SHRI ADITYA CONSTRUCTIONS PRIVATE LIMITED vs SRI. H R HARINDRANATHA SHASTRY
- Court
- Karnataka High Court
- 1 -
COMAP No. 376 of 2025
C/W COMAP No. 374 of 2025
COMAP No. 375 of 2025
AND 1 OTHER
TH
RESERVED ON 27 AUGUST 2026
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
TH
DATED THIS THE 04 DAY OF NOVEMBER, 2026
PRESENT
THE HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE
AND
THE HON'BLE MRS. JUSTICE K.S. HEMALEKHA
COMMERCIAL APPEAL NO.376 OF 2025
C/W
COMMERCIAL APPEAL NO.374 OF 2025
COMMERCIAL APPEAL NO.375 OF 2025
COMMERCIAL APPEAL NO.380 OF 2025
IN COMAP NO.376/2025
BETWEEN:
SHRI ADITYA CONSTRUCTIONS PRIVATE LIMITED
CORPORATE REGISTERED OFFICE AT
H.NO.2801A, "A" VASUDEV RETREAT
VASUDEV NAGAR, BICHOLIM,
GOA - 403504,
REPRESENTED BY ITS DIRECTOR
SRI. H.S. SHIVASHANKAR,
S/O. SHESHAGIRIYAPPA,
AGED ABOUT 65 YEARS,
"SARVASIDDI", F-70,
GOPALA GOWDA EXTENSION,
SHIVAMOGGA - 577 205.
…APPELLANT
(BY SRI. DWARAKANATH H.S., ADVOCATE)
AND:
1. SMT. H.R. KOUSALYA
S/O. H.V. RAMACHANDRA SHASTRY,
Digitally signed
by C K LATHA
Location: High
Court of
Karnataka
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COMAP No. 376 of 2025
C/W COMAP No. 374 of 2025
COMAP No. 375 of 2025
AND 1 OTHER
AGED ABOUT 62 YEARS,
RESIDING AT PARVATHI NILAYA,
PARK EXTENSION, DURGIGUDI,
SHIVAMOGGA - 577 205.
2. SRI. S.R. SOMASHEKHARA
FORMER DISTRICT & SESSIONS JUDGE,
SOLE ARBITRATOR,
ARBITRATION & CONCILIATION CENTRE
BENGALURU - 560 009.
…RESPONDENTS
(BY SRI. PRASHANTH CHANDRA S.N., ADVOCATE FOR R-1)
THIS COMMERCIAL APPEAL IS FILED UNDER SECTION 13(1A)
OF THE COMMERCIAL COURTS ACT, 2015 R/W SECTION 37(1)(C) OF
THE ARBITRATION AND CONCILIATION ACT, 1996 PRAYING TO CALL
FOR RECORDS FROM THE III ADDITIONAL DISTRICT AND SESSIONS
JUDGE AT SHIVAMOGGA OF COM. ARBITRATION PETITION
NO.02/2021 FILED UNDER SECTION 34 OF THE ARBITRATION &
CONCILIATION ACT, 1996; SET ASIDE THE ORDERS PASSED BY THE
III ADDITIONAL DISTRICT AND SESSIONS JUDGE AT SHIVAMOGGA
DATED 02.05.2025 IN COM. ARBITRATION PETITION NO.2/2021
ST
ALLOWING THE PETITION FILED BY THE 1 RESPONDENT UNDER
SECTION 34 OF ARBITRATION & CONCILIATION ACT, 1996 R/W
SECTION 10(3) OF COMMERCIAL COURTS ACT, 2015 AND ETC.
IN COMAP NO.374/2025
BETWEEN:
SHRI ADITYA CONSTRUCTIONS PRIVATE LIMITED
CORPORATE REGISTERED OFFICE AT
H.NO.2801A, "A" VASUDEV RETREAT
VASUDEV NAGAR,
BICHOLIM, GOA - 403504,
REPRESENTED BY ITS DIRECTOR
SRI. H.S. SHIVASHANKAR,
S/O. SHESHAGIRIYAPPA,
AGED ABOUT 65 YEARS,
"SARVASIDDI", F-70,
GOPALA GOWDA EXTENSION,
SHIVAMOGGA - 577 205.
...APPELLANT
(BY SRI. DWARAKANATH H.S., ADVOCATE)
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COMAP No. 376 of 2025
C/W COMAP No. 374 of 2025
COMAP No. 375 of 2025
AND 1 OTHER
AND:
1. MR. H.R. HARINDRANATHA SHASTRY
S/O. H.V. RAMACHANDRA SHASTRY,
AGED ABOUT 62 YEARS,
RESIDING AT PARVATHI NILAYA,
PARK EXTENSION, DURGIGUDI,
SHIVAMOGGA - 577 205.
2. SRI. S.R. SOMASHEKHARA
FORMER DISTRICT & SESSIONS JUDGE,
SOLE ARBITRATOR,
ARBITRATION & CONCILIATION CENTRE
BENGALURU - 560 009.
...RESPONDENTS
(BY SRI. PRASHANTH CHANDRA S.N., ADVOCATE FOR R-1)
THIS COMMERCIAL APPEAL IS FILED UNDER SECTION 13(1A)
OF THE COMMERCIAL COURTS ACT, 2015 R/W SECTION 37(1)(C) OF
THE ARBITRATION AND CONCILIATION ACT, 1996 PRAYING TO CALL
FOR RECORDS FROM THE III ADDITIONAL DISTRICT AND SESSIONS
JUDGE AT SHIVAMOGGA OF COM. ARBITRATION PETITION NO.3/2021
FILED UNDER SECTION 34 OF THE ARBITRATION & CONCILIATION
ACT, 1996; SET ASIDE THE ORDERS PASSED BY THE III ADDITIONAL
DISTRICT AND SESSIONS JUDGE AT SHIVAMOGGA DATED 02.05.2025
IN COM. ARBITRATION PETITION NO.3/2021 DISMISSING THE
PETITION FILED BY THE APPELLANT UNDER SECTION 34 OF THE
ARBITRATION & CONCILIATION ACT, 1996 R/W SECTION 10(3) OF
COMMERCIAL COURTS ACT, 2015 AND ETC.,
IN COMAP NO.375/2025
BETWEEN:
SHRI ADITYA CONSTRUCTIONS PRIVATE LIMITED
CORPORATE REGISTERED OFFICE AT
H.NO.2801A, "A" VASUDEV RETREAT
VASUDEV NAGAR, BICHOLIM,
GOA - 403 504,
REPRESENTED BY ITS DIRECTOR
SRI. H.S. SHIVASHANKAR,
S/O. SHESHAGIRIYAPPA,
AGED ABOUT 65 YEARS,
"SARVASIDDI", F-70,
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COMAP No. 376 of 2025
C/W COMAP No. 374 of 2025
COMAP No. 375 of 2025
AND 1 OTHER
GOPALA GOWDA EXTENSION,
SHIVAMOGGA - 577 205.
