FSI purchase costs are restorable benefits under Section 64, distinct from contractually prohibited damages or compensation.

The Respondent-Society entered into a Development Agreement (DA) and Power of Attorney (POA) with the Petitioner-Developer in September 2007 for the redevelopment of its property involving 60 members

The members vacated their flats in late 2007, but construction halted in 2011 following a "stop work" notice due to unauthorized construction

After years of delay and the encashment of a Rs. 5 Crore bank guarantee by the Society, the parties entered into Consent Terms in May 2017 to resolve disputes and set new timelines

the Petitioner defaulted on transit rent payments, post-dated cheques were dishonored, and construction remained incomplete

Consequently, the Society terminated the DA and Consent Terms on June 9, 2018

A Sole Arbitrator upheld the termination, awarded the Society Rs. 7,08,53,695.03 (primarily for rent arrears), and rejected the Petitioner’s counterclaims for damages and restoration of construction/FSI costs

The Petitioner challenged this award under Section 34 of the Arbitration and Conciliation Act, 1996.

1. Whether the termination of the Development Agreement and Consent Terms by the Society was valid and legal

2. Whether Clause 22 of the DA, which prohibits the developer from claiming damages or compensation upon termination, is enforceable

3. Whether the Developer is entitled to the "restoration of benefits" under Section 64 of the Indian Contract Act for transit rent paid, construction costs incurred, and the purchase price of additional FSI/TDR

Section 34 of the Arbitration and Conciliation Act, 1996, regarding the limited grounds for setting aside an arbitral award

Sections 64, 73, and 67 of the Indian Contract Act, 1872; Section 64 mandates that a party rescinding a contract must restore any "benefit" received to the other party

Section 73 governs compensation for loss caused by breach

The court relied on Muralidhar Chatterji v. International Film Company Ltd. to establish that Section 64 applies even when a contract is rescinded due to a breach

principle from Steel Authority of India Ltd. v. J.C. Budharaja, holding that an arbitrator is bound by the contractual terms and cannot award claims expressly prohibited by the contract

The Court upheld the Arbitrator's finding that the Petitioner committed material breaches, including non-payment of transit rent and failure to meet construction timelines, thus validating the termination

Regarding the claim for damages (loss of profits), the Court held that Clause 22 of the DA was enforceable because in redevelopment contracts, a developer's right to profit is contingent upon fulfilling the primary obligation of rehousing members; failure to do so leaves that right "imperfect"

Transit Rent is not a benefit but compensation for members' displacement, and returning it would unjustly reward the breaching developer

Construction Costs did not constitute a benefit here as the "bare shell" structure was unusable for the members and lacked credible evidentiary proof

FSI/TDR/Tit-bit Land Purchase Price was a distinct benefit. Since the Society retained and could monetize the additional FSI/land purchased by the Developer, failing to restore the purchase price would result in "unjust enrichment"

The Court found the Arbitrator's conflation of "restoration of benefits" (Section 64) with "damages" (Section 73) to be a patent illegality

It upheld the award regarding the validity of the termination and the monetary claim awarded to the Society (Rs. 7.08 Crores)

However, it set aside the portion of the award that rejected the Petitioner’s counterclaim for the restoration of the purchase price of FSI and tit-bit land.

Specifically, the Society was directed to restore benefits totaling Rs. 8,18,03,435 (tit-bit land), Rs. 20,61,150 (RG FSI), and Rs. 2,50,00,000 (adjusted FSI benefit)

No order as to costs was made