Omaxe Ltd. vs. Jaswinder Singh & Anr.

* IN THE HIGH COURT OF DELHI AT NEW DELHI
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% Reserved on : 26 April, 2023
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Pronounced on: 19 July, 2023

+ O.M.P. (COMM) 294/2021 & I.A. 12841/2021 & I.A.
12842/2021 & I.A. 14856/2021

OMAXE LTD. ..... Petitioner
Through: Mr. Ramesh Singh and Mr.
Rajshekhar Rao, Sr. Advocates
with Ms. Mukti Bodh, and Mr.
Vipin Sharma, Advocates

Versus


JASWINDER SINGH & ANR. ..... Respondents

Through: Ms. Shobhana Takiar and Mr.
Kuljeet Singh, Advocates
Mr. Sujoy Gaur, Mr. Rajat Gaur,
Mr.R.K.Sharma, and Mr.Himanshu
Aggarwal, Advocates for
Interveners
CORAM:
HON’BLE MR. JUSTICE CHANDRA DHARI SINGH

J U D G M E N T
CHANDRA DHARI SINGH, J.

1. The instant Petition under Section 34 of the Arbitration and
Conciliation Act, 1996 (hereinafter ―The Act, 1996‖) being aggrieved of
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the Award dated 20 March 2020 seeking the following reliefs:
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―a. Pass an order summoning the entire original arbitral
record from the Learned Sole Arbitrator in the arbitration
proceedings arising out of Arbitration Petition No.17/2015
titled Jaswinder Singh & Anor. Vs. Omaxe Ltd.;
b. Pass an order thereby setting aside the· impugned award
dated 20.03.2020 passed in arbitration proceedings arising
out of Arbitration Petition No. 17/2015 titled Jaswinder
Singh & Anor. Vs. Omaxe Ltd.;
c. Pass an order thereby allowing the Counter Claims made
by the Petitioner in arbitration proceedings arising out of
Arbitration Petition No. 17/2015 titled Jaswinder Singh &
Anor. Vs. Omaxe Ltd.;
d. stay the operation and execution of the impugned Award
dated 20.03.2020 passed by the Learned Sole Arbitrator
during the pendency of the present proceedings.
e. Pass an order allowing costs of the present proceedings in
favour of the Petitioner and against the Respondents;
f. Pass any other or further order(s) deemed fit in the facts
and circumstances of the case and in the interest of justice.‖

FACTUAL MATRIX
2. The petitioner was a Real-Estate Development Company
incorporated under The Companies Act, 1956 and subsequently under
the Companies Act, 2013. It works in the construction and development
of commercial, residential and integrated Real-Estate projects across
India.
3. The petitioner undertook the construction and development of a
commercial project in the nature of a shopping/commercial mall in the
name and style of "Omaxe Novelty Mall" situated at Lawrence Road,
Amritsar, Punjab (hereinafter referred to as "Project/said Project") in
collaboration with the landowners, namely M/s. Novelty Associates Pvt.
Ltd., vide Collaboration Agreement.
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4. On 7 April 2005, an MOU was executed at New Delhi between
the petitioner and the respondent (owner & Attorney Holder of other Co-
owners) for the purpose of development and construction of commercial
complex on the land owned by them under the name and style of Omaxe
Novelty Mall , Amritsar. As per the terms of the said MOU, built-up area
was to be shared by petitioner and respondent in the ratio of 55% and
45%, respectively. The sale proceeds were to be received in a separate
escrow account in the name of "Omaxe-Novelty" with standing
instructions to the Bank to transfer 90% of the proceeds to the individual
account of the parties as per their sharing ratio of the project. The balance
amount of 10% was agreed to be transferred to the account of Omaxe for
meeting costs and expenses of advertisement, marketing, brokerage,
documentation and office expenses.
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5. On 23 May 2005, a Collaboration Agreement was executed
between the petitioner and the respondent for the development of the
Commercial Complex/Mall.
6. The landowners had also executed the Power of Attorney dated
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23 May, 2005 in favor of the Petitioner for carrying out the objectives
contained in the Collaboration Agreement.
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7. The Municipal Corporation, Amritsar vide its letter dated 25 May,
2006, sanctioned the building plan of the project/mall in question with
height upto 30 meters pursuant to which the Municipal Corporation,
Amritsar, the petitioner started the construction of the Mall and it was in
full swing by April, 2007.
8. The respondents had approached the petitioner seeking purchase of
commercial real-estate in furtherance to the respondents' intentions; the
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petitioner offered them an opportunity to purchase a commercial property
in the nature of a shop in their upcoming said project.

9. Accordingly, the respondents submitted an application with the
petitioner for provisional allotment of a Unit in the said project.
Subsequently following mutual agreement and deliberations between the
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respondents and the petitioner, vide allotment letter dated 03 January,
2007, the respondents were allotted the Multiplex Unit on Fourth and
Fifth Floor having an approximate area of 2601.263 sq. mt. at a basic sale
consideration of INR 10,58,04,160.00.Additionally, an addendum dated
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04 January, 2007 to the allotment letter was also executed between the
respondents and the petitioner which stipulated that upon receipt of 95%
of the basic sale price for the said shop by the petitioner, the petitioner
shall be liable to pay a sum of Rs. 9,84,199.00/- per month as monthly
return in terms of the said addendum. The same was subjected to the
Respondents/Allotted adherence to the allotment letter including the force
majeure clause.
10. The Clause 26 (a) of the Allotment Agreement stipulated that the
Petitioner shall complete the construction of the Unit/Commercial
Complex within 36 months from the date of the signing of the Allotment
Agreement with further reasonable extension of time for delivery of
possession, subject to the other conditions and force majeure . It also
provided that no claim by way of damages/compensation shall lie against
the petitioner Company for delay in handing over the possession on
account of any reason beyond the control of the Company. However,
Clause 26 (e) further stipulated that in case, delay in construction of the
Unit/Commercial Complex is attributable to the Company, the Company
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would pay a sum at the rate of Rs. 10/- per sq. ft. of Super area per month
for the period of delay.

11. The Archaeological Survey of India, Punjab (hereinafter referred to
as ―ASI‖) issued letter to the petitioner as well as the landowners i.e. M/s
Novelty Associates on the ground that the project in question was
encroaching upon the regulated area of the monument of Maharaja Ranjit
Singh Summer Palace, Company Bagh Complex, Amritsar, Punjab that
was declared to be a monument of national importance. The petitioner
issued Show-Cause Notice on April, 2007 by Archaeological Survey of
India, Punjab Circle. The petitioner obtained the necessary permissions,
approvals and licenses from the Municipal Corporation, Amritsar and
after receiving the sanction of the Building Plan by the Municipal
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Corporation, Amritsar dated 25 May, 2006 the petitioner began the
construction and development of the said Project.
12. That ASI directed to stop the construction of the said project at 15
meters whereas the Building Plan was approved by the Municipal
Corporation, Amritsar, had sanctioned the height to be 30 meters and it
was on the basis of the sanction of the building plan by the Municipal
Corporation, Amritsar, that the petitioner had floated and advertised the
proposed project at such a pertinent time. Archaeological Survey of India
further directed the Municipal Corporation, Amritsar, to take necessary
actions to stop the ongoing construction of the project, vide its letter
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dated 27 April, 2007 to the landowners. Vide the said letter, the ASI also
directed the Municipal Corporation Amritsar not to sanction any building
plan within the prohibited area without receiving a No-Objection
Certificate from the ASI and further dictated the Municipal Corporation,
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Amritsar to cancel the site plans accorded to the projects within the
prohibited area. The same objection created hindrance and delay in
development of the project. The petitioner in order to resume construction
and to resolve the said issue pursued the ASI to obtain the requisite NOC.
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Subsequently the ASI, vide its letter dated 27 and 28 July, 2007,
granted the NOC for construction only up to a height of 15 meters from
the ground level.
13. The revised building plans to the Municipal Corporation Amritsar
and after receiving assent to the revised building plans resumed the
construction of the project. The construction was completed and the
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Completion Certificate dated 08 July, 2015 was issued by the
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Competent Authority vide letter dated 08 July, 2015 and subsequently,
the possession was offered.
14. The matter was pursued vigorously by the petitioner before the
Competent Authorities and finally after several representations and
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letters, the Competent Authority granted the permission on 22 February,
2012 to construct the said project up to a height of 24 meters and
additional 2 meters height for air conditioning plant and mumty etc. It is
submitted that on account of the aforesaid objection by the Archeological
Survey of India, Punjab the said Project remained stalled and the
construction was at a standstill (with off and on construction) for a period
of almost 60 months i.e. w.e.f. from April 2007 up until March 2012. It is
submitted that the same was force-majeure as the delay was beyond the
control of the Petitioner.
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15. The respondent invoked arbitration vide legal notice dated 31
January 2013 as per Arbitration Clause 44 (b) of the Allotment Letter.
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Subsequently, the respondent filed a petition under Section 11 of the Act,
1996 before this Court. The said petition was disposed of on the ground
that the respondent is a resident of United Kingdom and thus, the dispute
falls in the domain of International Arbitration and does not fall within
the domain of the Domestic Arbitration. Subsequently, the respondent
filed an application under Section 11 of the Act, 1996 was filed before the
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Hon‘ble Supreme Court vide order dated 11 May 2015. On 15 May
2018, the Hon‘ble Supreme Court suggested that the amount should be
refunded by the petitioner to the respondent.
16. The Hon‘ble Supreme Court referred the matter to Mediation
Centre for settlement of the matter by mediation. The mediation report
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was sent by the Mediation Centre on 23 August 2015 as per which the
matter could not be settled and hence, was sent back to the Court for
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adjudication of the matter. On 17 September 2018, on petitioner‘s
failure to refund the said amount to respondent and no settlemement by
way of mediation, the Hon‘ble Supreme Court allowed the Application
u/s 11 of Act, 1996 and appointed Sole Arbitrator in the matter.
17. Under Section 29 A (3) of Act, 1996 was allowed vide order dated
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10 September 2019 and the time was extended by mutual consent for six
months.
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18. The Award was passed on 20 March 2020.Aggrieved by the
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Award the petitioner, challenged the Award dated 20 March 2020.
SUBMISSIONS
(On behalf of the petitioner)
19. Learned Senior Counsel appearing on behalf of the petitioner
submitted that the time was not the essence of the aforesaid Allotment
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Agreement and the respondent never made/gave notice making time the
essence of the said Agreement.

