Shreeram Builders vs Upendra Kantilal Thanawala

Reportable
IN THE SUPREME COURT OF INDIA
2026 INSC 1176
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
Yet again, the saga of an arbitral award sailing into rough seas.
1.
Finding affirmation under Section 34 of the Arbitration and Conciliation
1
Act, 1996 , 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,
Signature Not Verified
Digitally signed by
babita pandey
Date: 2026.10.29
18:01:16 IST
Reason:
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’

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. Upon 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.
The majority arbitral award dated 10.12.2011 was pronounced by
3.
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 agreement 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
2

th
were directed to execute a sale deed in respect of their 2/9 share in the
properties in Schedules A, B and C of the ‘Statement of Claims’, 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.
3

5. Dissatisfied with the majority 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.
However, in the second round, both parties proved unsuccessful, as
6.
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
4

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.
By order dated 12.08.2024, as clarified thereafter, this Court
7.
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,
5

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. Leelavati relinquished her right,
title and interest in the lands in favour of her sons. They, accordingly,
rd
became joint owners, each entitled to a 1/3 share therein. Registered
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partition deed dated 31.03.1974 was executed by them, allotting 1/3
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. She
relinquished her interest in favour of her brothers on 01.07.2003. In effect,
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Kantilal’s 1/3 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
6

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. 119 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
7

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
rd
2/3 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
th
agreed to sell his undivided 1/9 share in the property to the appellant. He
executed deed of conveyance dated 21.08.2008 in its favour, transferring
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his 1/9 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
rd
conveyance transferring their undivided 1/3 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.
8

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
9

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 portrayal 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
2
vs. North American Coal Corporation (India) Limited , 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.
Significantly, the first paragraph of the said agreement, after naming
15.
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
10

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 sale 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’,
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paragraph ‘W’ stated that Upendra and Pankaj had 8/90 share each and
th
Vishal, Upendra’s son, was entitled to 2/90 share while Kunal and Niket,
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Pankaj’s sons, had 1/90 share each. In effect, their shares put together
th th
came to 20/90 or 2/9 undivided share in Lands A, B and C.
Paragraph ‘CC’ recorded that the ‘Purchaser’ had approached the
16.
‘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
11

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 ‘Vendors’ 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 ‘Vendors’ agreed to give and the
‘Purchaser’ agreed to take from them the right to develop their undivided
th
2/9 share in the total Floor Space Index (FSI) available for the property
12

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
th
‘Purchaser’ jointly calculated the net FSI available for the 2/9 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
th
F.S.I. on the undivided 20/90 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
13

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
th
2/9 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’
15

for the purpose of development of the property agreed to be developed.
Clause 10 affirmed that the ‘Vendors’ confirmed that possession of their
th
undivided 2/9 share in the property agreed to be developed was handed
over to the ‘Purchaser’ and the ‘Purchaser’ had entered thereon for the
development thereof.
Clause 11 required the ‘Purchaser’, after entering into possession
21.
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
16

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 ‘Vendors’ 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 ‘Vendors’, in writing, that the partition has been effected 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,
rd th
only units between the 3 and 6 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 these presents. The ‘Purchaser’ could
18

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.
Clause 16 required the ‘Vendors’ to make out a marketable title to
24.
th
the undivided 2/9 share of the property agreed to be developed, free from
any encumbrance and from any doubt. The ‘Vendors’ agreed to indemnify
th
the ‘Purchaser’ against any claim in respect of their undivided 2/9 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’.
Clause 19 recorded that, simultaneously with the signing of these
25.
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
19

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
th
‘Vendors’ further stated that that they had 2/9 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 purchasers 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,
20

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
21

‘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
th
the ‘Vendors’ had no responsibility for the same) for the undivided 2/9
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
22

