Brij Mohan Bajaj And Ors. vs M S Prime Property Realty

$~43
* IN THE HIGH COURT OF DELHI AT NEW DELHI

% Date of decision: 23.04.2026

+ O.M.P. (COMM) 501/2024 & I.A. 46321/2024
BRIJ MOHAN BAJAJ AND ORS. .....Petitioners
Through: Ms. Megha Saxena, Ms.
Rashmi Kaushik & Ms. Shreya
Bhatnagar, Advs with P-4 in
person.

versus

M S PRIME PROPERTY REALTY .....Respondent
Through: Mr. Sachin Sain, Adv. with R-
partner in person.

CORAM:

HON'BLE MR. JUSTICE AVNEESH JHINGAN

AVNEESH JHINGAN, J. (ORAL)
1. This petition is filed under Section 34 of the Arbitration and
Conciliation Act, 1996 (for short „the Act‟) against the arbitral award
dated 29.07.2024.
2. The brief facts are that the petitioners were the owners of the
property bearing Plot No. 97, Block-C, Chander Nagar, Janak Puri,
New Delhi-110058. The Collaboration Agreement dated 10.05.2019
(hereinafter referred to as „CA‟) was executed between the parties to
the lis . The respondent was required to demolish the existing building
and re-construct a new one and in return on payment of Rs. 3.55
crores was to get the first, second, and third floors with roof rights.
The petitioners apart from consideration were entitled to fully
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furnished upper ground floor with 1/4th share of the stilt floor. As per
Clause 15 of the CA, an advance payment of Rs. 35 lacs was to be
made by the respondent. The details of the payments to be made is
tabulated below:

2.1 Clause 2 of the CA stipulates that the work was to be completed
within twenty months from the execution of the CA. The construction
was not completed and a notice dated 04.09.2022 was issued by the
petitioners for termination of the CA. Clause 17 of the CA provided
for dispute resolution through arbitration and the proceedings were
initiated at the instance of the respondent. This Court vide order dated
12.10.2022 appointed an arbitrator.
2.2 The following issues were framed by the arbitrator:
i. Whether the Claimant is entitled to the declaration that the
termination of the Collaboration Agreement by the Respondent
on 04.09.2022 was illegal? OPC
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ii. Whether the Claimant is entitled to further time for construction
i.e. a period of 17 months 11 days? OPC
iii. In the alternative, whether the Claimant is entitled to a sum of
Rs.3,28,40,567/- as claimed? OPC
iv. Whether the Claimant is entitled to interest and if so, at what
rate and for which period? OPC
v. Whether the Respondents are entitled to the return of the
sanctioned plans (B-1 and B-2) of property C-97, Chander
Nagar, Janakpuri and other documents provided by them to the
Claimant? OPR
vi. Relief.
2.3 All the issues except issue no. iii were rejected.
2.4 The heads of amount quantified in issue no. iii and their
outcome is as under:

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2.5 Further, the petitioners were directed to bear fifty percent of the
expenses of the Delhi International Arbitration Centre (DIAC) under
whose aegis the arbitration was conducted. The challenge in this
petition is only to the refund of Rs. 35 lacs of advance payment
received by the petitioners.
3. Learned counsel for the petitioners vehemently argues that the
direction to refund Rs. 35 lacs is perverse as the arbitrator ignored the
relevant piece of evidence i.e. the letter dated 14.03.2021 whereby the
respondent sought an extension of twelve to fifteen months for
completion of construction and upon failure volunteered that the
amount of Rs. 35 lacs already paid be forfeited. Reliance is placed
upon the decisions of the Supreme Court in PSA Sical Terminal
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Private Limited v. Board of Trustees of V. O. Chidambranar Port
Trust Tuticorin and Ors ., (2023) 15 SCC 781 and State of
Rajasthan & Anr. v. Ferrpo Concrete Construction Private
Limited , (2009) 12 SCC 1 to buttress the contention that an award
passed ignoring the relevant evidence is vitiated by perversity.
3.1 The submission is that no reasons have been recorded for
awarding Rs. 35 lacs to the respondent and the award is violative of
Section 31(3) of the Act.