20. It is submitted that the parties had entered into an Addendum to the
aforesaid Allotment Agreement, according to which, the allottees
including the respondents were entitled to an assured monthly return of
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Rs.9.84 lacs per month w.e.f. 29 November 2007, i.e. the date by which
the said allottees had paid 95% of the total basic sale consideration till the
date of the offer of possession.
21. It is further submitted that according to Clause 26 (e) of the
Allotment Agreement the Company had to pay sum @ Rs. 10/- per sq. ft.
of super area per month for the period of delay.
22. It is submitted that under Section 55 of the Indian Contract Act
1872, particularly the second part of the said provision – ―Effect of such
failure when time is not essential‖, the Respondents could not have
avoided/ terminated the Agreement and placed reliance on the judgment
of the Supreme Court in Banglore Development Authority vs. Syndicate
Bank 2007 (6) SCC 711 .
23. It is submitted that the Completion Certificate in the present case
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had also been issued on 08 July 2015. It is further contended that the
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said Certificate was cancelled on 29 January 2016 and was immediately
taken care of, by way of approaching the High Court of Punjab &Haryana
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vide its order dated 17 February 2016, wherein the stay was granted to
the said cancellation, and ultimately the said certificate was restored on
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31 July 2019.
24. It is submitted that in any event, the petitioner was entitled to the
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benefit of exclusion of the period between 03 July 2008 to 22 February
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2012 in the total period starting from 02 May 2008 i.e, the date of the
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Allotment Agreement and 16 July 2015 i.e. the date of the original offer
of possession. It is submitted that hence, the delay was effective was only
42 months.
25. It is further submitted that the Learned Arbitrator has not given the
benefit of the said period on the ground that the force majeure clause
started after entering into the Contract however ASI intervention, was not
subsequent but prior to the date of signing of the Agreement.
26. It is submitted that as per the evidence on record the crucial
intervention of ASI for the purpose of the aforesaid force majeure event
arose only with the cancellation of NOC by ASI which happened only on
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03 July 2008 which was after signing of the Agreement dated 02 May
2008.
27. It is submitted that the Learned Arbitrator also wrongly held that
the respondents were not informed of the developments of ASI
interventions. It is submitted that the Learned Arbitrator ignored the
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crucial evidence of the Minutes of meetings dt. 14 March 2011 duly
signed by respondent whereby it was agreed that permission to
build/construct the multiplex would be sought.
28. It is contended that the Learned Arbitrator ignored the fact that the
ASI had wrongly restrained the petitioner from raising the height beyond
15 mtrs and it is evident from the fact that it had allowed the petitioner to
raise the construction till 26 mtrs.
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29. It is submitted that the letter of termination dated 18 April 2013
was issued only by the present two Respondents. It is also an admitted
position that the Allotment Agreement was executed by five co-allottees
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including the present two respondents and 95% of the Basic Sale
Consideration was paid by all the said five co-allottees.

30. It is submitted that the present respondents did not even seek to
join the other three co-allottees as parties in the present Arbitration
proceedings. It is submitted that the Learned Arbitrator while dealing
with issue regarding the claim is bad for non-joinder of necessary parties,
held that non-arraying the co-allottees is not fatal.
31. It is submitted that interest has been granted for the period between
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01 May 2011 [i.e. the date post expiry of 36 months period – as provided
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in Clause 26(a) of the Agreement] and 20 March 2020 (i.e. the date of
award). It is submitted that if the award upholding the termination and the
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consequent refund is upheld, the period between 03 July 2008 and 22
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February 2012 and therefore, the period between 01 May 2011 and 22
February 2012 has to be excluded. It is further submitted that period after
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16 July 2015 and 20 March 2020 has to be excluded, as the petitioner
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had already made the offer of possession on 16 July 2015.
32. It is further submitted that the interest amount has to be reduced by
an amount of Rs.2,85,71,431/-, i.e., the total assured monthly return paid
by the petitioner to the allottees under the aforesaid Addendum. It is
submitted that the termination of the Allotment Agreement is upheld, the
Addendum to the same also ceases to exist automatically and that too
from the very inception. Therefore, any benefit which the respondent had
enjoyed under the said Addendum, has to be returned back in favor of the
petitioner as per the principle of Section 64 of the Contract Act.
33. It is submitted that since the termination of the Allotment
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Agreement vide notice dated 18 April 2013, is patently illegal, the
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consequences of the same is that the respondents were in breach of their
obligations to take over possession of the multiplex once the offer of
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possession was made on 16 July 2015. Therefore, in terms of Clause
26(d) of the Allotment Agreement, the respondents were deemed to have
taken possession and accordingly, were liable to pay maintenance charges
and other taxes, levies and outflows due to said unit as per the said
provision from the date of offer of possession.
34. It is submitted that though the original offer of possession was
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made on 16 July 2015, the said liability, in present peculiar facts would
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arise only w.e.f. 29 June 2016 i.e., the date of the renewed offer of
possession once the cancellation of the completion certificate was stayed
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by the Punjab and Haryana High Court vide order dated 17 February
2016.
35. It is submitted that accordingly, the respondents were liable to pay
maintenance charges and other taxes, levies, outflows on account of the
said unit for any other purpose under the said provision.
36. It is contended that the learned Arbitrator has dismissed the said
principal counter claim on ground of limitation , the said finding is ex-
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facie perverse given the fact that the counterclaim was filed on 04 April
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2019 and therefore, within three years of 19 June 2016.
37. It is submitted that in any event, the aforesaid payment under
Clause 26(d) were recurring liability and therefore, the exact and
complete liability can only be ascertained after the said breach of Clause
26(d) had been taken care of by the respondents. Thus, the said payment
claim is also a case of continuing cause of action in terms of Section 22
of the Limitation Act, 1963.
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38. It is submitted that while deciding issue No.2 and other issues, the
Learned Arbitrator has repeatedly held ― even today it is not possible to
ascertain as to whether the respondent has been issued the Completion
Certificate by the Corporation which is valid and can be acted upon. The
respondent withheld all material information in this regard, though the
law requires the party to adduce best evidence to substantiate its case. In
such an eventuality even adverse inference can be drawn against such a
party .‖ It is submitted in this regard that no legally sustainable or
admissible evidence or proof was brought on record by the respondents to
this effect.
39. It is further submitted that merely on the basis of the copies of
some wrong and unsubstantiated Newspapers reports filed by the
respondents, the Learned Arbitrator has held that it was not clear whether
the Unit was ready for possession even on that day. It is contended that
the Learned Arbitrator failed to appreciate that the petitioner had
proposed to summon, examine, and to produce documents from the ASI,
the Municipal Corporation, Amritsar, and from the Police Authorities.
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However, the Learned Arbitrator himself, vide his order dated 23
December 2019, dispensed with the examination of witnesses proposed to
be summoned by the petitioner from the ASI, the Municipal Corporation,
Amritsar, and from the Police Authorities on the basis of the statement by
the counsel for the respondents that she would not insist for proof of such
documents. It is submitted that no issue was framed in this regard by the
Learned Arbitrator, nor pressed by the respondents.
(On behalf of respondent)
40. Learned Counsel for the respondent contends that the Award
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passed by the Learned Arbitrator is well- reasoned and has considered all
the material on record. Therefore, the Award does not warrant
interference under Section 34 of the Act, 1996.
41. It is submitted that since the respondents are residents of the United
Kingdom and the present dispute amounts to International Commercial
Arbitration. Under Section 34 of the Act, 1996 the ground of patent
illegality is not applicable to International Commercial Arbitration, hence
the Award challenged in the present petition cannot be challenged on the
ground of patent illegality.
42. It is submitted that as per Clause 19 of the Allotment Agreement
the, timely payment of installment was the essence of the allotment which
was admittedly duly complied with by the respondents. It is further
submitted that vide clause 21 of the Agreement, in the event of failure on
the part of the respondent to perform their obligation the petitioner had
the authority to cancel the allotment by forfeiting earnest money with
interest and in exceptional circumstances the petitioner had the discretion
to condone the delay in payment by charging penal interest @ 18% p.a.
on the amount outstanding and @ 24% p.a. thereafter, on the delayed
payment. It is submitted that as per Addendum Letter petitioner agreed to
pay monthly return upon receipt of 95% of the sale consideration. It is
further submitted that the Allotment Agreement and Addendum are one-
sided contracts in favor of the petitioner with the respondents getting no
opportunity to amend them.
43. It is submitted that the timely payment of installments and any
other charges were one of the conditions of the Contract in the Allotment
Letter and the Addendum to the Allotment Letter. It is submitted that the
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petitioner has accepted in all the contracts that 95% of the basic sale price
was paid and agreed to pay monthly returns as a result.

44. It is submitted that petitioner agreed to construct the
unit/commercial complex within 36 months from the date of signing the
Allotment letter and Addendum to the Allotment letter.
45. It is contended that in respect of the Multiplex, the Allotment
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Letters and Addendum were both signed on the 2 May 2008. As a result
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it was agreed possession would be handed over by the 1 May 2011. It is
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submitted that as per Exhibit CW1/19 the meeting of the 14 May 2010 it
was agreed completion of the delayed mall would be completed by
February 2011 and possession would be handed over.
46. It is submitted that agreed monthly returns would be paid for
February and March 2010. It is submitted as per Exhibit CW1/20 – the as
per minutes of the meeting dated 19th January 2011 it was agreed to pay
the principal amount plus the assured return till date of actual payment
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will be paid by Omaxe to the investors on or before 05 February 2011 in
full and final settlement as due.
47. It is submitted that the respondents have fully complied with their
obligation in the allotment letter and addendum but the petitioner has
failed to honor their obligations by failing to construct within the time
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limits agreed upon failure to pay monthly returns from the 1 March 2010
on the Multiplex and all other units.
48. It is submitted that after the petitioner‘s failures to pay the monthly
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returns from 1 March 2010 and their failure to construct within the
agreed time limits the respondents as per CW1/21 of documents sent a
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legal notice on 18 April 2013 for a refund of the entire amount in
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accordance with law and invoked the arbitration clause.
49. It is submitted that the claim was for the recovery of the whole
amount as mentioned in the claim and no occasion ever arose where
possession could have been lawfully given by the petitioner to the
respondents.
50. It is submitted that petitioner have accepted in evidence that they
had their own construction and mining team at the site of the construction
of Omaxe Novelty Mall since at least the year 2006 and that they are
experienced builders and have been involved in the construction of
numerous projects across India since at least 1989. The Municipal
Corporation Amritsar was never going to be conducting any mining
operation or construction at the site and only Omaxe Ltd were going to be
conducting construction operations or mining operations at the site.
51. It is submitted that Omaxe Ltd never had a licence from the ASI as
was required under Rule 34 of the ‗Ancient Monuments and
Archaeological sites and remains rules 1959‘ which states –― Application
for a licence – Every person intending to undertake any mining operation
or any construction in a regulated area shall apply to the Director
General in form VI at least 3 months before the commencement of such
an operation or construction ‖.
52. It is submitted that petitioner failed in the exercise of due diligence
since an examination of the map of the area of construction that the site at
Omaxe Novelty mall Amritsar fell in the regulated area of Maharaja
Ranjit Singh Summer Palace. The Summer Palace was across the road in
an area directly opposite the corner of Lawrence Road and Mall Road
from the site of construction was at distance of 127 meters away from the
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site of construction and petitioner believed it was a distance of 500 metres
away which was a glaring error on their part.

