the Court

or authority concerned is bound to adopt what is, in legal parlance, called

a 'judicial approach' in the matter. The second principle was that a Court

and so also a quasi-judicial authority, while determining the rights and

14

(2008) 13 SCC 80

15

(2014) 9 SCC 263

41

obligations of a party before it, must do so in accordance with the

principles of natural justice. It was noted that, besides the ‘audi alteram

partem’ rule, one of the facets of the principles of natural justice is that the

Court or authority deciding the matter must apply its mind to the attendant

facts and circumstances while taking a view one way or the other. It wa s

observed that non-application of mind is a defect that is fatal to any

adjudication. The requirement that an adjudicatory authority must apply

its mind was held to be so deeply embedded in our jurisprudence that it

could be described to be a ‘fundamental policy of Indian law’. The third

principle recognized as a salutary juristic fundamental in administrative

law is that a decision which is so perverse or irrational that no reasonable

person could have arrived at the same cannot be sustained. Pe rversity or

irrationality of decisions wa s to be tested on the touchstone of the

Wednesbury principle of reasonableness.

49. In Associate Builders vs. Delhi Development Authority

16

,

considering Section 28(3) of the Act of 1996, this Court observed that an

arbitral tribunal must decide in accordance with the terms of the contract

but, if an arbitrator construes a term of the contract in a reasonable

manner, it would not mean that the award can be set aside on that ground.

It was observed that construction of the terms of the contract is primarily

for an arbitrator to decide, unless the arbitrator construes the contract in

16

(2015) 3 SCC 49

42

such a way that it could be said to be something that no fair-minded or

reasonable person could do. It was further observed that when a C ourt is

applying the ‘public policy’ test to an arbitral award, it does not act as a

Court of appeal and a plausible view of facts by the arbitrator necessarily

has to be accepted, as the arbitrator is the ultimate master of facts.

Similarly, in UHL Power Company Limited vs. State of Himachal

Pradesh

17

, a 3-Judge Bench of this Court confirmed that, if a plausible

interpretation of the contract is available, no fault can be found with the

arbitrator if he accepted one such interpretation as against another.

50. In OPG Power Generation Private Limited vs. Enexio Power

Cooling Solutions India Private Limited and another

18

, a 3- Judge

Bench of this Court held that an arbitral tribunal must decide in

accordance with the terms of the contract and in case it does so against

the terms of the contract, the award would be patently illegal. On the same

lines, in South East Asia Marine Engineering and Constructions

Limited (SEAMEC LTD.) vs. Oil India Limited

19

, this Court had held that,

if on a full reading of the contract, the view of the arbitral tribunal on the

terms of the contract is not a plausible view, the award would be

considered perverse and, as such, amenable to interference. In

Ssangyong Engineering (supra), this Court found that the award created

17

(2022) 4 SCC 11

18

(2025) 2 SCC 417

19

(2020) 5 SCC 164

43

a new contract by applying a circular that was not even placed before the

arbitral tribunal. It was, therefore, held that a fundamental principle of

justice was breached, i.e., that a unilateral addition or alteration of a

contract could not be foisted upon an unwilling party nor can a party to the

agreement be made liable to perform a bargain not entered into by it. It

was held that such a course of conduct would be contrary to the

fundamental principles of justice as followed in this country and shocked

the Court’s conscience. It was, however, cautioned that this ground would

be available only in exceptional circumstances and, under no

circumstances, would the Court interfere with an award on the ground that

justice, in its opinion, was not done.

51. Before applying these settled legal principles to the present case,

we may note that the subject agreement dated 06.08.2003, though titled

‘Agreement for Development’, does not conform to the typical prototype

of a development agreement, whereunder a landowner would expect

returns, usually in the shape of a share in the built-up area. The normal

bargain in a development agreement is that the landowner would provide

the land on which the development is to be made while the developer

would bring in the funds and the wherewithal to undertake such

development and upon completion of the project, both would share the

built-up area in the agreed upon ratio. However, the subject agreement

was not a run-of-the-mill development agreement but was a complex

44

document that contemplated development being undertaken but, in effect,

also providing for conveyance of title over the respondents’ share in the

land to the appellant or its nominee. In effect, the respondents l iterally

washed their hands off the whole project and did not expect any returns

from the development itself. They were not benefited in any manner by

the actual development, either by appropriating to themselves a share in

the built-up area or a part of the sale proceeds thereof. They were only to

be paid the consideration on the strength of the FSI and the additional

amounts payable in the context of the extra FSI, if any, and basements, if

any. Further, the price for computing the consideration payable to the

respondents was based on the projected FSI of 25,000 square feet and

remained flexible only till municipal sanction of the plan. Thereafter, the

consequences of changes in the FSI Rules, be it beneficial or otherwise,

were to be borne by the appellant alone. Ordinarily, such benefit would go

to the landowner also and not just to the developer.