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
23

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
24

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 06.08.2003,
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
25

encashed. They claimed that they were ready and willing to pay the
balance sale consideration to the respondents, after deducting the
th
amounts paid, for transfer of their 2/9 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/-.
Contesting these claims before the arbitral tribunal, the respondents
31.
raised the issue of limitation. They also asserted that the claimants had
committed breach of various clauses of the agreement dated 06.08.2003.
th
They denied that the claimants were in possession of their 2/9 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/-.
The majority award noted that the nomenclature of a document was
32.
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
26

have described the developments to be carried out by the claimants. It
th
was further noted that the respondents had agreed to give their 2/9 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
27

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.
Reference was then made to the stand of Upendra and Pankaj in
34.
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
3
and Financiers Ltd. and others , wherein it was observed that an

3
AIR 1977 SC 409
28

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
29

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
th th
only the cheques given for the 7 to 9 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
30

₹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
31

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
th
deed in respect of the respondents’ 2/9 share in the property, excluding
their share in the bungalow and the garden in front of and behind the
32

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 Madhukant’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
33

contract. Reference was made to the decision of the Bombay High Court
in Board of Control for Cricket in India vs. Deccan Chronicle
4
Holdings Ltd. , 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
34

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
5
decision in ,
Ramabai Shriniwas Nadgir vs. Government of Bombay
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
6
Mohite and another 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
7
Court in .
Basant Singh vs. Janki Singh and others
Further, the learned Judge was also of the opinion that acceptance
43.
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 was 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
35

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 was 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
8
Novasoft Technologies Limited 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
36

9
India (NHAI) , this Court affirmed the view taken earlier in Board of
Control for Cricket in India vs. Kochi Cricket Private Limited and
10
others 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 arbitral 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
37

parties cannot derogate, or, failing such agreement, was not in
accordance with this Part; or

(b) the Court 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 section
75 or section 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 Court 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 Court 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 arbitral tribunal will eliminate
the grounds for setting aside the arbitral award.’

11
45. In Renusagar Power Co. Ltd. vs. General Electric Co. , 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
12
Corporation Ltd. vs. Saw Pipes Ltd. , this Court held that the phrase

11
(1994) Supp 1 SCC 644
12
(2003) 5 SCC 705
38

‘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 was 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 was observed
that such illegality must go to the root of the matter and should not be of
a trivial nature. It was 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.
In
46. Centrotrade Minerals & Metals Inc. vs. Hindustan Copper
13
, elaborating on the scope of ‘patent illegality’, this Court observed
Ltd.
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
39

47. In Delhi Development Authority vs. R.S. Sharma and Company,
14
New Delhi , 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
15
International Limited , 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
40

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 was
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. Perversity or
irrationality of decisions was to be tested on the touchstone of the
Wednesbury principle of reasonableness.
16
In ,
49. Associate Builders vs. Delhi Development Authority
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
41

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 Court 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
17
, a 3-Judge Bench of this Court confirmed that, if a plausible
Pradesh
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
18
Cooling Solutions India Private Limited and another , 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
19
, this Court had held that,
Limited (SEAMEC LTD.) vs. Oil India Limited
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
42

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
43

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 literally
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.
In any event, irrespective of the slotting of the subject agreement, in
52.
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
44

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 trade 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.
The fundamental error writ large in the majority award is that it dealt
53.
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
45

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 was willing to abide by the
direction in that regard. However, our jurisdiction presently is different from
that of an appellate Court 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
46

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
47

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.
No doubt, the first six instalments were paid belatedly by the
56.
appellant and were accepted by the respondents without protest. The
failure on their part to raise an objection was 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 committing
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
48

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 those 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.
More importantly, the total consideration payable by the appellant to
57.
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
49

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
50

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
th
the 2/9 share of the respondents in the excluded property, thereby
including the rest of such excluded property within the proposed deed of
51

th
conveyance. Notably, the owners of the remaining 7/9 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
52

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.
Further, the agreement did not provide for any claim being made by
60.
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.
Thus, the two learned arbitrators not only construed the express
61.
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
th
entitled to execution of a deed of conveyance for the 2/9 share of the
respondents, in total derogation of the agreement terms. These were the
53

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
th

stated to the effect that if no construction was made by then on the 2/9
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
th
construction was made on their 2/9 share. It was not open to them to
54

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.
55