53. It is submitted that Novelty Sweets, the owners of the site
according to their website have been established since 1950 at the site of
the construction of Omaxe Novelty Mall and would have been well aware
of the Summer Palace and received notices from the ASI through the
years petitioner had prior knowledge to the 25th April 2007 of the illegal
and unauthorized construction in the regulated area of Rambagh.
54. It is submitted that petitioner built illegally on public land and the
cancellation of the Completion Certificate for Omaxe Novelty mall,
Amritsar by the Commissioner of the Municipal Corporation of Amritsar
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on the 29 January 2016 for obtaining the completion certificate was for
misrepresentation by the respondents.
55. It is submitted that after the show cause notice was issued by the
ASI against the petitioner the project remained stalled and stayed by the
order until 22nd February 2012 due to the action of the respondents in
failing to honour local laws and other regulations for the construction of
buildings.
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56. It is submitted that the respondent paid 95% of amount on 30
October 2007 vide receipt. It is further submitted that the assured return
was paid only till January 2010. But the Learned Arbitrator has only
allowed refund of principal amount with interest from @ 14% simple
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interest from 01 May 2011 till the date of award under Section 31(7)(b)
@ 12% from the date of award till the date of realization.
57. It is submitted that no interest has been awarded from date of
payment which was October 2007 though vide CW1/20 at the petitioner
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Company agreed to pay the principal amount plus the assured return till
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date of actual payment on or before 05 February 2011 as full and final
settlement as a final decision. It is submitted that though as per the
Allotment Letter under clause 21 of the Agreement in case of delay in
payment, Omaxe can condone the delay by charging penal interest @18%
p.a. on the amount outstanding up to one month delay and @24% p.a.
thereafter on the delayed outstandings. The respondent relies upon
judgment of the Hon‘ble Supreme Court titled UHL Power Company
Limited v. State of Himachal Pradesh (2022) 4 SCC 116 wherein
award of compound interest was restored.
58. It is hence, submitted that petitioner is liable to be dismissed.
ANALYSIS AND FINDING
59. I have heard learned counsel for the parties at length, who have
taken me through the award passed by the learned Arbitral Tribunal,
provisions of the contract executed between the parties and the
correspondences exchanged between them as well as the relevant
documents.
Scope and Spirit of Section 34 under Arbitration and Conciliation
Act, 1996
60. Before adjudicating upon the merits of the case, it is essential to
recapitulate the idea, purpose, goal and objective of the Arbitration Act as
well as Section 34 of the Act to understand the implications the
provisions therein have on the powers and jurisdiction of this Court.
Section 34(1) of the Arbitration and Conciliation Act, 1996 is thus
reproduced as follows;
――34. Application for setting aside arbitral award.—
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(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 establishes on the basis
of the record of the arbitral tribunal 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
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 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 1.—For the avoidance of any doubt, it is
clarified that an award is in conflict with the public policy of
India, only if,—
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(i) the making of the award was induced or affected by fraud
or corruption or was in violation of section 75 or section 81;
or
(ii) it is in contravention with the fundamental policy of
Indian law; or
(iii) it is in conflict with the most basic notions of morality or
justice.
Explanation 2.—For the avoidance of doubt, the test as to
whether there is a contravention with the fundamental policy
of Indian law shall not entail a review on the merits of the
dispute.]
[(2A) An arbitral award arising out of arbitrations other
than international commercial arbitrations, may also be set
aside by the Court, if the Court finds that the award is
vitiated by patent illegality appearing on the face of the
award: Provided that an award shall not be set aside merely
on the ground of an erroneous application of the law or by
reappreciation of evidence.] …‖

th
61. The Law Commission of India in its 246 Report has also
elaborated upon the background of introducing Section 34 of the
Arbitration Act and laid down as under:-
―3. The Arbitration and Conciliation Act, 1996 (hereinafter
"the Act") is based on the UNCITRAL Model law on
International Commercial Arbitration, 1985 and the
UNCITRAL Conciliation Rules, 1980. The Act has now been
in force for almost two decades, and in this period of time,
although arbitration has fast emerged as a frequently chosen
alternative to litigation, it has come to be afflicted with
various problems including those of high costs and delays,
making it no better than either the earlier regime which it
was intended to replace; or to litigation, to which it intends
to provide an alternative. Delays are inherent in the
arbitration process, and costs of arbitration can be
tremendous. Even though courts play a pivotal role in giving
finality to certain issues which arise before, after and even
during an arbitration, there exists a serious threat of
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arbitration related litigation getting caught up in the huge
list of pending cases before the courts. After the award, a
challenge under Section 34 makes the award inexecutable
and such petitions remain pending for several years. The
object of quick alternative disputes resolution frequently
stands frustrated.

4. There is, therefore, an urgent need to revise certain
provisions of the Act to deal with these problems that
frequently arise in the arbitral process. The purpose of this
Chapter is to lay down the foundation for the changes
suggested in the Report of the Commission. The suggested
amendments address a variety of issues that plague the
present regime of arbitration in India and, therefore, before
setting out the amendments, it would be useful to identify the
problems that the suggested amendments are intended to
remedy and the context in which the said problems arise and
hence the context in which their solutions must be seen.
X X X

25. Similarly, the Commission has found that challenges to
arbitration awards under Sections 34 and 48 are similarly
kept pending for many years. In this context, the Commission
proposes the addition of Sections 34(5) and 48(4) which
would require that an application under those sections shall
be disposed of expeditiously and in any event within a period
of one year from the date of service of notice. In the case of
applications under Section 48 of the Act, the Commission
has further provided a time-limit under Section 48(3), which
mirrors the time-limits set out in Section 34(3), and is aimed
at ensuring that parties take their remedies under this
section seriously and approach a judicial forum
expeditiously, and not by way of an afterthought.‖

62. The Hon'ble Supreme Court regarding the scope of Section 34 of
the Act, 1996 has held in the judgment of Reliance Infrastructure Ltd. v.
State of Goa 2023 SCC OnLine SC 604 as under:
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47. Having regard to the contentions urged and the issues
raised, it shall also be apposite to take note of the principles
enunciated by this Court in some of the relevant decisions
cited by the parties on the scope of challenge to an arbitral
award under Section 34 and the scope of appeal under
Section 37 of the Act of 1996.
48. In MMTC Limited (supra), this Court took note of
various decisions including that in the case of Associate
Builders (supra) and exposited on the limited scope of
interference under Section 34 and further narrower scope of
appeal under Section 37 of the Act of 1996, particularly
when dealing with the concurrent findings (of the Arbitrator
and then of the Court). This Court, inter alia, held as
under:—
―11. As far as Section 34 is concerned, the position is
well-settled by now that the Court does not sit in appeal
over the arbitral award and may interfere on merits on
the limited ground provided under Section 34(2)(b)(ii)
i.e. if the award is against the public policy of India. As
per the legal position clarified through decisions of this
Court prior to the amendments to the 1996 Act in 2015, a
violation of Indian public policy, in turn, includes a
violation of the fundamental policy of Indian law, a

violation of the interest of India, conflict with justice or
morality, and the existence of patent illegality in the
arbitral award. Additionally, the concept of the
―fundamental policy of Indian law‖ would cover
compliance with statutes and judicial precedents,
adopting a judicial approach, compliance with the
principles of natural justice, and Wednesbury
[Associated Provincial Picture Houses v. Wednesbury
Corpn., [1948] 1 K.B. 223 (CA)] reasonableness.
Furthermore, ―patent illegality‖ itself has been held to
mean contravention of the substantive law of India,
contravention of the 1996 Act, and contravention of the
terms of the contract.

12. It is only if one of these conditions is met that the
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Court may interfere with an arbitral award in terms of
Section 34(2)(b)(ii), but such interference does not entail
a review of the merits of the dispute, and is limited to
situations where the findings of the arbitrator are
arbitrary, capricious or perverse, or when the conscience
of the Court is shocked, or when the illegality is not
trivial but goes to the root of the matter. An arbitral
award may not be interfered with if the view taken by the
arbitrator is a possible view based on facts. (See
Associate Builders v. DDA [Associate Builders v. DDA,
(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204]. Also see
ONGC Ltd. v. Saw Pipes Ltd. [ONGC Ltd. v. Saw Pipes
Ltd., (2003) 5 SCC 705]; Hindustan Zinc Ltd. v. Friends
Coal Carbonisation [Hindustan Zinc Ltd. v. Friends Coal
Carbonisation, (2006) 4 SCC 445]; and McDermott
International Inc. v. Burn Standard Co. Ltd. [McDermott
International Inc. v. Burn Standard Co. Ltd., (2006) 11
SCC 181]) 13. It is relevant to note that after the 2015
Amendment to Section 34, the above position stands
somewhat modified. Pursuant to the insertion of
Explanation 1 to Section 34(2), the scope of
contravention of Indian Page 20 of 61 public policy has
been modified to the extent that it now means fraud or
corruption in the making of the award, violation of
Section 75 or Section 81 of the Act, contravention of the
fundamental policy of Indian law, and conflict with the
most basic notions of justice or morality. Additionally,
sub-section (2-A) has been inserted in Section 34, which
provides that in case of domestic arbitrations, violation
of Indian public policy also includes patent illegality
appearing on the face of the award. The proviso to the
same states that an award shall not be set aside merely
on the ground of an erroneous application of the law or
by reappreciation of evidence.

14. As far as interference with an order made under
Section 34, as per Section 37, is concerned, it cannot be
disputed that such interference under Section 37 cannot
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travel beyond the restrictions laid down under Section
34. In other words, the court cannot undertake an
independent assessment of the merits of the award, and
must only ascertain that the exercise of power by the
court under Section 34 has not exceeded the scope of the
provision. Thus, it is evident that in case an arbitral
award has been confirmed by the court under Section 34
and by the court in an appeal under Section 37, this
Court must be extremely cautious and slow to disturb
such concurrent findings.‖

49. In the case of Ssangyong Engineering (supra), this Court
has set out the scope of challenge under Section 34 of the
Act of 1996 in further details in the following words:—
―37. Insofar as domestic awards made in India are
concerned, an additional ground is now available under
sub-section (2-A), added by the Amendment Act, 2015, to
Section 34. Here, there must be patent illegality
appearing on the face of the award, which refers to such
illegality as goes to the root of the Page 21 of 61 matter
but which does not amount to mere erroneous application
of the law. In short, what is not subsumed within ―the
fundamental policy of Indian law‖, namely, the
contravention of a statute not linked to public policy or
public interest, cannot be brought in by the backdoor
when it comes to setting aside an award on the ground of
patent illegality.

38. Secondly, it is also made clear that reappreciation of
evidence, which is what an appellate court is permitted to
do, cannot be permitted under the ground of patent
illegality appearing on the face of the award.

39. To elucidate, para 42.1 of Associate Builders
[Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2
SCC (Civ) 204], namely, a mere contravention of the
substantive law of India, by itself, is no longer a ground
available to set aside an arbitral award. Para 42.2 of
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Associate Builders [Associate Builders v. DDA, (2015) 3
SCC 49 : (2015) 2 SCC (Civ) 204], however, would
remain, for if an arbitrator gives no reasons for an award
and contravenes Section 31(3) of the 1996 Act, that
would certainly amount to a patent illegality on the face
of the award.