...APPELLANT
(BY SRI. DWARAKANATH H.S., ADVOCATE)
AND:
1. SMT. H.R. KOUSALYA
W/O. H.V. RAMACHANDRA SHASTRY,
AGED ABOUT 91 YEARS,
RESIDING AT PARVATHI NILAYA,
PARK EXTENSION, DURGIGUDI,
SHIVAMOGGA - 577 205.
2. SRI. S.R. SOMASHEKHARA
FORMER DISTRICT & SESSIONS JUDGE,
SOLE ARBITRATOR,
ARBITRATION & CONCILIATION CENTRE,
BENGALURU - 560 009.
...RESPONDENTS
(BY SRI. PRASHANTH CHANDRA S.N., ADVOCATE FOR R-1)
THIS COMMERCIAL APPEAL IS FILED UNDER SECTION 13(1A)
OF THE COMMERCIAL COURTS ACT, 2015 R/W SECTION 37(1)(C) OF
THE ARBITRATION AND CONCILIATION ACT, 1996 PRAYING TO CALL
FOR RECORDS FROM THE III ADDITIONAL DISTRICT AND SESSIONS
JUDGE AT SHIVAMOGGA OF COM. ARBITRATION PETITION
NO.04/2021 FILED UNDER SECTION 34 OF THE ARBITRATION &
CONCILIATION ACT, 1996; SET ASIDE THE ORDERS PASSED BY THE
III ADDITIONAL DISTRICT AND SESSIONS JUDGE AT SHIVAMOGGA
DATED 02.05.2025 IN COM. ARBITRATION PETITION NO.4/2021
DISMISSING THE PETITION FILED BY THE APPELLANT UNDER
SECTION 34 OF THE ARBITRATION & CONCILIATION ACT, 1996 R/W
SECTION 10(3) OF COMMERCIAL COURTS ACT, 2015 AND ETC.
IN COMAP NO.380/2025
BETWEEN:
SHRI ADITYA CONSTRUCTIONS PRIVATE LIMITED
CORPORATE REGISTERED OFFICE AT
H.NO.2801A, "A" VASUDEV RETREAT
VASUDEV NAGAR,
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COMAP No. 376 of 2025
C/W COMAP No. 374 of 2025
COMAP No. 375 of 2025
AND 1 OTHER
BICHOLIM, GOA - 403 504,
REPRESENTED BY ITS DIRECTOR
SRI. H.S. SHIVASHANKAR
S/O. SHESHAGIRIYAPPA,
AGED ABOUT 65 YEARS
"SARVASIDDI", F-70,
GOPALA GOWDA EXTENSION,
SHIVAMOGGA - 577 205.
...APPELLANT
(BY SRI. DWARAKANATH H.S., ADVOCATE)
AND:
1. SRI. H.R. HARINDRANATHA SHASTRY
S/O. H.V. RAMACHANDRA SHASTRY,
AGED ABOUT 62 YEARS,
RESIDING AT PARVATHI NILAYA,
PARK EXTENSION, DURGIGUDI,
SHIVAMOGGA - 577205.
2. SRI. S.R. SOMASHEKHARA
FORMER DISTRICT & SESSIONS JUDGE,
SOLE ARBITRATOR,
ARBITRATION & CONCILIATION CENTRE,
BENGALURU - 560 009.
...RESPONDENTS
(BY SRI. PRASHANTH CHANDRA S.N., ADVOCATE FOR R-1)
THIS COMMERCIAL APPEAL IS FILED UNDER SECTION 13(1A)
OF THE COMMERCIAL COURTS ACT, 2015 R/W SECTION 37(1)(C) OF
THE ARBITRATION AND CONCILIATION ACT, 1996 PRAYING TO CALL
FOR RECORDS FROM THE III ADDITIONAL DISTRICT AND SESSIONS
JUDGE AT SHIVAMOGGA OF COM. ARBITRATION PETITION
NO.01/2021 FILED UNDER SECTION 34 OF THE ARBITRATION &
CONCILIATION ACT, 1996; SET ASIDE THE ORDERS PASSED BY THE
III ADDITIONAL DISTRICT AND SESSIONS JUDGE, AT SHIVAMOGGA
DATED 02.05.2025 IN COM. ARBITRATION PETITION NO.01/2021
ST
ALLOWING THE PETITION FILED BY THE 1 RESPONDENT UNDER
SECTION 34 OF THE ARBITRATION AND CONCILIATION ACT, 1996
R/W SECTION 10(3) OF COMMERCIAL COURTS ACT, 2015 AND ETC.,
THESE COMMERCIAL APPEALS HAVING BEEN HEARD AND
RESERVED FOR JUDGMENT, COMING ON FOR PRONOUNCEMENT
THIS DAY, JUDGMENT WAS PRONOUNCED AS UNDER:
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COMAP No. 376 of 2025
C/W COMAP No. 374 of 2025
COMAP No. 375 of 2025
AND 1 OTHER
CORAM: HON'BLE MR. VIBHU BAKHRU ,CHIEF JUSTICE
and
HON'BLE MRS. JUSTICE K.S. HEMALEKHA
CAV JUDGMENT
(PER: HON'BLE MRS. JUSTICE K.S. HEMALEKHA)
1. All these four appeals are preferred by Shri. Aditya
Constructions Private Limited, under Section 37 (1)(C) of the
Arbitration and Conciliation Act, 1996 [ A&C Act ] read with Section
13(1A) of the Commercial Courts Act, 2015 assailing the orders
dated 02.05.2025 [ impugned order ] passed by the III Additional
District and Sessions Judge, Shivamogga [ Commercial Court ], in
Commercial Arbitration Petition Nos.1/2021 to 4/2021 arising out of
the common award dated 24.06.2021 [ Arbitral Award ] passed in
A.C Nos.84/2018 and 85/2018. Since all these appeals arise out of
the common Arbitral Award and involve common questions of fact
and law, they are heard together and are disposed of by this
common judgment.