52. In any event, irrespective of the slotting of the subject agreement, in

terms of whether it was only for development or it was also an agreement

to sell, the performance of obligations envisioned thereunder was clearly

set out. Once the agreement made it clear that the parties thereto were to

perform their respective obligations in a particular order, the same was

binding upon them and the agreement had to be given effect to as

envisaged therein. Viewed in that context, it was not essential to identify

45

and label the character of the agreement as it was the terms thereof,

stipulating sequential performance of obligations, that assumed

importance. While so, the majority award proceeded on the premise that

the subject agreement was not for development but was an agreement to

sell and, treating it as such, it went on to analyse the terms thereof. In that

regard, we may note that Section 28(3) of the Act of 1996 mandates that,

in all cases, the arbitral tribunal shall decide and make the award by taking

into account the terms of the contract and the trade usages applicable to

the transaction. Trite to state, when the terms of the contract are clear and

explicit, it would not be necessary to import t rade usages, as that step

would usually be necessary when the contract is silent on such aspects.

It is in the light of this statutory provision that we have to examine the

majority award, as the High Court interfered with it on the ground that there

was violation of Section 28(3) of the Act of 1996.

53. The fundamental error writ large in the majority award is that it dealt

with the matter as if it was a regular suit for specific performance of an

agreement to sell and not as an arbitration arising out of a contract that

visited obligations upon the parties thereto with a binding sequence as to

how they were to perform their respective parts . That erroneous approach

continued even before this Court, as arguments were advanced as if we

were dealing with a regular appeal arising out of a decree for specific

performance of an agreement to sell. On those lines, it has been stated

46

on behalf of the appellant that it paid about 82% of the total consideration

of ₹2,28,75,000/-, i.e., ₹1,87,63,226/-, and that the balance consideration

of ₹41,11,744/- was deposited with the District Judge’s Court at Thane on

15.07.2017. The appellant expressed willingness to conclude the sale

transaction under the agreement, by agreeing to enhancement of the

consideration to ₹13,72,75,000/-, as per the direction in the majority

award. It was stated that, though the appellant filed an appeal against the

direction to pay six times the agreed rate of ₹915/- per square foot, the

appellant would not pursue the same and wa s willing to abide by the

direction in that regard. However, our jurisdiction presently is different from

that of an appellate C ourt dealing with a regular specific performance

decree, as we are only required to test the validity of the majority award

on the anvil of Section 34 of the Act of 1996.

54. As stated earlier, the agreement terms specified the sequence in

which they were to be acted upon. However, it is clear that the said

sequence did not come to pass in reality. For starters, the violation of the

payment schedule, in terms of the agreement, is apparent. We may note

that, under Clause 3 of the agreement, the consideration payable to the

respondents, as set out therein, was to be remitted within the time frame

stipulated under Clause 6 thereof. It was made clear that such payments

were to be timebound and it was affirmed more than once that time was

of the essence. Clause 6 provided for three alternative modes for paying

47

the balance consideration in ten instalments of ₹17,37,500/- each,

stipulating that the mode which would be earlier in point of time had to be

resorted to. The first mode was that it would be paid within 30 months from

the date of issuance of the commencement certificate. The second mode

was that it would be paid within 30 months from the date of sanction of the

municipal plan. Neither of these events took place, as the admitted

position is that the appellant failed to secure a sanctioned plan for the

development that was to be carried out. Therefore, the third mode was the

only mode that could be adopted for payment of the consideration. This

mode stated that the first instalment would be paid on 30.04.2005; the

second instalment on 01.08.2005; the third instalment on 01.06.2006 and

successive instalments, thereafter, on the first day of each fourth

successive month. The amount was to be paid in full by 01.03.2008.

55. However, the first instalment due on 30.04.2005 was remitted on

02.05.2005 with 02 days delay. Further, out of the sum of ₹17,37,500/-

due towards this instalment, ₹1,95,000/- was paid only on 06.07.2005.

The second instalment, due on 01.08.2005, was paid on 20.09.2005 with

50 days delay. The third instalment that was due on 01.06.2006 was paid

on 27.06.2006 with 26 days delay. The fourth instalment , due on

01.09.2006, was paid on 06.10.2006 with 35 days delay. The fifth

instalment, due on 01.12.2006, was paid on 04.01.2007 with 34 days

delay. The sixth instalment, due on 01.03.2007, was paid on 17.04.2007

48

with a delay of 47 days. The seventh, eighth and ninth instalments were

due on 01.06.2007, 01.09.2007 and 01.12.2007 respectively. Ten

cheques dated 10.10.2007, for ₹34,75,000/-, and five cheques dated

27.03.2008, for ₹17,37,500/-, were offered by the appellant towards these

instalments. However, the cheques were not encashed and were returned

by the respondents on 16.04.2008. The delay in offering payment of these

instalments, reckoned from the due dates, works out to 144 days, 52 days

and 117 days respectively. The tenth instalment of ₹17,35,500/- that was

due on 01.03.2008 was never tendered, but the appellant communicated

readiness to make the payments due, under its letter dated 27.03.2008.