40. The change made in Section 28(3) by the Amendment
Act really follows what is stated in paras 42.3 to 45 in
Associate Builders [Associate Builders v. DDA, (2015) 3
SCC 49 : (2015) 2 SCC (Civ) 204], namely, that the
construction of the terms of a contract is primarily for an
arbitrator to decide, unless the arbitrator construes the
contract in a manner that no fair-minded or reasonable
person would; in short, that the arbitrator's view is not
even a possible view to take. Also, if the arbitrator
wanders outside the contract and deals with matters not
allotted to him, he commits an error of jurisdiction. This
ground of challenge will now fall within the new ground
added under Section 34(2-A).
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
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.‖

50. The limited scope of challenge under Section 34 of the
Act was once again highlighted by this Court in the case of
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PSA SICAL Terminals (supra) and this Court particularly
explained the relevant tests as under:—

―43. It will thus appear to be a more than settled legal
position, that in an application under Section 34, the
court is not expected to act as an appellate court and
reappreciate the evidence. The scope of interference
would be limited to grounds provided under Section 34 of
the Arbitration Act. The interference would be so
warranted when the award is in violation of ―public
policy of India‖, which has been held to mean ―the
fundamental policy of Indian law‖. A judicial
intervention on account of interfering on the merits of the
award would not be permissible. However, the principles
of natural justice as contained in Section 18 and
34(2)(a)(iii) of the Arbitration Act would continue to be
the grounds of challenge of an award. The ground for
interference on the basis that the award is in conflict with
justice or morality is now to be understood as a conflict
with the ―most basic notions of morality or justice‖. It is
only such arbitral awards that shock the conscience of
the court, that can be set aside on the said ground. An
award would be set aside on the ground of patent
illegality appearing on the face of the award and as such,
which goes to the roots of the matter. However, an
illegality with regard to a mere erroneous application of
law would not be a ground for interference. Equally,
reappreciation of evidence would not be permissible on
the ground of patent illegality appearing on the face of
the award.
44. 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.
45. To understand the test of perversity, it will also be
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appropriate to refer to paragraph 31 and 32 from the
judgment of this Court in Associate Builders (supra),
which read thus:
―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
Page 24 of 61 decision, 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 [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.‖‖
51. In Delhi Airport Metro Express (supra), this Court again
surveyed the case-law and explained the contours of the
Courts' power to review the arbitral awards. Therein, this
Court not only re-affirmed the principles aforesaid but also
highlighted an area of serious concern while pointing out ―a
disturbing tendency‖ of the Courts in setting aside arbitral
awards after dissecting and re-assessing factual aspects.
This Court also underscored the pertinent features and
scope of the expression ―patent illegality‖ while reiterating
that the Courts do not sit in appeal over the arbitral award.
The relevant and significant passages of this judgment could
be usefully extracted as under:-
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―26. A cumulative reading of the UNCITRAL Model Law
and Rules, the legislative intent with which the 1996 Act
is made, Section 5 and Section 34 of the 1996 Act would
make it clear that judicial interference with the arbitral
awards is limited to the grounds in Section 34. While
deciding applications filed under Section 34 of the Act,
Courts are mandated to strictly act in accordance with
and within the confines of Section 34, refraining from
appreciation or reappreciation of Page 25 of 61 matters
of fact as well as law. (See Uttarakhand Purv Sainik
Kalyan Nigam Ltd. v. Northern Coal Field Ltd.
[Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern
Coal Field Ltd., (2020) 2 SCC 455 : (2020) 1 SCC (Civ)
570], Bhaven Construction v. Sardar Sarovar Narmada
Nigam Ltd. [Bhaven Construction v. Sardar Sarovar
Narmada Nigam Ltd., (2022) 1 SCC 75] and Rashtriya
Ispat Nigam Ltd. v. Dewan Chand Ram Saran [Rashtriya
Ispat Nigam Ltd. v. Dewan Chand Ram Saran, (2012) 5
SCC 306].)
X X X
28. This Court has in several other judgments interpreted
Section 34 of the 1996 Act to stress on the restraint to be
shown by Courts while examining the validity of the
arbitral awards. The limited grounds available to Courts
for annulment of arbitral awards are well known to
legally trained minds. However, the difficulty arises in
applying the well-established principles for interference
to the facts of each case that come up before the Courts.
There is a disturbing tendency of Courts setting aside
arbitral awards, after dissecting and reassessing factual
aspects of the cases to come to a conclusion that the
award needs intervention and thereafter, dubbing the
award to be vitiated by either perversity or patent
illegality, apart from the other grounds available for
annulment of the award. This approach would lead to
corrosion of the object of the 1996 Act and the
endeavours made to preserve this object, which is
minimal judicial interference with arbitral awards. That
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apart, several judicial pronouncements of this Court
would become a dead letter if arbitral awards are set
aside by categorising them as perverse or patently illegal
without appreciating the contours of the said expressions.

29. Patent illegality should be illegality which goes to the
root of the matter. In other words, every error of law
committed by the Arbitral Tribunal would not fall within
the expression ―patent illegality‖. Likewise, erroneous
application of law cannot be categorised as patent
illegality. In addition, contravention of law not linked to
public policy or public interest is beyond the scope of the
expression ―patent illegality‖. What is prohibited is for
Courts to reappreciate evidence to conclude that the
award suffers from patent illegality appearing on the face
of the award, as Courts do not sit in appeal against the
arbitral award. The permissible grounds for interference
with a domestic award under Section 34(2-A) on the
ground of patent illegality is when the arbitrator takes a
view which is not even a possible one, or interprets a
clause in the contract in such a manner which no fair-
minded or reasonable person would, or if the arbitrator
commits an error of jurisdiction by wandering outside the
contract and dealing with matters not allotted to them.
An arbitral award stating no reasons for its findings
would make itself susceptible to challenge on this
account. The conclusions of the arbitrator which are
based on no evidence or have been arrived at by ignoring
vital evidence are perverse and can be set aside on the
ground of patent illegality. Also, consideration of
documents which are not supplied to the other party is a
facet of perversity falling within the expression ―patent
illegality‖.

30. Section 34(2)(b) refers to the other grounds on which
a court can set aside an arbitral award. If a dispute
which is not capable of settlement by arbitration is the
subject-matter of the award or if the award is in conflict
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with public policy of India, the award is liable to be set
aside. Explanation (1), amended by the 2015 Amendment
Act, clarified the expression ―public policy of India‖ and
its connotations for the purposes of reviewing arbitral

awards. It has been made clear that an award would be
in conflict with public policy of India only when it is
induced or affected by fraud or corruption or is in
violation of Section 75 or Section 81 of the 1996 Act, if it
is in contravention with the fundamental policy of Indian
law or if it is in conflict with the most basic notions of
morality or justice.
X X X
42. The Division Bench referred to various factors
leading to the termination notice, to conclude that the
award shocks the conscience of the court. The discussion
in SCC OnLine Del para 103 of the impugned judgment
[DMRC v. Delhi Airport Metro Express (P) Ltd., 2019
SCC OnLine Del 6562] amounts to appreciation or
reappreciation of the facts which is not permissible under
Section 34 of the 1996 Act. The Division Bench further
held [DMRC v. Delhi Airport Metro Express (P) Ltd.,
2019 SCC OnLine Del 6562] that the fact of AMEL being
operated without any adverse event for a period of more
than four years since the date of issuance of the CMRS
certificate, was not given due importance by the Arbitral
Tribunal. As the arbitrator is the sole Judge of the quality
as well as the quantity of the evidence, the task of being a
Judge on the evidence before the Tribunal does not fall
upon the Court in exercise of its jurisdiction under
Section 34. [State of Rajasthan v. Puri Construction Co.
Ltd., (1994) 6 SCC 485] On the basis of the issues
submitted by the parties, the Arbitral Tribunal framed
issues for consideration and answered the said issues.
Subsequent events need not be taken into account.‖
(emphasis supplied)
52. In the case of Haryana Tourism Ltd. (supra), this Court
yet again pointed out the limited scope of interference under
Sections 34 and 37 of the Act; and disapproved interference
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by the High Court under Section 37 of the Act while entering
into merits of the claim in the following words:
―8. So far as the impugned judgment and order passed by
the High Court quashing and setting aside the award and
the order passed by the Additional District Judge under
Section 34 of the Arbitration Act are concerned, it is
required to be noted that in an appeal under Section 37
of the Arbitration Act, the High Court has entered into
the merits of the claim, which is not permissible in
exercise of powers under Section 37 of the Arbitration
Act. 9. As per settled position of law laid down by this
Court in a catena of decisions, an award can be set aside
only if the award is against the public policy of India.
The award can be set aside under Sections 34/37 of the
Arbitration Act, if the award is found to be 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. None of the aforesaid exceptions shall be
applicable to the facts of the case on hand. The High
Court has entered into the merits of the claim and has
decided the appeal under Section 37 of the Arbitration
Act as if the High Court was deciding the appeal against
the judgment and decree passed by the learned trial
Court. Thus, the High Court has exercised the
jurisdiction not vested in it under Section 37 of the
Arbitration Act. The impugned judgment and order
passed by the High Court is hence not sustainable.‖ 53.
As regards the limited scope of interference under
Sections 34/37 of the Act, we may also usefully refer to
the following observations of a 3-Judge Bench of this
Court in the case of UHL Power Company Limited v.
State of Himachal Pradesh, (2022) 4 SCC 116:— ―15.
This Court also accepts as correct, the view expressed by
the appellate court that the learned Page 29 of 61 Single
Judge committed a gross error in reappreciating the
findings returned by the Arbitral Tribunal and taking an
entirely different view in respect of the interpretation of
the relevant clauses of the implementation agreement
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governing the parties inasmuch as it was not open to the
said court to do so in proceedings under Section 34 of the
Arbitration Act, by virtually acting as a court of appeal.

16. As it is, the jurisdiction conferred on courts under
Section 34 of the Arbitration Act is fairly narrow, when it
comes to the scope of an appeal under Section 37 of the
Arbitration Act, the jurisdiction of an appellate court in
examining an order, setting aside or refusing to set aside
an award, is all the more circumscribed.‖‖
Therefore, it held by the said judgment that the Court may
set aside an arbitral award on very limited grounds under
Section 34 of the Act, 1996. Even if a contrary view is
possible on the facts established before the Arbitral
Tribunal, the Court cannot, in the absence of any compelling
reason, interfere with the view taken by the arbitrators. The
Court does not seat in appeal over the award made by the
Tribunal. Hence, the scope of interference is very limited
under Section 34 of the Act, 1996. Keeping these principles
in mind, I will now examine the present case.‖

63. The repeal of Arbitration Act of 1940 by way of Arbitration Act,
1996, the legislature sought to achieve the objective of reducing the
supervisory role of courts in arbitration proceedings. The amendment of
Section 34 was also to have the Courts readily and expeditiously
adjudicate upon any proceedings arising out of arbitration proceedings.
The challenge to an Award also must be disposed of as expeditiously
possible by the Courts.
64. It is clear that the speed and efficiency of disposal of disputes
between parties are few of the substantial and key purposes of the
introduction, development and promotion of resolving disputes by way of
alternate mechanisms of dispute resolution.
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65. Hence, the objective, goal and purpose of the Act as well as the
intention of the legislature have to be given due consideration while
adjudicating a petition under Section 34 of the Arbitration Act.
Scope of Patent Illegallity in International Arbitration
66. The law regarding patent illegality and public policy of India in no
more res integra and has been authoritatively clarified by the Hon‘ble
Supreme Court in a number of judicial pronouncements. In Renusagar
Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644 , the
Hon‘ble Supreme Court dealt with a challenge to a foreign award under
Section 7 of the Foreign Awards (Recognition and Enforcement) Act,
1961. Though the Arbitration Act has repealed the Foreign Awards Act,
the said judgment is of great importance in understanding the parameters
of judicial review when it comes to either foreign awards or international
commercial arbitration seated in India as Section 7 of the Foreign Awards
Act contained grounds that were borrowed from Article V of the
Convention on the Recognition and Enforcement of Foreign Arbitral
Awards, 1958 (the "New York Convention"), which is almost in the same
terms as Sections 34 and 48 of the Arbitration Act.
67. After referring to the New York Convention, the Hon‘ble Supreme
Court delineated the scope of inquiry of grounds under Sections 34/48
(equivalent to the grounds under Section 7 of the Foreign Awards Act,
which was considered by the Court), and held:
―34. Under the Geneva Convention of 1927, in order to
obtain recognition or enforcement of a foreign arbitral
award, the requirements of clauses (a) to (e) of Article I had
to be fulfilled and in Article II, it was prescribed that even if
the conditions laid down in Article I were fulfilled
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recognition and enforcement of the award would be refused
if the Court was satisfied in respect of matters mentioned in
clauses (a), (b) and (c). The principles which apply to
recognition and enforcement of foreign awards are in
substance, similar to those adopted by the English courts at
common law. (See: Dicey & Morris, The Conflict of Laws,
11th Edn., Vol. I, p. 578). It was, however, felt that the
Geneva Convention suffered from certain defects which
hampered the speedy settlement of disputes through
arbitration. The New York Convention seeks to remedy the
said defects by providing for a much more simple and
effective method of obtaining recognition and enforcement of
foreign awards. Under the New York Convention the party
against whom the award is sought to be enforced can object
to recognition and enforcement of the foreign award on
grounds set out in sub-clauses (a) to (e) of clause (1) of
Article V and the court can, on its own motion, refuse
recognition and enforcement of a foreign award for two
additional reasons set out in sub-clauses (a) and (b) of
clause (2) of Article V. None of the grounds set out in sub-
clauses ( a ) to ( e) of clause (1) and sub- clauses ( a ) and (
b) of clause (2) of Article V postulates a challenge to the
award on merits. XXXXXX 37. In our opinion, therefore, in
proceedings for enforcement of a foreign award under the
Foreign Awards Act, 1961, the scope of enquiry before the
court in which award is sought to be enforced is limited to
grounds mentioned in Section 7 of the Act and does not
enable a party to the said proceedings to impeach the award
on merits.‖)].‖