2. For the sake of convenience, the appellant shall hereinafter
be referred to as claimant and the respondents as landowners.
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C/W COMAP No. 374 of 2025
COMAP No. 375 of 2025
AND 1 OTHER
PREFATORY FACTS
3. The respondent in A.C No.84/2018, Smt. H.R.Kousalya, is
the owner of land bearing Re.Sy.No.58 measuring 5 acres 18
guntas, whereas respondent in A.C No.85/2018, H.R Harindranatha
Shastry, is the owner of land bearing Sy.No.53/5 measuring 4 acres
37 guntas both situated at Mullakere Village, Shivamogga
[ scheduled properties ]. The landowners had obtained conversion
of the scheduled properties for non-agriculture purposes and also
secured approval of layout plans from the Shivamogga Urban
Development Authority [ SUDA ].
4. The landowners entered into separate development
agreements dated 17.01.2014 with the claimant for developing the
scheduled properties into residential layouts. Under the
agreements, the claimant was required to undertake development
of the scheduled properties, obtain necessary statutory approvals
and form residential sites. The parties agreed that 60% of the
saleable sites would be allotted to the landowners and remaining
40% to the claimant. Power of attorney was also executed in favour
of the claimant on 18.01.2014 to facilitate the development works
and obtaining of necessary permissions. Addendums dated
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C/W COMAP No. 374 of 2025
COMAP No. 375 of 2025
AND 1 OTHER
21.01.2014 were also stated to have been executed between the
parties.
5. According to the claimant, pursuant to the development
agreements, it undertook substantial development works, including
formation of roads, underground drainage, construction of culverts,
laying of water pipelines and development of parks. It was
contended that except for erection of electrical poles, drawing of
electricity supply lines and asphalting of roads, the remaining
development works had substantially been completed.
6. It was further contended that completion of remaining works
was prevented by the failure of the landowners to obtain consent
from the owners of adjoining properties for providing access and
laying utility lines, as well as permission from forest department for
removal of certain trees. The claimant asserted that despite
repeated requests, the landowners failed to extend the necessary
cooperation.
7. The landowners on the other hand, contended that under the
development agreements, the obligation to obtain sanction layout
plans and other statutory permission was that of the claimant. It
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C/W COMAP No. 374 of 2025
COMAP No. 375 of 2025
AND 1 OTHER
was alleged that the claimant had failed to obtain a fresh sanction
layout plan from SUDA and had undertaken development works
without requisite statutory approvals. It was further contended that
the claimant had failed to complete the development within the
stipulated period and had therefore committed breach of the
contractual obligations.
8. In these circumstances, the landowners by separate notices
dated 28.05.2016, terminated the development agreements and
revoked the powers of attorney executed in favour of the claimant.
Aggrieved by the termination, the claimant invoked the arbitration
clause contained in the respective agreements and sought the
following reliefs in A.C.84/2018 as under :
" WHEREFORE, the petitioner pray that the Hon'ble
Authority may be pleased to pass orders and direct the
Respondent to:
a) tender co-operation to the Petitioner to submit the
layout plan to SUDA, Shimoga for release of first
installments of sites/plots.
b) To execute the supplementary agreement in terms of
Clause-II of the development agreement dated 17-01-2014
so as to enable the petitioner to take its 40% share of
saleable area of sites/plots in the approved layout plan.
c) To get the registered GPA duly registered in the
office of the Sub-Register, Shimoga to empower the
petitioner to deal with the sites/plots allotted to its share as
per the agreed ratio with other essential requirements.
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C/W COMAP No. 374 of 2025
COMAP No. 375 of 2025
AND 1 OTHER
(d) For an Order of specific performance of the Joint
Development Agreement dated 17-01-2014;
(e) For an Order declaring that the notice issued dated
28-05-2016 produced as Annexure-C is not valid in law and
is void ab-initio.
(f) For an Order for payment of Rs.25,00,000/- in
addition to specific performance as pleaded in paragraph
12(L);
(g) For an Order directing the Respondent to register the
Joint Development Agreement dated 17-01-2014.
(h) If for any reason this Hon'ble Tribunal were to come
to the conclusion that specific performance is not possible,
for a direction to the Respondent to pay an amount of
Rs.5,36,03,989/- (Rupees Five Crore thirty-six lakhs three
thousand nine hundred and eighty-nine only) as per
paragraph 12(J)
And that this Hon'ble court may deem fit in the facts and
circumstances of the case, in the interest of justice and
equity. "
9. And in A.C 85/2018 as under :
" WHEREFORE, the Petitioner prays that the Hon'ble
Authority may be pleased to pass orders and direct the
Respondent to:
a) Tender co-operation to the Petitioner to submit the
layout plan to SUDA, Shimoga for release of first
installments of sites/plots and to the forest department,
MESCOM and other department for necessary approvals.
b) To execute the supplementary agreement in terms of
Clause-II of the development agreement dated 17-01-2014
so as to enable the petitioner to take its 40% share of
saleable area of sites/plots in the approved layout plan.
c) To get the registered GPA duly registered in the
office of the Sub-Register, Shimoga to empower the
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C/W COMAP No. 374 of 2025
COMAP No. 375 of 2025
AND 1 OTHER
petitioner to deal with the sites/plots allotted to its share as
per the agreed ratio with other essential requirements.
d) For an Order of specific performance of the Joint
Development Agreement dated 17/01/2014;
e) For an Order declaring that the notice issued dated
28/05/2016 produced as Annexure-C is not valid in law and
is void ab-initio.
f) For an Order for payment of Rs.25,00,000/- in
addition to specific performance as pleaded in paragraph
12(L);
g) For an Order directing the Respondent to register the
Joint Development Agreement dated 17/01/2014.
h) If for any reason this Hon'ble Tribunal were to come
to the conclusion that specific performance is not possible,
for a direction to the Respondent to pay an amount of
Rs.5,21,42,306/-(Rupees Five crores twenty-one lakhs
forty-two thousand three hundred and six only) as per
paragraph 12(J).