However, as this letter was not accepted, letter dated 09.04.2008 was

again sent along with fresh cheques. These cheques were also returned

by the respondents on 16.04.2008, under cover of a letter. Thus, the

admitted position is that the payment of the balance consideration was not

completed by 01.03.2008, in terms of Clause 6 of the agreement.

56. No doubt, the first six instalments were paid belatedly by the

appellant and were accepted by the respondents without protest. The

failure on their part to raise an objection w as held against them in the

majority award. This is due to the fact that Clause 7 of the agreement

provided that, in the event of the appellant and its partners c ommitting

default in payment of any instalments, the respondents were to serve

upon them a notice in writing giving the details of the default and calling

49

upon them to remedy the same within 15 days. We may, however, note

that the clause, having stated so, goes on to record that the due payments

were to be treated as the essence of the presents under the agreement

and that time shall be the essence. Further, all that this clause stated was

that, if there was a delay in any payment, the respondents were to issue

a notice and the payment due had to be cleared within 15 days of the

receipt thereof. The failure on the part of the respondents to issue a notice

under Clause 7, therefore, had the effect of curing the delay in the

payment of thos e six instalments which were accepted by the respondents

without protest. However, it did not mean that either the time stipulations

or the oft-repeated insistence in the agreement that time shall be the

essence thereof stood wiped out. To hold so would mean that, irrespective

of when the amounts due under the agreement were remitted, the

respondents were bound to accept the same. That was never the intention

of the parties, as is clear from the agreement itself.

57. More importantly, the total consideration payable by the appellant to

the respondents was not fully determined as per the agreement terms and

remained fluid as on the date of the award. The consideration payable to

the respondents, though reckoned on the projected FSI area of 25,000

square feet in Clause 3, was left open to modification as any change in

the FSI Rules prior to sanctioning of the municipal plan was to enure to

the benefit of the respondents and was to be taken into account while

50

computing the total consideration. As the appellant did not secure a

sanctioned plan, the total consideration amount remained open to change

and could not be restricted to the amount worked out on the basis of the

estimated FSI area of 25,000 square feet. Similarly, Clause 20 of the

agreement provided for further addition being made to the FSI area if the

land, allegedly in the adverse possession of the respondents, was gotten

regularized by the appellant. This additional amount was to be paid when

the adverse possession was regularized by the competent authority.

Further, the consideration was to increase if the appellant constructed

basements in the proposed project. Clause 4 stated that a sum of

₹5,00,000/- was to be paid in this regard and the said sum was to be

added to the last instalment. The clause made it clear that it was only if

basements were constructed that it would be payable. Therefore, the

consideration amount was amenable to alteration after completion of the

project. These agreement clauses made it clear that the consideration

payable to the respondents did not stand frozen and remained flexible,

linked with the sanctioning of the building plan and the total FSI area

available at that time; the additional FSI area that would be available upon

regularization of the respondents’ adverse possession; and construction

of basements, if any, in the project.

58. Surprisingly, the majority award completely overlooked and ignored

the obligations in the agreement and the sequence in which they were to

51

be performed. Even if the award, on the analysis undertaken, proceeded

on the premise that the subject agreement was an agreement to sell and

was not just for development, it was not for the two learned arbitrators to

rewrite its terms. As per the agreement, the total consideration payable to

the respondents hinged upon later events that did not materialize by the

date of the award. Further, as per the agreement, even the estimated total

consideration of ₹ 2,28,75,000/- was to be paid in full by 01.03.2008, but it

was not paid. Significantly, it was only on payment of all the amounts due

under the agreement that a conveyance deed was to be executed by the

respondents in favour of the appellant or its nominee. Thus, the execution

of the conveyance deed was linked to the full amount being paid to the

respondents. Admittedly, this event had not come to pass by the time the

majority award was passed, be it in terms of the estimated consideration

or the actual consideration, which still remained indeterminate. To

compound matters further, the majority award not only directed execution

of a conveyance deed but also went on to include a part of the excluded

property therein, contrary to the agreement terms. The agreement made

it quite clear that the bungalow and the appurtenant gardens along with

Room No. 1 in Chawl No. 1, in their entirety, were to be left out from the

scope of the agreement. However, the majority award merely excluded

the 2/9

th

share of the respondents in the excluded property, thereby

including the rest of such excluded property within the proposed deed of

52

conveyance. Notably, the owners of the remaining 7/9

th

share in the

excluded property were not before the arbitral tribunal, whereby their

share therein could have been dealt with to their detriment.