68. In the judgment of Ssangyong Engineering and Construction
Company Limited v. National Highways Authority of India (NHAI)
[2019] 15 SCC 131 , the Hon‘ble Supreme Court has set out the scope of
challenge under Section 34 of the Act of 1996 in case of international
commercial arbitration in further details as follows:—
―37. Insofar as domestic awards made in India are
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concerned, an additional ground is now available under sub-
section (2-A), added by the Amendment Act, 2015, to Section
34. Here, there must be patent illegality appearing on the
face of the award, which refers to such illegality as goes to
the root of the matter but which does not amount to mere
erroneous application of the law. In short, what is not
subsumed within ―the fundamental policy of Indian law‖,
namely, the contravention of a statute not linked to public
policy or public interest, cannot be brought in by the
backdoor when it comes to setting aside an award on the
ground of patent illegality.‖

69. At the outset, it is observed that the ground of patent illegality as
enshrined in Section 34(2A) is not available for an award arising out of
international commercial arbitrations. It is evident from the record in this
case that Arbitral Award impugned has arisen out of an international
commercial arbitration given the fact that the Respondents/Claimants are
overseas citizens of India under the provisions of Section 7A of the
Citizenship Act, 1955. The respondents are residents of UK and the
present dispute falls under the domain of International Commercial
Arbitration. The record further reveals that arbitral proceedings between
the parties were initiated on a reference by the Hon‘ble Supreme Court of
India under Section 11 of the Act, 1996. Hence, the ground of patent
illegality is not available to the petitioner in this case. In light of the
foregoing, all that remains is to deal with the question as to whether the
impugned award or any part thereof is liable to be set aside on the ground
enshrined under Section 34(2) of the Act, 1996.
70. The following issues framed by the Learned Arbitrator in the
Award are as follows:
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―(1) Whether the Respondent failed to honour the local laws
and other requirements for construction of buildings?
(2) Whether the Respondent breached the terms and
conditions of the contract?
(3) Whether time was the essence of the Allotment letter
Agreement? If so, its effect?
(4) Whether the addendum to the allotment letter/agreement
is a separate agreement?
(5) Whether the claims raised by the Claimants are time-
barred?
(6) Whether the non-completion of the Project in the time
stipulated in the Agreement was due to force-majeure?
(7) Whether the present statement or claim is bad for non-
joinder or necessary parties?
(8) Whether Claimant/Respondent is entitled for the reliefs
claimed?‖

71. The instant arbitral award was challenged by the petitioner mainly
on the four ground firstly whether there is a breach of Contract and
whether the non- completion of the project falls within the domain of
force majeure , secondly whether the claims raised by the respondent (in
the present petition) are time-barred, thirdly present statement or claim is
bad for non-joinder or necessary parties and fourthly whether the
respondent (in the present petition) is entitled for the reliefs claimed.
ISSUE NO. 1 & 6
72. Issues no. 1 and 6 are inter-connected and were dealt with
simultaneously by the Learned Arbitrator. The issues pertains to whether
there has been a violation of the local laws and whether such non –
completion of the project falls within the domain of the ― force majeure ‖.
The relevant portion of the Award is reproduced as follows:
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Issue no. 1 Whether the petitioner (in the present petition) failed to
honour the local laws and other requirements for construction of
buildings?
Issue No. 6- Whether the non-completion of the Project in the time
stipulated in the Agreement was due to force-majeure?

―38. ln the instant case, the ASI had intervened and
informed the Respondent Company that NOC was required
from ASI for the construction and the Respondent Company
applied for permission prior to the allotment letter and
addendum dated 2.05.2008. Shri Joginder Singh Nijjar in his
cross-examination in reply to Question no.99 deposed as
under:

"There was never Force majeure. Omaxe built illegally on
public land and lacked capacity. Omaxe received the
notice from the ASI on 8.04.2007, and continued to take
bookings and sale considerations. Omaxe did not exercise
due-diligence and process of law as the area fell within the
prohibited area of Protected Monuments.... and lastly
Force-Majeure is applicable in the situation where after
the contract is made, the Act becomes enforceable"

39. Section 2 (ha) of Act 1958 defines prohibited area as any
area specified or declared to be prohibited area under
Section 20A. Section 19 provides that no person shall
construct my building within the protected area without the
permission or the Central Government. Section 20A(4)
imposes restrictions for grant of permission f()r construction
in the prohibited area. Rule 10 of the Rules 1959 imposes
restrictions on every person to undertake any construction
within a protected area except under and in accordance with
a permission granted in this behalf by the Central
Government. The rule further provides to make an
Application to the Central Government at least three months
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before the commencement of the construction. Rule 34
provides that every person intending to undertake any
construction in a regulated area shall apply to the Director-
General in form VI at least three months before the date of
commencement of such operation or construction.

40. The maintenance of monuments has been considered
within the ambit of Articles 21, 25, 26, 49, and 51 A or the
Constitution of India as right to life includes right to mental
and intellectual growth there is a Constitutional obligation
on the Government to protect and preserve the ancient
monument (vide: Sarika v. Administrator, Shri
Mahakaleshwar Mandir Committee, Ujjain, (2018) 17 SCC
112).

41. The law must be given effect within the sphere of its
operation. The court cannot issue direction contrary to law
or direct a statutory authority to act in convention of law. If
law behaves lawlessly, social justice becomes a judicial
hoax. Rule of law requires the court to direct to do what has
been injected by law. Law is a social mechanism to be used
for the advancement of the society. It should not be allowed
to be a dead weight on society.
"The law should not be seen to sit by limply, while those who
defy it go free and those who seek its protection lose hope".
Where a prohibition is enacted in public interest, its
violation should not be treated lightly. (vide; VD.
Dhanwatey v. Commissioner of' Income Tax, M.P. Nagpur,
AIR 1968 SC 683; Karnataka state road corporation v.
Ashrafulla Khan, AIR 2002 SC 629; Zahiro Habibulla
Sheikh (5) & Ans. v. State of Gujrat & Ors. (2006) 3 SCC
37; and Manish Goel v. Rohini Goel ,AIR 2010 SC 1099).

xxxx xxxxx
xxxx

49. The Respondent was having regular correspondence
with ASI prior to the date of Agreement. It is not the case
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where the ASI intervened subsequent to the date of signing
the contract by the parties. In spite of the intervention by the
ASI, the Respondent continued the booking and taking
advances from the intended buyers without disclosing the
fact of intervention and stipulating the time of completion of
the construction. Hence, the Respondent cannot raise the
issue of force majeure, in case the ASI did not permit the
Respondent to raise the construction for five years. The plea
taken by the Respondent that it was not aware of the legal
requirement of obtaining the NOC from the ASI is not
factually correct and thus untenable.

The issues are decided against the Respondent.‖

73. The Tribunal has held that correspondence between parties reveals
that the plan for construction was sanctioned by the Corporation without
having NOC from the ASI which was mandatorily required. Moreover,
Corporation had been informed by the ASI time and again regarding the
same that it had no jurisdiction to consider the approval of the essential
plan, without having an NOC from the ASI. The petitioner was having
regular correspondence with ASI prior to even entering into the
Agreement. The petitioner continued booking despite knowing it has not
taken the requisite sanction required and even did not disclose the fact to
the intended buyers.
74. The term ― force majeure ‖ has been defined in Black‘s Law
Dictionary, as ‗ an event or effect that can be neither anticipated nor
controlled . The term includes both acts of nature (e.g. floods and
hurricanes) and acts of people (e.g. riots, strikes, and wars) - Also termed
force majesture, viz majour; superior force. Cf. ACT OF GOD; vis
MAJOR . ‘. In such contracts, the determination as to whether or not an
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event is a force majeure event will be if such an event could be
contemplated as per the course of an event or if it was something
extraordinary.
75. This Court has relied on the judgment of the Hon‘ble Supreme
Court in ― South East Asia Marine Engg. & Constructions Ltd.
(SEAMEC LTD.) v. Oil India Ltd. , (2020) 5 SCC 164 regarding the
force majeure held as follows:

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of frustration as per the old doctrine were moderated by the
introduction of the law of restitution. Interestingly, Lord
Shaw in Cantiare San Rocco SA (Shipbuilding Co.) v. Clyde
Shipbuilding and Engg. Co. Ltd. [Cantiare San Rocco SA
(Shipbuilding Co.) v. Clyde Shipbuilding and Engg. Co. Ltd.,
1924 AC 226 (HL)] , had observed that English law of
leaving the loss to where it fell unless the contract provided
otherwise was, he said, appropriate only ―among tricksters,
gamblers and thieves‖. The UK Parliament took notice of
the aforesaid judgment and legislated the Law Reform
(Frustrated Contracts) Act, 1943.‖

76. In the judgment of Bombay High Court in Deluxe Caterers Pvt.
Ltd.v. Narayani Associates and Others 2023 SCC OnLine Bom 415
held as follows :
―22. The Black's Law Dictionary (8th Edition)
defines force majeure to mean an event or effect that can be
neither anticipated nor controlled which would include both,
the acts of nature and acts of people. It also defines force
majeure clause, being a contractual provision allocating risk
performance became impossible or impracticable. It would
be relevant to note these definitions which are as follows :—
XXX
Force-majeure clause. A contractual provision allocating
the risk if performance becomes impossible or
impracticable, esp. as a result of an event or effect that the
parties could not have anticipated or controlled. [Cases :
Contracts - 309(1). C.J.S. Contracts - 520-522, 524]‖
23. Advanced Law Lexicon ‗P Ramanatha Aiyar‘
describes ―force majeure‖ as under:
―Force majeure. Events outside the control of the parties and
which prevent one or both of the parties from performing their
contractual obligations.
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A contract provision that stipulates the unforeseen
events-wars, Acts of God, certain strikes-that will excuse a
party from its duty to perform the contract.
Standard clause in a contract that absolves either of the
parties of blame for non-fulfillment of obligations caused by
events beyond their control (such as earthquakes, floods or
acts of war).
Irresistible force or compulsion; circumstance beyond
one's control. (See 48 Mad. 538 : 87 IC 68 : AIR 1925 Mad
626 : 48 Mad LJ 374)
… …
A contractual provision allocating the risk if performance
becomes impossible or impracticable as a result of an event
or effect that the parties could not have anticipated or
controlled. (Black, 7th Edn., 1999)‖
24. In Dhanrajamal Gobindram v. Shamji Kalidas and
Co.3, the Supreme Court considered as to what would be
meant by force majeure. On analysis of the rulings on the
subject it was observed that where reference is made to
―force majeure‖, the intention is to save the performing
party from the consequences of anything over which he has
no control. Mr. Justice M. Hidayatullah speaking for the
Bench observed thus:
―17. McCardie J. in Lebeaupin v. Crispin ([1920] 2 K.B.
714), has given an account of what is meant by ―force
majeure‖ with reference to its history. The expression ―force
majeure‖ is not a mere French version of the Latin
expression ―vis major‖. It is undoubtedly a term of wider
import. Difficulties have arisen in the past as to what could
legitimately be included in ―force majeure‖. Judges have
agreed that strikes, breakdown of machinery, which, though
normally not included in ―vis major‖ are included in ―force
majeure‖. An analysis of rulings on the subject into which it
is not necessary in this case to go, shows that where
reference is made to ―force majeure‖, the intention is to
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save the performing party from the consequences of anything
over which he has no control. This is the widest meaning
that can be given to ―force majeure‖, and even if this be the
meaning, it is obvious that the condition about ―force
majeure‖ in the agreement was not vague. The use of the
word ―usual‖ makes all the difference, and the meaning of
the condition may be made certain by evidence about a force
majeure clause, which was in contemplation of parties.‖