And that this Hon'ble court may deem fit in the facts
and circumstances of the case, in the interest of justice and
equity. "
PROCEEDINGS BEFORE THE ARBITRAL TRIBUNAL
10. Since the dispute arose out of similar development
agreements and involving substantially common questions, the
proceedings, A.C Nos.84/2018 and 85/2018 which were registered
pursuant to the order passed by this court in CMP Nos.286/2017
and 287/2017, were clubbed together and common evidence was
recorded and both the matters were disposed of by a common
Arbitral Award dated 24.06.2021.
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C/W COMAP No. 374 of 2025
COMAP No. 375 of 2025
AND 1 OTHER
11. Before the Arbitral Tribunal, the claimant sought specific
performance of development agreements, a declaration that the
termination notices dated 28.05.2016 were invalid, and direction to
the landowners to cooperate in obtaining the statutory approvals
and performing their contractual obligations. Alternatively, the
claimant sought monetary compensation towards the expenditure
incurred on development works, interest and damages. The total
` `
monetary claims were 5,36,03,989 in A.C 84/2018 and
5,21,42,306 in A.C 85/2018.
FINDINGS OF THE ARBITRAL TRIBUNAL
12. Upon consideration of the pleadings, oral and documentary
evidence and the terms of development agreements, the learned
Arbitral Tribunal held that the execution of addendums dated
21.01.2014 had been established. However, upon interpretation of
clauses 6 and 8 of the development agreements, the Arbitral
Tribunal found that the obligation to obtain sanction layout plans
and requisite statutory approvals rested upon the claimant.
13. The Arbitral Tribunal further recorded that the claimant had
failed to obtain a fresh sanction layout plan or renewal of the earlier
approval from SUDA. The claimant had neither established
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C/W COMAP No. 374 of 2025
COMAP No. 375 of 2025
AND 1 OTHER
submission of an application for such approval nor payment of the
prescribed fee. The Arbitral Tribunal found that the claimant has
failed to establish completion of the development works within the
stipulated period and had not proved that delay was attributable to
any omission or commission on the part of the landowners.
14. Consequently, the Arbitral Tribunal held that the claimant had
failed to establish its continuous readiness and willingness to
perform its contractual obligations and that the landowners were
justified in terminating the development agreements and revoking
the powers of attorney by notices dated 28.05.2016. Accordingly,
`
the claim for specific performance and the additional claim of
25,00,000/- were rejected.
15. However, while considering the alternative claim of monetary
compensation, the Arbitral Tribunal examined the applicability of
Sections 64, 70 and 73 of the Indian Contract Act, 1872 [ Contract
Act ]. The learned Arbitral Tribunal held that the claimant, having
failed to establish breach of contract on the part of the landowners,
is not entitled to damages under Section 73. Nevertheless,
invoking Section 64 of the Contract Act, the Arbitral Tribunal held
that the landowners, having rescinded the development
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C/W COMAP No. 374 of 2025
COMAP No. 375 of 2025
AND 1 OTHER
agreements, were liable to restore benefits received under the
agreements. Taking into consideration the oral evidence of PW1,
the admissions of RW-1 and the report of the Court Commissioner
as establishing that development works had been carried out and
the vouchers and invoices at Exs.P24 to P348 as establishing the
expenditure incurred, the Arbitral Tribunal partly allowed the
alternative monetary claims and awarded ` 1,21,46,306 in A.C
No.84/2018 and ` 1,09,76,249 in A.C No.85/2018 with interest at
8.5% per annum from the date of award till payment. Thus, while
refusing specific performance, the Arbitral Tribunal granted
monetary compensation aggregating to ` 2,31,22,555.
Proceedings before the Commercial Court under Section 34 of
the A&C Act
16. Aggrieved by the Arbitral Award dated 24.06.2021, both the
claimant and the landowners independently invoked Section 34 of
the A&C Act before the Commercial Court. The claimant preferred
Commercial Arbitration Petition Nos.3/2021 and 4/2021
challenging the award insofar as it declined specific performance
of the development agreements and rejected the remaining
monetary claims. On the other hand, the landowners preferred
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C/W COMAP No. 374 of 2025
COMAP No. 375 of 2025
AND 1 OTHER
Commercial Arbitration Petition Nos.1/2021 and 2/2021,
challenging the Arbitral Award insofar as monetary compensation
had been granted to the claimant under Section 64 of the Contract
Act.
Findings of the Commercial Court
17. The Commercial Court, by common order dated 02.05.2025
passed in Commercial Arbitration Petition Nos.3/2021 and 4/2021,
dismissed the petitions preferred by the claimant. The Commercial
Court concurred with the findings of the Arbitral Tribunal that the
claimant has failed to obtain the requisite sanction layout plans and
had not established readiness and willingness to perform its
contractual obligation. It held that refusal of specific performance
was based on appreciation of the contractual terms and evidence
and did not warrant any interference within the limited scope of
Section 34 of the A&C Act. The Commercial Court also declined to
interfere with the rejection of additional monetary claims.
18. Insofar as Commercial Arbitration Petition Nos.1/2021 and
2/2021 preferred by the landowners are concerned, the
Commercial Court, by a separate common order of the same date,
allowed both petitions. The Commercial Court held that the Arbitral
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C/W COMAP No. 374 of 2025
COMAP No. 375 of 2025
AND 1 OTHER
Tribunal had erred in invoking Section 64 of the Contract Act to
award compensation to the claimant. It observed that development
works had been undertaken without obtaining the requisite
statutory approval from SUDA and that the claimant had failed to
establish that the landowners had actually derived any benefit from
such works.