59. The majority award also fell in error in ignoring the clear mandate of

Clause 51 that all prior agreements stood superseded by the subject

agreement, including the MoU dated 15.03.2002. The sum of ₹19,50,000/ -

allegedly paid to Kantilal was under the said MoU. As all the rights under

that MoU stood forfeited under Clause 51, the payment made under the

said MoU, if any, could not be considered under the subject agreement.

However, the majority award took into account the alleged payment made

under the said MoU and adjusted a sum of ₹13,18,334/- from the amount

payable, treating it as the sum reimbursable by Upendra and Pankaj.

Similarly, the sum of ₹26,222/- which was adjusted against the amount

payable to the respondents, being the liability of Upendra and Pankaj to

the Gujarat Financial Corporation, was also beyond the scope of the

agreement. Last but not the least, when the agreement stipulated the rate

as ₹915/- per square foot for the FSI area that would be available at the

time of sanctioning of the plan and the rate of ₹450/- per square foot for

the extra FSI area, if the respondents’ adverse possession was

regularized, it was not for the two learned arbitrators to come up with a

new rate at which the consideration should be paid. Strangely, no

computation exercise was undertaken in this regard and no reasoning was

53

offered as to why the rate at six times the stipulated rate of ₹915/ - per

square foot was adopted, bringing the net rate to ₹5490/- per square foot.

This direction in the majority award was, therefore, completely beyond the

scope of the agreement and defied logic.

60. Further, the agreement did not provide for any claim being made by

either side towards damages, liquidated or unliquidated. Though both

sides raised claims in this regard before the arbitral tribunal, be it termed

as damages or as compensation, it ought to have been noted that the

agreement did not speak of any such relief being granted to either of them.

The award of damages to the appellant in the majority award was,

therefore, without foundation. Further, the grant of such relief, in the

alternative, if the relief of specific performance was set aside, is contrary

to the established tenets applicable to an arbitral award and was,

therefore, opposed to public policy, as rightly noted by the High Court.

61. Thus, the two learned arbitrators not only construed the express

terms of the agreement contrarily but completely supplanted them with

new terms, as per their own fancies. Their approach was clearly at

variance with the edicts of this Court as to interpretation of the underlying

contract. Their award, therefore, ought not to have granted the relief of

specific performance to the appellant and its partners, by holding them

entitled to execution of a deed of conveyance for the 2/9

th

share of the

respondents, in total derogation of the agreement terms. These were the

54

aberrations in the majority award that weighed with the High Court while

exercising appellate jurisdiction under Section 37 of the Act of 1996.

Though the High Court also went into the issue as to whether the subject

agreement was an agreement to sell or was merely for development, that

exercise was not necessary, in the light of the correct finding by the High

Court that Section 28(3) of the Act of 1996 stood violated by the rewriting

of the contract in the majority award. In essence, the judgment dated

05.03.2024 passed by the High Court gave effect to the settled principle

of law that it is not open to an arbitral tribunal to do so.

62. However, we may note one other crucial fact at this stage. Though

the respondents attributed breach of the agreement to the appellant to

justify its termination by way of their legal notice dated 09.04.2008, there

is no denying the fact that they themselves failed to abide by Clause 54

of the agreement. Clause 53 thereof recorded that, in the event of there

being any default in payment of amounts within time, the agreement would

come to an end and the rights given to the appellant would automatically

stand terminated. In the event of this clause having application, Clause 54

stated to the effect that if no construction was made by then on the 2/9

th

share of the respondents, they would be liable to pay back the amount

paid towards consideration only , without interest. The respondents,

therefore, had to return the consideration paid by the appellant, as no

construction was made on their 2/9

th

share. It wa s not open to them to

55

retain the said amount when they wished to retract from the agreement.

Therefore, though we find no grounds to uphold the majority award for the

reasons aforestated, we deem it appropriate to exercise jurisdiction under

Article 142 of the Constitution, so as to do complete justice instead of

relegating the parties to a fresh round of litigation on this issue. Further,

we may note that the ‘no-interest’ condition would have applied had the

respondents returned the monies on 09.04.2008, when they terminated

the agreement, but they failed to so and retained the same till date . It

would only be fair that they do so now with reasonable interest. We,

accordingly, direct the respondents to return the amounts paid to them

under the agreement with simple interest thereon @ 9% per annum from

the date of each payment made by the appellant till the date of actual

refund. Further, the appellant’s amounts lying in deposit with the Courts

may also be returned, along with the interest accrued thereon, if any.

The appeals are disposed of in the above terms.

Parties shall bear their own costs.

..............................., J

SANJAY KUMAR

..............................., J.

SANJEEV SACHDEVA

October 29, 2026

New Delhi.