77. The Hon‘ble Supreme Court in the judgment of NBCC (India) Ltd.
v. Shri Ram Trivedi , (2021) 5 SCC 273 held that delay in handing over
the possession of the building does not constitute ― Force- Majeure ‖as
follows:
"16. Similarly, there is absolutely no substance in the force
majeure defence. The appellant has alleged that a dispute
with the contractor over termination and a boundary wall
dispute with neighbouring landowners constituted a force
majeure condition under Clause 20 of the allotment letter.
We find no merit in this argument as the appellant, being an
experienced developer, must be conscious of routine delays
caused by business exigencies. This would not frustrate the
contract or absolve the appellant of the obligations assumed
under the terms of the agreement. Similar delays were
rejected as force majeure grounds by a three-Judge Bench of
this Court in DLF Home Developers Ltd. v. Capital Greens
Flat Buyers Assn. [DLF Home Developers Ltd. v. Capital
Greens Flat Buyers Assn., (2021) 5 SCC 537] where the
Court noted : (SCC pp. 540-41, para 7)
―7. At the outset, we must deal with the force majeure
CDRC
defence. N has carefully evaluated the basis on which
the defence was set up and has come to the conclusion that
there is no cogent evidence in regard to the nature of the
delay and the reasons for the delay in the approval of the
building plans. Quite apart from this finding of fact, it is
evident that a delay in the approval of building plans is a
normal incident of a construction project. A developer in the
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position of the appellant would be conscious of these delays
and cannot set this up as a defence to a claim for
compensation where a delay has been occasioned beyond
the contractually agreed period for handing over possession.
As regards the stop work orders, there is a finding of fact
that these were occasioned by a succession of fatal accidents
which took place at the site and as a result of the failure of
the appellant to follow safety instructions. This is a pure
finding of fact. There is no error of law or fact. Hence, we
find no substance in the force majeure defence.‖
17. We, accordingly, uphold the principal findings
of N CDRC in regard to the entitlement of the respondent to
receive compensation for the delayed handing over of
possession. The force majeure defence raised by the
appellant was justifiably rejected by N CDRC . The respondent
was entitled to be compensated for the delay of the appellant
for which an appropriate direction for interest is necessary.
However, as indicated above, the order [Shriram
Trivedi v. National Building Construction Corpn. Ltd., 2019
SCC OnLine NCDRC 339 (N CDRC )] of N CDRC in regard to
the rate of interest and the date from which it becomes
payable has to be modified. …. .”

78. This Court is of the view as per Section 56 of the Contract Act as
per the said Section the force majeure is an unprecedented event. The
petitioner was already in the knowledge of the said event and therefore,
the event cannot be covered under the garb of force majeure . Since, even
before entering into Contract with the petitioner the respondent had
knowledge that it requires the No-Objection Certificate from ASI.
Therefore, the plea of force- majeure cannot be taken at this stage and the
petitioner has committed a violation of the local laws by not adhering to
the requirement of taking a No-Objection Certificate from the ASI which
is mandated as per the local laws. I do not find any reason to interfere qua
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issues no. 1 and 6.
ISSUE NO. (2)

79. Issue no. 2 issue pertains to whether the petitioner breached the
terms and the conditions of the Contract. The relevant part of the Award
has been reproduced below:

Issue No. (2) Whether the Respondent breached the terms
and Conditions of the Contract?

―50. Clause 26(a) of the Agreement dated 02.05.2008
stipulated that the construction of the commercial complex
would be completed within 36 months fhm1 the date of the
agreement, however, subject to .force-majeure and other
conditions of the agreement. Admittedly the Claimants had
paid 95% of the basic sale price prior 10 the date of
agreement. Doctrine of force majeure, as explained above
does not apply in the instant case for the reason that it does
not take within its ambit the events occurred prior to the
commencement of the agreement. Undoubtedly, Clause 39 of
the Agreement provided that delay on the part of the
Respondent would not be construed as a breach of the
Agreement, but the same has to be read along with other
terms of the Agreement which may include the Application of
doctrine of force-majeure. In the instant case, the
Respondent started construction without meeting the legal
requirement. Respondent could not complete the
construction even after expiry of 5 years from the date of the
Agreement which provided the completion period as 36
months. The Completion Certificate dated 08.07.2015 issued
by the Corporation was subsequently cancelled vide Order
dated 29.01.2016 as evident from Ext. CW 1/24. Mr. Anshul
K. Mathur, the representative of the Respondent in his cross-
examination admitted that "permission was cancelled due to
breach of conditions by the Respondent" but voluntarily said
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that though the respondent received the cancellation letter
but there was no breach of conditions by the Omaxe Ltd.
The order dated 15.05.2018 (Ext-CW-1/23) passed by the
Supreme Court make it evident that a statement was made at
the bar on behalf of the respondent that the Completion
Certificate issued by the Corporation had been a subject
matter of litigation before the High Court of Punjab and
Haryana. No document relating to that litigation had ever
been placed on record in these proceedings. Nor has it been
explained as what has been the progress in those cases
before the High Court. Copy of any plan sanctioned by the
Corporation had never been placed on record.Even today, it
is not possible to ascertain as to whether the respondent has
been issued the Completion Certificate by the Corporation
which is valid and can be acted upon. The respondent
withheld all material information in this regard, though the
law requires a party to adduce the best evidence to
substantiate its case. In such an eventuality even adverse
inference can be drawn against such a party. Hence, it is
held that the respondent failed to fulfil its obligations under
the Agreement and it breached the terms and conditions of
the contract.‖

80. The Tribunal has held that the petitioner started the construction
without the meeting legal requirement. Furthermore, the petitioner was
not able to complete the construction within 5 years from the date of the
Agreement which provided the completion period as 36 months.
th
Moreover, the Completion Certificate dated 08 July 2015 issued by the
th
Corporation was subsequently canceled vide order dated 29 January
2016. This Court is of the view that the Tribunal has given its reasons
regarding the same to hold that has been a breach of the Contract.
81. I do not find any reason to interfere qua issue no. 2.
ISSUE NO. 4
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82. Issue no. 4 issue pertains to whether the Addendum to the
allotment letter/ Agreement was not part of the Allotment letter/
Agreement and is a separate Agreement. The relevant part of the Award
has been reproduced below:
“Issue No. (4) Whether the Addendum to the allotment letter/
Agreement is not part of the Allotment letter/ Agreement and is
a separate Agreement?

61. An addendum to a document is a document or
information attached or added to clarify, modify, or support
the terms incorporated in the original document. The
English Dictionary defines the phrase as: A thing to be
added or to add supplemental terms or conditions to a
contract and it 1hrms an integral part of the agreement to
which it is added."
62. ln the instant case, the addendum reads:
"Sub: Addendum to the Allotment Letter dated 02.05.08".
The Addendum further reads: "This further reference to the
allotment of the aforesaid until in our proposed commercial
complex known as 'OMAXE NOVELTY MALL' situated at
Lawrence road, Amritsar.. Punjab on the terms mentioned in
nd
the said Allotment letter dated 2 May 2008.
Various paragraphs of the addendum make reference to the
Allotment letter. The Communication between the parties
also reveal that the parties understood the addendum to be
an integral part of the Agreement.
Thus, it is held that Addendum is an integral part of the
Allotment letter and does not constitute a separate
Agreement/Contract.
However, in view of the provisions of Section 7(5) of the Act
1996, it is required to be determined in each case as to
whether a reference in a document like Addendum etc. or
separate contracts would attract the Arbitration clause in
the referred document even for the subsequent contract/
Agreement. The issue can be detained only on the basis or
the contents of the referring contract and the intention of the
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parties to apply the Arbitration clause in subsequent
contract also. (vide; M.R. Engineers & Contractors Pvt. Ltd.
v. Som Datt Builders Ltd. (2009) 7 SCC 696 ). In the instant
case, the issue becomes purely academic for the reason that
addendum dated 2.05.2008 provides for payment of monthly
return till possession is offered. The Claimants have
repudiated the contract and are not claiming for possession.

83. The Tribunal has held that since an Addendum is a document
attached to the original document, therefore the Addendum is a part of the
allotment letter in the present case. It has been further held that the issue
does not have any practical implication since the Addendum provided for
the payment of monthly return till possession is offered. In the present
case, however, the respondent has repudiated the contract and is not
claiming possession. This Court is of the view that the reasoning of the
Tribunal is cogent and there is no reason to interfere qua issue no. 4.
ISSUE NO. 5
84. Issue no.5 issue pertains to whether the claims are time-barred. The
relevant part of the Award has been reproduced below:
“Issue No. (5)
Whether the Claims raised by the Claimants are time-
barred?
66. The Arbitration proceedings commenced on the date of
receipt of notice by the Respondent for reference of the
dispute of the Arbitration. The Claim was made within
limitation and thus Claims arc by no means time-barred. The
issue is decided in favour of the Claimants and against the
Respondent.‖

85. The Tribunal has held that the arbitral proceedings commenced on
the date of the receipt of the notice by the petitioner invoking arbitration.
The claims fall within the period of limitation and are not time-barred.
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This Court is of the view that the reasoning of the Tribunal is cogent and
there is no reason to interfere qua issue no. 5.
ISSUE NO. 7
86. Issue no.7 issue pertains to whether the present statement is bad for
non-joinder of necessary parties. The relevant part of the Award has been
reproduced below:
“Issue No. (7)
Whether the present statement of claim is bad for non-
joinder of necessary parties?
68. The co-allottee(s) are not necessary parties as to enable
the Arbitrator to adjudicate effectively and completely all the
issues/controversies between the parties. "A necessary party
is one without whom no order can be made effectively; a
proper party is one in whose absence an effective order can
be made but whose presence is necessary for a complete and
final decision on the question involved in the proceeding.''
(vide Udit Narain Singh Malpaharia v. Additional Member,
Board of Revenue, Bihar, AIR 1963 SC 786; and Kasturi v.
Iyyamperumal AIR 2005 SC 2813) .

69. More so each allottee has a definite share in the allotted
premises und the claimants may not be awarded the total
amount of investment. Both the Claimants have only 33.33%
shares. While dealing with the application of the co-
allottee(s) for impleadment on 20.02.2020 the co-
allottee(s)/Applicants were given liberty to agitate their
claims independently.
The issue is decided accordingly".