19. The Commercial Court further held that the expenditure
incurred by the claimant could not, by itself, be equated with the
benefit received by the landowners. In the absence of evidence
establishing that development works could be properly utilised or
approved by competent authority, the award directing
reimbursement of the expenditure was held to be contrary to law.
20. Consequently, the Commercial Court set aside the common
Arbitral Award insofar as it granted monetary compensation to the
claimant under paragraph 131 (iii) of the Arbitral Award, thus, the
Commercial Court dismissed Commercial Arbitration Petition
Nos.3/2021 and 4/2021 preferred by the claimant, while allowing
Commercial Arbitration Petition Nos.1/2021 and 2/2021 preferred
by the landowners. The result was that the refusal of specific
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COMAP No. 375 of 2025
AND 1 OTHER
performance stood undisturbed whereas the monetary
compensation awarded to the claimant was set aside.
PRESENT APPEALS
21. Aggrieved by the aforesaid orders, the claimant have
preferred the present appeals. Commercial Appeal Nos.374/2025
and 375/2025 arise out of the dismissal of Commercial Arbitration
Petition Nos.3/2021 and 4/2021 respectively, whereas Commercial
Appeal Nos.376/2025 and 380/2025 arise out of the orders
allowing Commercial Arbitration Petition Nos.2/2021 and 1/2021
respectively.
CONTENTIONS
22. The learned counsel appearing for the appellant/claimant
would contend that the Commercial Court has failed to appreciate
the true scope and effect of development agreements and
addendums executed between the parties. It is submitted that the
addendum specifically contemplated development and sharing of
residential sites in accordance with the layout plans already
approved by SUDA and that the claimant had substantially carried
out the development works in accordance with those plans. It is
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C/W COMAP No. 374 of 2025
COMAP No. 375 of 2025
AND 1 OTHER
contended that the landowners had full knowledge of the
development activities undertaken by the claimant and had actively
participated in obtaining various permissions. It is contended that
the landowners or their representatives had regularly supervised
the development works without raising any objection. Having
permitted the claimant to undertake substantial development at
considerable expense, the landowners could not subsequently
deny the claimant's entitlement by insisting upon a fresh sanction
layout plan.
23. Insofar as monetary compensation awarded by the Arbitral
Tribunal is concerned, it is contended that the Arbitral Tribunal
upon appreciation of the oral and documentary evidence had
recorded findings regarding development works undertaken and
expenditure incurred by the claimant. It is stated that the award of
compensation under Section 64 of the Contract Act was based on
the benefit received by the landowners consequent upon such
development. The Commercial Court, while exercising jurisdiction
under Section 34 of the A&C Act, could not have reassessed the
evidence and substituted its own conclusion for those recorded by
the Arbitral Tribunal. It is further contended that the Commercial
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C/W COMAP No. 374 of 2025
COMAP No. 375 of 2025
AND 1 OTHER
Court exceeded the limited scope of interference permissible under
Section 34 of the A&C Act.
24. Per contra, the learned counsel appearing for the
respondents/landowners supporting the impugned order passed by
the Commercial Court would contend that the Arbitral Tribunal,
having categorically held that the claimant had failed to discharge
his contractual obligation and that the landowners were justified in
terminating the development agreements, could not have
proceeded to award reimbursement of the expenditure incurred by
the claimant by invoking Section 64 of the Contract Act. It is
submitted that the development agreements expressly obligated
the claimant to obtain requisite approval from the competent
authority before undertaking development works. Admittedly, no
fresh sanction layout plan or renewal of the earlier approval was
obtained. The claimant nevertheless proceeded to undertake
development works contrary to the terms of agreement and the
applicable statutory requirements.
25. It is contended that Section 64 of the Contract Act
contemplates restoration of the benefit received by the party
rescinding a voidable contract and does not provide for
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COMAP No. 375 of 2025
AND 1 OTHER
reimbursement of the expenditure incurred by the defaulting party.
It is contended that the claimant was therefore required to establish
not merely that certain development works had been undertaken,
but that the landowners actually received a benefit thereunder
capable of restitution. It is contended that the Tribunal confined its
enquiry to whether the claimant had incurred expenditure on
development and proceeded to quantify such expenditure and no
independent finding was recorded regarding the nature, extent or
value of benefit received by the landowners. The learned counsel
would submit that the monetary award by the Arbitral Tribunal
suffered from patent illegality inasmuch as the Arbitral Tribunal
granted relief without determining the essential statutory
requirement of benefit received under Section 64 of the Contract
Act.
REASONS AND CONCLUSION
26. At the outset, it is necessary to bear in mind the limited scope
of interference with the Arbitral Award under Section 34 of the A&C
Act and further restricted scope of appellate jurisdiction under
Section 37 of the A&C Act. The Court exercising jurisdiction under
Section 34 does not sit in appeal over the findings of the Arbitral
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COMAP No. 375 of 2025
AND 1 OTHER
Tribunal. Re-appreciation of evidence or substitution of another
plausible interpretation of the contract is impermissible merely
because a different conclusion could have been reached.
Interference is warranted only where the award suffers from
infirmity falling within the grounds enumerated under Section 34,
including patent illegality appearing on the face of the award, in the
case of domestic arbitration.
27. The Apex Court in Ssangyong Engineering and
Construction Company Limited Vs. National Highways
1
Authority of India (NHAI) , explained the expression "fundamental
policy of Indian law" and reiterated the limited scope of interference
under Section 34 of the A&C Act. It held that the expression of
"fundamental policy of Indian law" must be understood in the
manner explained in paragraph Nos.18 and 27 of decision in
2
Associate Builders vs DDA and held at paragraph Nos.34, 35
and 36 as under:
"34. What is clear, therefore, is that the expression
“public policy of India”, whether contained in Section 34 or
in Section 48, would now mean the “fundamental policy of
Associate
Indian law” as explained in paras 18 and 27 of
Builders
i.e. the fundamental policy of Indian law would be
1
(2019) 15 SCC 131
2
(2015) 3 SCC 49
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relegated to “Renusagar” understanding of this expression.