4. Per contra , the scope of interference under Section 34 of the
Act is limited. The submission is that there cannot be any re-
appreciation of the evidence. It is submitted that no case is made out
to bring the matter within the ambit of Section 34 of the Act. The
impugned award is defended by stating that the arbitrator after due
consideration of the facts and the evidence has passed a reasoned
award. Reliance is placed upon the decision of the Supreme Court in
Associate Builders v. Delhi Development Authority , (2015) 3 SCC
49 to support the contention that the scope of interference under
Section 34 of the Act is limited.
5. Heard learned counsel for the parties at length. Perused the
relevant record with their able assistance. No submission other than
those noted above has been made.
6. Clause 2 of the CA provided that the construction shall be
completed within twenty months of the execution of the CA. It is an
admitted position that the work was not completed within the
stipulated time. During the arbitration it was proved that the
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respondent in violation of the terms of the CA without completion of
the building and without paying the consideration amount had sold
two flats for which the purchaser invoked arbitration. The arbitrator
took into consideration the pandemic situation yet held that the delay
in completion of the project was attributable to the respondent and the
termination of the CA was upheld. This finding has not been
challenged and has attained finality. The monetary claims of the
respondent for recovery of costs of construction, payment towards
rent, money spent on salary of consultant and loss of profit for illegal
termination were also rejected.
7. The pin-pointed issue remained was that as per the respondent
an advance of Rs. 50 lacs was paid to the petitioners, the break-up
whereof was Rs. 35 lacs by banking transaction and Rs. 15 lacs in
cash. The respondent failed to prove that payment of Rs. 15 lacs in
cash was made and consequently the claim for Rs. 35 lacs was
considered.
8. The arbitrator for allowing the claim relied upon the fact that
there was no clause in the CA for forfeiture of the advance payment
made to the petitioners in the eventuality of failure to complete the
construction at the site.
9. The contention of the learned counsel for the petitioners that
relevant evidence was not considered deserves acceptance. A
communication dated 14.03.2021 issued by the respondent was on
record and is attached as Document No. 12 with this petition. In the
said communication the respondent sought twelve to fifteen months‟
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time from the date of approval of sanction and stated that in case of
default in commitment of the construction as per the time schedule,
the CA be terminated and the petitioners be permitted to forfeit the
advance of Rs. 35 lacs.
10. The arbitrator while deciding the other claims had taken
Document No. 12 into consideration but had ignored it while deciding
the issue in controversy, wherein the same was of utmost relevance.
The decisions of the Supreme Court relied upon by the learned
counsel for the petitioners in PSA Sical Terminal Private Limited
(supra) and Ferro Concrete (supra) lend support to the contention
that non-consideration of relevant evidence vitiates the award on the
ground of patent illegality. It would be apposite to quote the relevant
paragraphs from the judgment of the Supreme Court in PSA Sical
Terminal Private Limited (supra):
“39. In Ssangyong Engg. & Construction Co. Ltd.
[Ssangyong Engg. & Construction Co. Ltd. v. NHAI,
(2019) 15 SCC 131 : (2020) 2 SCC (Civ) 213] , this Court
after considering various judgments including the
judgment in Associate Builders [Associate Builders v.
DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204]
observed thus : (Ssangyong case [Ssangyong Engg. &
Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 :
(2020) 2 SCC (Civ) 213] , SCC pp. 169-71, paras 34-42)
*
41. What is important to note is that a decision
which is perverse, as understood in paras 31 and
32 of Associate Builders [Associate Builders v.
DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ)
204] , while no longer being a ground for
challenge under “public policy of India”, would
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certainly amount to a patent illegality appearing
on the face of the award. Thus, a finding based
on no evidence at all or an award which ignores
vital evidence in arriving at its decision would
be perverse and liable to be set aside on the
ground of patent illegality. Additionally, a
finding based on documents taken behind the
back of the parties by the arbitrator would also
qualify as a decision based on no evidence
inasmuch as such decision is not based on
evidence led by the parties, and therefore, would
also have to be characterised as perverse.
*
41. A decision which is perverse, though would not be a
ground for challenge under “public policy of India”, would
certainly amount to a patent illegality appearing on the