87. The Tribunal has held that the co- allottee are not necessary parties
to enable the Arbitrator to adjudicate as each allottee has a definite share
and both the respondents have only. Moreover, an application was filed
by the co-allottee for the impleadment and they were given liberty to
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pursue their claim independently.
88. Before examining the reasons of the Tribunal this Court relies on
the judgment of the Hon‘ble Supreme Court regarding the law on
―necessary party‖ in Moreshar S/O Yadaorao Mahajan V.Vyankatesh
Sitaram Bhedi (D) Thr. Lrs. And Others CIVIL APPEAL NOS.
5755¬5756 OF 2011 dated 27th September 2022 held as follows:
―17. This Court, in the case of Mumbai International
Airport Private Limited (supra), has observed thus:
―15. A ―necessary party‖ is a person who ought to
have been joined as a party and in whose absence no
effective decree could be passed at all by the court. If
a ―necessary party‖ is not impleaded, the suit
itself is liable to be dismissed. A ―proper party‖
is a party who, though not a necessary party, is
a person whose presence would enable the
court to completely, effectively and adequately
adjudicate upon all matters in dispute in the suit,
though he need not be a person in favour of or against
whom the decree is to be made. If a person is not
found to be a proper or necessary party, the court has
no jurisdiction to implead him, against the wishes of
the plaintiff. The fact that a person is likely to

secure a right/ interest in a suit property, after

the suit is decided against the plaintiff, will not make
such person a necessary party or a proper
party to the suit for specific performance.‖

18.It could thus be seen that a ―necessary party‖ is a
person who ought to have been joined as a party and in
whose absence no effective decree could be passed at all by
the court. It has been held that if a ―necessary party‖ is not
impleaded, the suit itself is liable to be dismissed.‖

89. This Court is of the view as per the aforementioned judgment the
Arbitral Tribunal has correctly held that the other parties which have not
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been impleaded as ―necessary party‖ because there is no requirement
joinder of the parties on the ground of effective adjudication since there is
a specific amount of share of each of the parties and joinder of parties is
not necessary.
90. The Tribunal has further correctly held that the co- allottee are not
necessary parties to enable the Arbitrator to adjudicate as each allottee
has a definite share and both the respondents have only. Moreover, an
application was filed by the co-allottee for the impleadment and they
were given liberty to pursue their claim independently. I do not find any
reason for interference qua issue no. 7.
ISSUE NO. 8
Issue No. (8)
Whether Claimant/Respondent is entitled for the reliefs
claimed?
―74. During the course or the argument Ms. Takiar did not
press the claim no. (vii) i.e., damages for lNR 1,50,00,000
(Rupees One Crore and Fifty Lakh only) for
misrepresentation in contractual obligations. Moreso, Ms.
Takiar could not explain how the multiple claims of interest
can be awarded. Claim no (iii) is in respect of monthly
return of Rs.9,84,199 (Rupees Nine I ,akh, Eighty Four
Thousand, One Hundred and Ninety Nine only) p.m. as
provided in the Addendum, till the date of possession. ln fact
the monthly return is an amount of interest on the debt (total
amount paid to the builder over and above the earnest
money). Earnest money may be a reasonable amount i.e. I
0% of the sale price .Claim no (iv) is interest on the monthly
returns mentioned in Claim (iii) and it is claimed till
possession is handed over. Claim no. (v) relates to a sum of
INR I 0 per sq.fl per month for a period or delay. In case
Claim no (i) and (ii) are allowed, the said Claim nos (iii),
(iv) and (v) do not survive as the Claimants arc not willing
to take possession of the premises and claimed to have
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repudiated the Agreement dated 2.05.2008. Though Ms.
Takiar has time and again unsuccessfully tried to impress by
making reference to the terms of agreement elated
02.05.2008 and addendum of the same date. Thus,
consideration or the said Claim nos i.e. (iii), (iv),(v) and (vii)
is not warranted The Claim nos (i), (ii),(vi),(viii) and (ix) are
required to be considered.

75. Claim no (i): Refund of INR 10,05,13,952 (Rupees Ten
Crore, Five Lakh, Thirteen Thousand, Nine Hundred and
Fifty two only) paid by the Claimants to the respondent
Company.

While dealing with the issues, it has been held that the
respondent filed to ensure compliance with the requirement
of law as it failed to take NOC from the ASI before signing
the contract. Being fully aware of the intervention by the
ASI, before the date of Agreement the Respondent ought to
have disclosed the facts to the allottee(s). Moreso, the
minutes of the meetings dated 14.05.2010 (Ext-CW-1/19)
and dated 19.01.2011 (Ext-CW-I/20) the Respondent had
agreed lO refund the amount with interest in case the
construction could not proceed in time. The Claimants have
sought refund of the entire amount on the basis that the
entire amount had been paid by the Claimant no.1 from his
bank account on different dates between 10.03.2007 to
28.11.2007. However the Allotment letter dated 2.05.2008 is
in the name of five persons including the Claimants. The
names or Mr. Jatinder Singh Chatta, Mr. Mohinder Singh
Sanghera and Mr. Ashwani Kumar Uppal. All residents of
the U.K. Their names had been included on the basis of
Assignment Deed dated 21.01.2008, duly notarized, executed
by the first Claimant Mr. Joginder Singh Niijar and Affidavit
cum Unde11aking dated 20.03.2008 submitted by him. lt
also makes it clear that both the Claimants hold 33.33%
shares. Mr.Jatinder Singh Chatta and Mr. Mohinder Singh
Sanghera both would hold 33.33% shares, while Mr.
Ashwani Kumar Uppal would hold 33.34% shares. The
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Assignee Mr. Joginder Singh Nijjar has also declared as
under:
"I hereby confirm that I am now left with no right, claim or
interest in respect of 66.67% individual share of any nature
in the aforesaid Unit. Now forward the above named
assignees shall become the joint allottee with me .... "
The other co-allottee(s) have also signed the Assignment
deed observing:
"... do hereby confirm and accept the above
endorsement/assignment in our favour…‖

XXX

79. Both the Claimants are entitled for refund of Rs.
3,35,04,650/- (R.s. Three Crore, Thirty Five Lakh, Four
Thousand, Six Hundred Fifty Only), i.e.33.3% of the total
amount Rs. 10,05,13,952/- (Rs. Ten Crore, Five Lakh,
Thirteen Thousand, Nine Hundred Fifty Two only).
However, it is open to the Claimants to settle their
disputes/accounts with the co-allottee(s), if any, separately
and independently in accordance with law.

80. Claim nos (ii) and (viii) - Interest @ 24 % on the amount
mentioned in Claim no. (i).
Clause 26(f) of the Agreement quoted herein above,
provided that in case there is a delay in construction due to
force-majeure, the amount shall be refunded on demand with
simple interest @6% p.a. from the happening of such
eventuality. However, Clause 21 of the Agreement provided
that in case there is a delay in payment by the allottee, the
allotment shall be cancelled and the amount paid by the
allottee(s) as earnest money would stand forfeited. The
Company may, ''in its absolute discretion, condone the delay
in payment by charging penal interest @ 18% p.a. on the
amount outstanding upto one month delay and @ 24% p.a.
thereafter on the delayed payments outstanding upto next
two months.

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81. Interest is compensation or damages to a person for
deprivation of the use of his money without a proper
justification. Interest is compensatory in nature and not
penal. Interest may be awarded if it is provided in the
agreement/contract or the statutory provisions provide for it.
It may also be awarded on equitable grounds if the facts and
circumstances of the case justify it and Jaw does not prohibit
the same. (vide: Secretwy, Irrigation Department,
Government of Orissa v. G. C. Roy, AIR 1992 SC 732; JK
Synthetics Ltd. v. Com.mercial Tax Qfficer, AIR 1994 SC
2393; Sovintorg India Ltd. v. State Bank of India, AIR 1999
SC 2963; and Union of India v. Upper Ganges Sugar &
Industries Ltd., AIR 2005 SC 778.).

82. Claimants have sought interest on the outstanding dues
24% p.a. (a). the Agreement/ Allotment Letter does not
contain any clause for providing the interest or f(w
prohibition forwarding the interest. The Agreement does not
stipulate any term in respect or interest in the facts and
scenario or the instant case. Clause 4 of the Agreement
provided that in case or decrease of super area or the Unit,
the amount received in excess over unci above the total cost
shall be refunded by the Respondent along with interest (ii)
12% p.a. the respondent, in view of Clause 21 of the
Agreement could recover the outstanding dues, if any from
the allottee(s) in view of the terms incorporated in the
agreement with 18% or 24% interest. The Respondent in its
counter claim also sought recovery of its dues with
interest@ 24<% p.a. It was a commercial transaction and
after signing the Agreement a period of approximately
twelve years has lapsed and the Claimants have been
running from pillar to post. The Respondent had suppressed
the material information from the Claimants about the
requirement of NOC from the ASI. Moreso, the Respondent
continued to book and receive advances in respect of the
Units knowing it well that it would not be possible to raise
construction and complete the same within the stipulated
area due to the intervention of the ASI. In B. Radhakrishna v
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Maharashtra Apex Corporation Ltd. (20 17) 4 MLJ 492, the
Supreme Court while dealing with the interpretation of
Section 31 (7) of the Act, 1996 observed that in absence of
any stipulation in the Agreement about the rate of interest
(()r the pre-award period has been left to the Arbitrator. In
the said case in terms of the Agreement, the interest was
awarded ({lJ 36% p.a. and interest under Section 3 l (7)(b)
of the Act, 1996 was awarded @ 18% p.a.

83. In the facts and circumstances of the case the Claimants
shall be entitled to the simple interest @14% p.a, on the
Amount of INR 3,35,04,650 (Rupees Three Crore Thirty Five
Lakh Four Thousand and Six Hundred Filly Only), from
01.05.2011 till date of Award i.e. 20.03.20 II, for nine years,
ten months and twenty days. It comes to INR 4,16,94,674
(Rupees Four Crore Sixteen Lakh Ninety Four Thousand Six
Hundred Seventy Four only). The Claimants are further
entitled under Section 31(7)(b) or the Act, 1996. for interest
@12%> on the sum of INR 3,35,04,650+1NR 4,16,94,674 =
INR 7,51,99,324 (Rs. Seven Crores Fifty One Lakhs Ninety
Nine Thousand three hundred and twenty Four only, from
the date of Award till the date of realisation.

84. Claim no (vi) Damages fix the loss of opportunity to the
tune of INR 150 lakhs. It has been submitted by the Learned
Counsel of the Claimant that the Claimants have been
deprived of the right to enjoy the use of the commercial
complex and have suffered a huge loss. There has been price
escalation and is skyrocketing and thus the claimants are
entitled for the said relief. ln the instant case, there are no
pleadings to substantiate the above claim, what to talk of the
evidence in that respect. The claimants did not produce any
document nor examine any witness to establish that there
has been price escalation on the area concerned during the
relevant period. The claim is liable to be rejected for want of
proper pleadings etc. The newspaper clippings were sent
after the award had been reserved to show the trend of
price-escalation, the same cannot be relied upon as the same
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neither been proved, exhibited nor any opportunity of
rebuttal is given to the respondent. The law requires a
specific procedure for proving the newspaper clips.
Newspaper, is at the best secondary evidence of its contents
and is not admissible in evidence without proper proof of the
contents under the Indian Evidence Act. The Court/Tribunal
cannot treat the newspaper rep1y is as duly 'proved' only by
the production of the copies of the newspaper. Thus, this
claim is liable to be rejected.