Western Geco
This would necessarily mean that
Western
expansion has been done away with. In short,
Geco Associate
, as explained in paras 28 and 29 of
Builders
, would no longer obtain, as under the guise of
interfering with an award on the ground that the arbitrator
has not adopted a judicial approach, the Court's
intervention would be on the merits of the award, which
cannot be permitted post amendment. However, insofar as
principles of natural justice are concerned, as contained in
a iii
Sections 18 and 34(2)( )( ) of the 1996 Act, these
continue to be grounds of challenge of an award, as is
Associate Builders
contained in para 30 of .
35. It is important to notice that the ground for
interference insofar as it concerns “interest of India” has
since been deleted, and therefore, no longer obtains.
Equally, 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”. This again would be in line with paras
Associate Builders
36 to 39 of , as it is only such arbitral
awards that shock the conscience of the court that can be
set aside on this ground.
36. Thus, it is clear that public policy of India is
now constricted to mean firstly, that a domestic award is
contrary to the fundamental policy of Indian law, as
Associate Builders
understood in paras 18 and 27 of , or
secondly, that such award is against basic notions of
justice or morality as understood in paras 36 to 39 of
Associate Builders b ii
. Explanation 2 to Section 34(2)( )( )
b ii
and Explanation 2 to Section 48(2)( )( ) was added by the
Western Geco
Amendment Act only so that , as understood
Associate Builders
in , and paras 28 and 29 in particular, is
now done away with."
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COMAP No. 375 of 2025
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28. In Delhi Airport Metro Express Private Limited Vs. Delhi
3
Metro Rail Corporation Limited , the Hon'ble Supreme Court held
that an Arbitral Award may be interfered with on the ground of
patent illegality where the findings are based on no evidence, where
vital evidence has been ignored, where the award contains no
reasons, or where the view taken by the arbitrator is not even a
plausible view. At the same time, the Court reiterated that patent
illegality must go to the root of the matter and that the Court cannot
re-appreciate evidence or act as an appellate authority.
29. The Supreme Court observed that a view which is not even
reasonably possible, or a finding based on no evidence or ignoring
vital evidence can constitute patent illegality. Taking these principles
in view, the challenge raised in these present appeals require
consideration under two distinct heads namely (I) refusal of specific
performance of the development agreements and (II) setting aside
of the monetary compensation awarded by Arbitral Tribunal.
3
(2022) 1 SCC 131
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(I) Commercial Appeals Nos. 374/2025 and 375/2025 -Refusal of
specific performance
30. The principal contention of the appellant is that the
development agreements dated 17.01.2014 were followed by
addendums dated 21.01.2014, under which the parties have agreed
to develop and share the residential sites in accordance with the
layout plans previously approved by SUDA. It is contended that the
landowners had full knowledge of the development works
undertaken by the claimant and had actively participated in the
same. Therefore, according to the appellant, the failure to obtain a
fresh sanction layout plan could not be treated as a ground for
denying specific performance. It is not in dispute that the parties
entered into separate development agreements dated 17.01.2014.
The execution of addendums dated 21.01.2014, though disputed by
landowners, was held to have been established by the Arbitral
Tribunal upon consideration of the oral and documentary evidence.
31. Clauses 6 and 8 of the development agreements read thus :
" 6) OBLIGATIONS OF THE SECOND
PARTY/DEVELOPERS:
The SECOND PARTY/DEVELOPERS shall, on its own and
at its own cost & expenses, perform the following, namely;
i) To prepare and finalize the demarcation Plan, layout
Plan and applications required for the formation of Layout
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with amenities and facilities on the Scheduled Property as
per the scheme formulated;
ii) To take all steps to obtain the layout plan sanctioned
by the Competent Authority or any statutory authority for
development of the Scheduled Property;
iii) To develop and form layout at its own cost and
expenses, on the Scheduled Property after obtaining
necessary approvals, sanctions, license etc., in accordance
with such alterations, additions, modifications as may, from
time to time become necessary.
iv) Deliver a copy of complete sanctioned plan of the
layout to the FIRST PARTY/OWNER along with the
possession of his share of the sites on completion of layout
in all aspects.
v) To obtain the required completion certificate from the
component authority for having completed the project in
accordance with the Plan and permissions.
vi) To sell or enter in to any Agreement for Sale of
developed plots of their 40% share.
x x x
8) LAYOUT PLAN:
i) The SECOND PARTY/DEVELOPERS at its cost
shall Design the Project / create the layout
plans/drawings/designs etc., for the Scheduled Property, as
per the bye-laws, rules and regulations for development and
formation of layout and submit the same to the competent
authority for sanction, approval. The SECOND PARTY/
DEVELOPERS is empowered to modify. add and/or delete
the contents in the Sanctioned plan as per the specific
regulatory requirements or as per the situational
requirements of development and shall seek ratification of
the same from appropriate authorities as may be deemed
necessary from time to time.
ii) It shall be the exclusive responsibility of the
SECOND PARTY/DEVELOPERS to secure all necessary
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clearances from the statutory authorities at its cost and to
meet the cost of preparation of the Layout Plan and getting
them sanctioned for development and formation of project
on the Scheduled Property within three or four months from
the date of registration of this Development Agreement,
subject to clearance from the government authorities and
production of all the required documents by The FIRST
PARTY/OWNER.