face of the award. However, a finding based on no
evidence at all or an award which ignores vital evidence in
arriving at its decision would be perverse and liable to be
set aside on the ground of patent illegality.
42. To understand the test of perversity, it will also be
appropriate to refer to paras 31 and 32 from the judgment
of this Court in Associate Builders [Associate Builders v.
DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , which
read thus : (SCC pp. 75-76)
31. The third juristic principle is that a decision
which is perverse or so irrational that no reasonable
person would have arrived at the same is important
and requires some degree of explanation. It is settled
law that where:
(i) a finding is based on no evidence, or
(ii) an Arbitral Tribunal takes into account
something irrelevant to the decision which it
arrives at; or
(iii) ignores vital evidence in arriving at its
decision,
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such decision would necessarily be perverse.
32. A good working test of perversity is contained in
two judgments. In Excise and Taxation Officer-cum
Assessing Authority v. Gopi Nath & Sons [Excise
and Taxation Officer-cum-Assessing Authority v.
Gopi Nath & Sons, 1992 Supp (2) SCC 312] , it was
held : (SCC p. 317, para 7)
7. … It is, no doubt, true that if a finding of
fact is arrived at by ignoring or excluding
relevant material or by taking into
consideration irrelevant material or if the
finding so outrageously defies logic as to
suffer from the vice of irrationality incurring
the blame of being perverse, then, the finding
is rendered infirm in law.‟
In Kuldeep Singh v. Commr. of Police [Kuldeep
Singh v. Commr. of Police, (1999) 2 SCC 10 : 1999
SCC (L&S) 429] , it was held : (SCC p. 14, para 10)
10. A broad distinction has, therefore, to be
maintained between the decisions which are
perverse and those which are not. If a decision
is arrived at on no evidence or evidence which
is thoroughly unreliable and no reasonable
person would act upon it, the order would be
perverse. But if there is some evidence on
record which is acceptable and which could be
relied upon, howsoever compendious it may
be, the conclusions would not be treated as
perverse and the findings would not be
interfered with.”
(Emphasis Supplied)
11. The Supreme Court in Gayatri Balasamy v. ISG Novasoft
Technologies Ltd. , (2025) 7 SCC 1 held that while an arbitral award
cannot be modified under Section 34 of the Act, a severable part of the
award may be set aside. The relevant paragraphs are quoted below:
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“32. In the present controversy, the proviso to Section
34(2)(a)(iv) is particularly relevant. It states that if the
decisions on matters submitted to arbitration can be
separated from those not submitted, only that part of the
arbitral award which contains decisions on matters non-
submitted may be set aside. The proviso, therefore, permits
courts to sever the non-arbitrable portions of an award from
arbitrable ones. This serves a two fold purpose. First, it
aligns with Section 16 of the 1996 Act, which affirms the
principle of kompetenz-kompetenz- that is, the arbitrators'
competence to determine their own jurisdiction. Secondly, it
enables the Court to sever and preserve the “valid” part(s) of
the award while setting aside the “invalid” ones. [ The
“validity” and “invalidity”, as used here, does not refer to
legal validity or merits examination, but validity in terms of
the proviso to Section 34(2)(a)(iv) of the 1996 Act.] Indeed,
before us, none of the parties have argued that the Court is
not empowered to undertake such a segregation.

33. We hold that the power conferred under the proviso to
Section 34(2)(a)(iv) is clarificatory in nature. The authority
to sever the “invalid” portion of an arbitral award from the
“valid” portion, while remaining within the narrow confines
of Section 34, is inherent in the Court's jurisdiction when
setting aside an award.

34. To this extent, the doctrine of omne majus continet in se
minus—the greater power includes the lesser—applies
squarely. The authority to set aside an arbitral award
necessarily encompasses the power to set it aside in part,
rather than in its entirety. This interpretation is practical and
pragmatic. It would be incongruous to hold that power to set
aside would only mean power to set aside the award in its
entirety and not in part. A contrary interpretation would not
only be inconsistent with the statutory framework but may
also result in valid determinations being unnecessarily
nullified.”
(Emphasis Supplied)
12. Taking into account the facts of the present case, setting aside
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the amount of Rs. 35 lacs awarded to the respondent is severable and
neither affects the other issues nor has an intricate connection.
Consequently, the impugned award to the extent of awarding Rs. 35
lacs to the respondent is set aside. The petition is allowed. Pending
application stands disposed of.


AVNEESH JHINGAN, J
APRIL 23, 2026
‘ha’


Reportable:- Yes
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