. Claim no (ix)- Cost of Arbitration
The cost of arbitration can be awarded the terms of Section
31 (8) of the Act, 1996. The explanation appended to the said
sub-section provides the guidelines for awarding the
reasonable costs taking into consideration, the fees and
expenses of Arbitrator and witnesses, legal fees and
expenses, administrative fees of the institution if any and
other expenses in connection with the Arbitral Proceedings.
The cost is awarded to a party which is forced to go for
litigation just to be compensated for the cost incurred in
prosecuting his case. The costs include all expenses properly
incurred by the part.ics during the course of arbitration. The
cost is to be awarded to the party which has succeeded in the
case. The cost is to be awarded by taking guidance from the
principle of justice and fairness and keeping in mind the
nature of litigation, the complex question of facts and laws
etc. ln determining the cost, the factors i.e. the conduct of all
the parties, the extent to which a party has succeeded in a
case and whether a party had made a frivolous counter-
claim leading to delay in arbitration proceedings are also
required to be considered. (vide: Santokh Singh v Union
(India, AIR 1992 sc 1809) Ms Takiar, Learned Counsel for
the Claimants have submitted the Certificate of Costs
claiming as under:
Certificate of costs as per Section 31 A of the Act, 1996 for
nine cases incurred by the Claimants
a) Fees and expenses before the H.igh Court, Supreme Court
and the
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LearnedArbitrator, Court for nine cases -
i) Before High Court- Rs.l ,00,00,000 (Rupees One Crore
only)
ii) Before Supreme Court- Rs.l ,00,00,000 (Rupees One
Crore only)
iii) Before Tribunal Fee - Rs.26,00,000 (Rupees Twenty Six
Lakh
only)
iv) Expenses for proceedings @ I 0 lakhs for nine cases-
Rs.90 lakhs(Rupees Ninety Lakh only)
b) Legal Fees and expenses- Rs.1,OO,OO,OOO (Rupees
One Crore only)
c) Administration fees of SNS ADR Centre @ Rs.12000 for 6
hearings Rs. 72,000/- (Rupees Seventy Two Thousand only)
Total cost- Rs.4,16,72,000/- (Rupees Four Crore, Sixteen
Lakh, Seventy
Two Thousand only)
The Claimants have succeeded in their case. The Claimants
were not furnished full information, expected from the
builder at the time of entering into the contract. The factum
of intervention by the ASI had occurred prior to the date of
the Agreement. In all fairness, this fact could have been
made known to every Applicant. Suppressing such a material
fact and knowing it well that construction would not be
permitted without the NOC by the ASI, the Respondent
continued to book and receive advances from the people for
the Units with a clear cut stipulation in the Agreements that
construction would be completed within stipulated period.
The respondent, expected to adduce the best evidence in
support of its case filed to furnish the required information
about the Completion Certificate. Even today, there is
nothing on record to show as to whether the respondent has
a valid Completion Certificate and is in the position to put
an allottee in possession. The Claimants have suffered from
mental agony and have been deprived of the right to enjoy
the property. The Certificate of Costs submitted on behalf of
the Claimants for lNR 4,16,72,000 (Rupees Four Crore,
Sixteen Lakh, Seventy Two Thousand only) is definitely
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excessive. In order to meet the ends of justice, it is desirable
that a cost of INR 25,00,000 (Rupees Twenty Five Lakh only)
be awarded for all the consolidated nine cases. All the
outstanding dues shall be paid by the respondent to the
Claimants within a period of three months from today.‖

91. This Court before adverting to the finding of the Tribunal has
relied on the judgment of the Hon‘ble Supreme Court Welspun Speciality
Solutions Ltd. v. ONGC, (2022) 2 SCC 382 regarding the principle
governing the damages held as follows:
“ 32. In order to examine whether the delayed execution of
contract by the Remi Metals was liable for compensation,
the Tribunal examined whether time was of the essence in
the contract. In our considered opinion, ―time not being the
essence of the contract‖, as determined by the Arbitral
Tribunal, was beyond reproach. Reliance on the contractual
conditions and conduct of parties to conclude that existence
of extension clause dilutes time being the essence of the
contract, was in accordance with rules of contractual
interpretation.
33. In this context, the award concludes that as time was not
the essence, liquidated damages could not be granted, in the
following manner:
―Since time was not the essence of the contract, the measure
of damages specified under clause liquidated damages,
which was the essence of the contract, cannot be regarded as
appropriate for determining the loss sustained by ONGC.‖
(emphasis supplied)
34. In order to consider the relevancy of time conditioned
obligations, we may observe some basic principles:
(a) Subject to the nature of contract, general rule is that
promisor is bound to complete the obligation by the date for
completion stated in the contract. [Refer to Percy Bilton
Ltd. v. Greater London Council [Percy Bilton Ltd. v. Greater
London Council, (1982) 1 WLR 794 (HL)] ]
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(b) That is subject to the exception that the promisee is not
entitled to liquidated damages, if by his act or omissions he
has prevented the promisor from completing the work by the
completion date. [Refer Holme v. Guppy [Holme v. Guppy,
(1838) 3 M & W 387 : 150 ER 1195] ]
(c) These general principles may be amended by the express
terms of the contract as stipulated in this case.
35. It is now settled that ―whether time is of the essence in a
contract‖, has to be culled out from the reading of the entire
contract as well as the surrounding circumstances. Merely
having an explicit clause may not be sufficient to make time
the essence of the contract. As the contract was spread over
a long tenure, the intention of the parties to provide for
extensions surely reinforces the fact that timely performance
was necessary. The fact that such extensions were granted
indicates ONGC's effort to uphold the integrity of the
contract instead of repudiating the same.
38. In Saw Pipes case [ONGC v. Saw Pipes Ltd., (2003) 5
SCC 705] , impugned clause for liquidated damages was
considered and upheld by this Court in the following manner
: (SCC pp. 733 & 740-41, paras 46, 64 & 66)
―46. From the aforesaid sections, it can be held that when a
contract has been broken, the party who suffers by such
breach is entitled to receive compensation for any loss which
naturally arises in the usual course of things from such
breach. These sections further contemplate that if parties
knew when they made the contract that a particular loss is
likely to result from such breach, they can agree for payment
of such compensation. In such a case, there may not be any
necessity of leading evidence for proving damages, unless
the court arrives at the conclusion that no loss is likely to
occur because of such breach. Further, in case where the
court arrives at the conclusion that the term contemplating
damages is by way of penalty, the court may grant
reasonable compensation not exceeding the amount so
named in the contract on proof of damages. However, when
the terms of the contract are clear and unambiguous then its
meaning is to be gathered only from the words used therein.
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In a case where agreement is executed by experts in the
field, it would be difficult to hold that the intention of the
parties was different from the language used therein. In such
a case, it is for the party who contends that stipulated
amount is not reasonable compensation, to prove the same.
*
64. … Under Section 73, when a contract has been broken,
the party who suffers by such breach is entitled to receive
compensation for any loss caused to him which the parties
knew when they made the contract to be likely to result from
the breach of it. This section is to be read with Section 74,
which deals with penalty stipulated in the contract, inter alia
(relevant for the present case) provides that when a contract
has been broken, if a sum is named in the contract as the
amount to be paid in case of such breach, the party
complaining of breach is entitled, whether or not actual loss
is proved to have been caused, thereby to receive from the
party who has broken the contract reasonable compensation
not exceeding the amount so named. Section 74 emphasises
that in case of breach of contract, the party complaining of
the breach is entitled to receive reasonable compensation
whether or not actual loss is proved to have been caused by
such breach. Therefore, the emphasis is on reasonable
compensation. … But if the compensation named in the
contract for such breach is genuine pre-estimate of loss
which the parties knew when they made the contract to be
likely to result from the breach of it, there is no question of
proving such loss or such party is not required to lead
evidence to prove actual loss suffered by him. …
*
66. In Maula Bux case [Maula Bux v. Union of India, (1969)
2 SCC 554] the Court has specifically held that it is true that
in every case of breach of contract the person aggrieved by
the breach is not required to prove actual loss or damage
suffered by him before he can claim a decree and the court is
competent to award reasonable compensation in a case of
breach even if no actual damage is proved to have been
suffered in consequence of the breach of contract. The Court
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The Division Bench of Calcutta High Court in the judgment of
S.B.I.W. Steels (P) Ltd. v. SAIL, 2022 SCC OnLine Cal 3842 on the
aspect of principle of awarding damages held as follows:
―27. Mr. Justice J.C. Shah delivering the judgment of the
Chand
Supreme Court in Fateh v. Balkishan Dass reported
in AIR 1963 SC 1405 has inter alia pronounced the
following dictum referring to Section 74 of the Indian
Contract Act:—

43.1. Where a sum is named in a contract as a
liquidated amount payable by way of damages,
the party complaining of a breach can receive as
reasonable compensation such liquidated amount
only if it is a genuine pre-estimate of damages
fixed by both parties and found to be such by the
court. In other cases, where a sum is named in a
contract as a liquidated amount payable by way
of damages, only reasonable compensation can be
awarded not exceeding the amount so stated.
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the respondent to the petitioner due to breach of Contract by the petitioner
alongwith the interest as per its discretion. The Tribunal has not awarded
damages to the petitioner and has given reasoning for loss of opportunity.
Moreover, the cost of Arbitration has been awarded by the Tribunal.
93. This Court is of the view that that the Tribunal has rightly refunded
the amount to the respondent and as it deemed fit awarded the interest of
the said amount which was refunded. Furthermore, relying on the
Welspun Speciality Solutions Ltd.(Supra) and S.B.I.W. Steels (P) Ltd
(Supra) this Court finds that the Tribunal has correctly held that the loss
of profit should not be awarded to the respondent as there is no proof or
evidence to the effect that the loss of profit as claimed by the respondent
has actually been suffered by it. Moreover, the Tribunal has correctly
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awarded the cost of the arbitration to the respondent. Thus, there is no
need for interference of this Court under Section 34 of the Act, 1996. I do
not find any reason qua issue no. 8 for interference.


CONCLUSION
94. In light of the facts, submissions, and contentions in the pleadings,
this Court finds that the petitioner has failed to corroborate with evidence,
as to how, the learned Arbitrator had erred in adjudicating the dispute.
The Courts shall not sit in an appeal while adjudicating a challenge to an
Award which is passed by an Arbitrator, the master of evidence, after due
consideration of facts, circumstances, evidence, and material before him.
95. The Court is of the view that the Learned Sole Arbitrator was well
within his jurisdiction and capacity to award the claim/compensation in
favour of the respondent.
96. It is settled law that the grounds under Section 34 of the Act, 1996
give way to setting aside an Arbitral Award with a very minimal scope of
intervention. A party cannot merely raise an objection on the ground of
Section 34 if the Award is against them. Section 34 of the Act, 1996
requires a distinct transgression of law, the clear lack of which thereof
makes the petition simply a pointless effort of objection towards an
Award made by a competent Arbitral Tribunal.
97. In the instant petition, it was argued that the impugned Award is
th
20 March 2020 and thus, liable to be set aside. The petitioner has failed
to make out such a case and was unable to show that the Award warrants
interference under Section 34 of the Act, 1996.
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th
98. It is evident from the perusal of the impugned Award dated 20
March 2020 that interference under Section 34 of the Act, 1996 is not
warranted. The Learned Arbitrator has passed the impugned Award after
considering all the relevant material placed before it during the arbitral
proceedings.
99. The Award is well-reasoned and is not in contravention of the
fundamental policy of Indian law, and thus there is no reason for
interference in the impugned Award. In view of the above discussion of
facts and law, this Court finds no reason to set aside the impugned
th
Arbitral Award dated 20 March 2020.
100. The petition is, accordingly, dismissed along with pending
applications, if any.
101. The judgment be uploaded on the website forthwith.


CHANDRA DHARI SINGH, J

JULY 19, 2023
SV/DB
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Signature Not Verified
Digitally Signed
By:DAMINI YADAV
Signing Date:21.07.2023
20:08:49