iii) The SECOND PARTY/DEVELOPERS is entitled to
make at its cost such modifications, additions, deletions
etc., in the Sanctioned Plan either as directed/required by
the authorities concerned or due to technical or other
exigencies, however, in accordance with the Bye-laws of
the statutory authority or any competent authority and
without causing any prejudice to the interest of the FIRST
PARTY/OWNER. "
32. The Arbitral Tribunal specifically examined clauses 6 and 8.
Clause 6 deals with the obligation of the developer, which requires
the claimant to obtain necessary approvals from the competent
authorities at its own cost and undertake development in
accordance with the sanction plan. Clause 8 also requires the
claimant to obtain layout plans and secure necessary ratification or
approval from the appropriate authorities. The Arbitral Tribunal also
considered the admission of PW1, the Director of the claimant
company, that obtaining the sanction layout plan was the
responsibility of the claimant. PW1 further admitted that no fresh
sanction layout plan had been obtained from SUDA subsequent to
the execution of the development agreements. Neither any
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application for obtaining a fresh approval or renewal of the earlier
plan nor payment of the prescribed fee was established by the
claimant. The finding of the Arbitral Tribunal that obtaining the
requisite statutory approval was contractual obligation of the
claimant is founded upon the express terms of the agreements and
the admission elicited in the evidence. Such a finding recorded by
the Arbitral Tribunal cannot be characterized as perverse or as one
based on an interpretation which no reasonable person could
adopt. Even assuming that the landowners had knowledge of the
works undertaken, their conduct cannot dispense with the statutory
compliance governing approval of residential layouts.
33. It is also relevant that under the development agreements,
the claimant was required to commence the development works
within 90 days from the date of approval and complete the project
within the stipulated period, subject to permissible extension. The
Arbitral Tribunal, upon consideration of the evidence, found that the
claimant had failed to establish that the delay was attributable to
any omission or commission on the part of the landowners. The
Arbitral Tribunal also found that the claimant's contention that the
landowners had failed to secure consent from the adjoining owners
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AND 1 OTHER
and permission from the Forest Department was not substantiated,
as the letters dated 27.11.2015 and 19.12.2015, said to have been
addressed to the claimants in that regard, were neither produced
nor put to RW1 in cross-examination. The Arbitral Tribunal found
that the claimant had failed to establish continuous readiness and
willingness to perform its part of the contract and declined to grant
specific performance.
34. The Commercial Court, while considering the Commercial
Arbitration Petition Nos.3/2021 and 4/2021, examined the findings
recorded by the Arbitral Tribunal and concluded that refusal of
specific performance did not suffer from any infirmity warranting
interference under Section 34 of the A&C Act. We find no reason to
take a different view. The Arbitral Tribunal has considered the
relevant contractual provisions, the oral and documentary evidence
and conduct of the parties. The conclusion that the claimant failed
to perform its essential contractual obligation is a plausible view
arising from the material on record. Accordingly, we find no merit in
Commercial Appeal Nos.374/2025 and 375/2025, which challenge
the refusal of specific performance of development agreements.
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AND 1 OTHER
II) Commercial Appeal Nos.376/2025 and 380/2025 - setting
aside monetary compensation
35. The question that arises for consideration in these appeals is
whether the Arbitral Tribunal was justified in awarding monetary
relief to the claimant under Section 64 of the Contract Act and
whether the Commercial Court was justified in interfering with that
portion of the Arbitral Award in exercise of its jurisdiction under
Section 34 of the A&C Act.
36. It is not in dispute that the claimant had undertaken certain
development works on the scheduled properties belonging to the
landowners. The Arbitral Tribunal has also recorded that the
claimant has failed to obtain requisite approval from SUDA as
contemplated under the development agreements, and that the
landowners were justified in terminating the agreements.
Consequently, the relief of specific performance was declined.
37. The claimant had specifically pleaded in para 12(B) of the
claim petition that the development works were undertaken lawfully,
that the landowners had received the benefit thereof and that the
claimant had not undertaken such works gratuitously. On that
basis, the claimant sought specific performance or alternatively
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COMAP No. 375 of 2025
AND 1 OTHER
monetary compensation towards expenditure incurred, interest and
loss of expected profits. The landowners disputed that they had
received the benefit from development works. The Arbitral Tribunal
rejected the applicability of Section 70 of the Contract Act, holding
that the works had been undertaken pursuant to an express
contract and moreover, without obtaining requisite statutory
approval. It also rejected the claim for damages under Section 73,
and found that the breach of contract was attributable to the
claimant and not to the landowners. Having arrived at these
findings, the Arbitral Tribunal proceeded to invoke Section 64 of the
Contract Act to award monetary relief to the claimant. The relevant
portion of the findings recorded by the Arbitral Tribunal is extracted
below for ready reference :
" 89. In para 12(B) of the claim petition it is stated
that the claimant has lawfully done the development work
and it did not do so gratuitously and respondents have
taken benefit of the development work and therefore they
are bound to compensate the claimant. During the course of
arguments Sri H.S. Dwarkanath referred to Section 70 of
the Indian Contract Act. No doubt as per Section 70 if a
person, lawfully does anything for any other person, not
intending to do so gratuitously and the latter enjoys the
benefit, he is bound to make compensation to the former.
But it cannot be lost sight of that Section 70 finds a place in
Chapter V of the Contract Act with the title "OF CERTAIN
RELATIONS RESEMBLING THOSE CREATED BY
CONTRACT". This is not a case where the relationship
between the claimant and the respondents resembles that
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AND 1 OTHER
created by a contract. On the other hand, there is a contract
itself. Therefore Section 70 is not applicable. Moreover for
the applicability of Section 70, the person claiming the
compensation should have lawfully done a thing. In this
case, the claimant without getting the plan renewed
proceeded with the work and therefore cannot be said to
have done the work lawfully.
90. Reference in this context may be made to the
th
14 Edition of the Indian Contract Act by Pollock & Mulla. At
page 1074 this is what the learned authors have stated
"Unlike s. 65, s. 70 covers a wider ground; it cannot be
invoked in case of a benefit received under a contract. In
Moselle Solomon v. Martin & Co., Lord William J. held that
the terms of s. 70 were very wide, and it was applicable
even when the plaintiff could sue upon the contract, express
or implied. Jack J. held to the contrary, i.e., the section was
not applicable where there was an express contract. The
latter, it is submitted, is the correct view. The section has,
therefore, no application where there is an express
contract."
x x x
92. Having said that neither Section 70 nor
Section 73 applies to this case, question still remains
whether the claimant in law is entitled to monetary relief
under this head viz., the amount spent for development.
While discussing issue No.5 and additional issue No.1 it is
observed that Section 39 of the Contract Act is apposite and
that the respondents have rightly terminated the
development agreements. If that be so, under which
provision the claimant would be entitled to the amount spent
on development is the question. In my opinion it is Section
64 of the Contract Act which reads as follows:
" 64. Consequences of rescission of
voidable contract.- When a person at whose
option a contract is voidable rescinds it, the other
party thereto need not perform any promise
therein contained in which he is promisor. The
party rescinding a voidable contract shall, if he has
received any benefit thereunder from another
party to such contract, restore such benefit, so far
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as may be, to the person from whom it was
received."
A passage at page 995 of the 14th Edition of the
Indian Contract Act by Pollock and Mulla commenting on
Section 64 is relevant and it reads as follows:
"In rescinding a contract, the courts act on the
principle that, as the transaction ought never to
have been made, the parties are to be placed, as
far as possible, in a situation in which they would
have stood, if there had never been any such
transaction.
The broad principle on which this and the
following section rest, has been stated:
No man can at once treat the contract as avoided
by him, so as to resume the property which he
parted with under it, and at the same time keep
the money or other advantages which he has
obtained under it."
x x x
99. Now we may refer to the report of the
Commissioner. He has also been examined as CW-1. I
have gone through his evidence. I have heard both the
learned counsel as to what they had to say about his
evidence. His report makes a reference at various places to
the quality of work and he has assessed it by referring to
the prescribed norms. In my opinion there is no need to
dilate on it. It is because RW-1 as already noticed has
admitted all crucial suggestions regarding execution of the
work. I have come to a conclusion that there is no breach of
contract on the part of the respondents and therefore the
question of awarding damages or compensation to the
claimant would not arise. If the alleged breach had been
established by the claimant, probably the quality of the work
turned out by him would have been of some relevance while
assessing the quantum of damages. We are now on the
only question whether the claimant has spent money for
carrying out the work and whether it is entitled to it. For this
purpose I am of the firm opinion that there is no need to
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AND 1 OTHER
refer to what all is elicited in the oral evidence of the
Commissioner. "
[Emphasis Ours]
38. Section 64 of the Contract Act reads as under :
" 64. Consequences of rescission of a voidable
contract.— When a person at whose option a contract is
voidable rescinds it, the other party thereto need not
perform any promise therein contained in which he is the
promisor. The party rescinding a voidable contract shall, if
he had received any benefit thereunder from another party
to such contract, restore such benefit, so far as may be, to
the person from whom it was received. "
39. Section 64 contemplates restoration of the benefit received
by a party rescinding a voidable contract. The statutory requirement
is therefore not merely that the other contracting party should have
incurred expenditure in performance of the agreement. What is
required to be established is that the party rescinding the contract
has actually received a benefit thereunder which is liable to be
restored. In the present case, a careful examination of the Arbitral
Award as stated supra particularly para 99 and the discussion that
follows, would indicate that the Arbitral Tribunal confined its enquiry
to the question whether the claimant had spent money in carrying
out development works and, if so, the amount so expended. The
Arbitral Tribunal proceeded to scrutinize the documentary evidence,
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COMAP No. 375 of 2025
AND 1 OTHER
and accounts for determining the expenditure incurred by the
claimant.
40. Significantly, the Arbitral Tribunal did not undertake any
independent examination as to whether the landowners had
actually received a benefit from the development works,
notwithstanding the absence of requisite statutory approval nor did
it determine the nature, extent or value of any such benefit. The fact
that certain works had been carried out on the properties and that
the expenditure had been incurred by the claimant cannot, by itself,
establish that the landowners had received a corresponding benefit.
The distinction between the expenditure incurred by the claimant
and the benefit received by the landowners is fundamental to the
application of Section 64 of the Contract Act. The Arbitral Tribunal
was therefore required to examine whether the works undertaken
without obtaining statutory approval had conferred any legally
recognizable benefit upon the landowners. This essential question
has not been addressed in the Arbitral Award.
41. The admission of RW1 that certain development works had
been undertaken, or alternative submission made on behalf of the
landowners that the expenditure could at best be approximately
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COMAP No. 375 of 2025
AND 1 OTHER
` 60,00,000 cannot be construed as an unequivocal admission that
the landowners had received a benefit of that value. Such material
may establish execution of works or expenditure incurred, but it
does not dispense with the statutory requirement of establishing the
benefit received. The Arbitral Tribunal, however, proceeded to
` `
award 1,21,46,306 in A.C No. 84/2018 and 1,09,76,249 in A.C
No.85/2018, substantially on the basis of the expenditure found to
have been incurred by the claimant, without determining whether
the landowners had received a corresponding benefit capable of
restitution. It is well settled that an Arbitral Award cannot be
interfered with merely because another interpretation of a contract
or another appreciation of the evidence is possible. However, the
principle that the plausible view of the Arbitral Tribunal must be
respected presupposes that the Arbitral Tribunal has addressed the
essential legal requirements governing the relief awarded. Where
the statutory provision invoked by the Arbitral Tribunal requires
proof of a particular fact, and the award proceeds to grant relief
without determining that essential requirement, the conclusion
cannot be protected merely by describing it as a plausible view.
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AND 1 OTHER
42. The Commercial Court, while considering Commercial
Arbitration Petition Nos.1/2021 and 2/2021, has noticed the
absence of material establishing that development works could be
lawfully utilized by the landowners. The burden of establishing the
existence and extent of a benefit capable of restitution rested upon
the claimant. The Arbitral Tribunal could not presume such benefit
merely from the proof of expenditure. Such an error goes to the
very foundation of the monetary relief granted and constitutes
patent illegality. We are therefore of the considered view that the
Commercial Court was justified in setting aside the monetary
portion of the Arbitral Award. The appellant has failed to establish
any ground warranting interference with the order passed by the
Commercial Court. Accordingly, COMAP Nos.376/2025 and
380/2025 are liable to be dismissed.
43. For the foregoing reasons, all the appeals are dismissed.
Sd/-
(VIBHU BAKHRU)
CHIEF JUSTICE
Sd/-
(K.S. HEMALEKHA)
JUDGE
CKL