Section 34 courts cannot reappreciate evidence or substitute a plausible arbitral interpretation.

DLF Home Developers Limited (“DLF”) launched the DLF Towers commercial project at Okhla, Delhi. Klassik Lamitex Pvt. Ltd. (“Klassik”) applied on 21 March 2008 for provisional allotment of approximately 830 sq. ft. of commercial office space and paid ₹10 lakh as booking amount.

The application form stated that the land was then classified as industrial but was permissible to be converted to commercial use, and that construction would commence after the necessary permission was obtained.

DLF subsequently allotted office space to Klassik for a total consideration of ₹1,51,25,000, against which Klassik paid ₹66,19,500, approximately 44% of the sale consideration.

DLF later issued a Buyers’ Agreement, but Klassik declined to sign it, alleging that it contained unilateral and inconsistent terms and that the project lacked the requisite approvals.

Klassik sought refund of the deposited amount with interest through a legal notice dated 23 April 2009.

DLF commenced arbitration, and after the arbitration proceedings were subsequently constituted, Klassik claimed either specific performance and possession or, alternatively, refund of ₹66,19,500 with interest.

The Sole Arbitrator held that DLF had failed to obtain the requisite conversion and construction approvals in a timely manner, had delayed the project, and had made misleading representations regarding the status of approvals.

The Arbitrator rejected the claim for specific performance but directed DLF to refund ₹66,19,500 with interest at 9% per annum from 21 March 2008 until filing of the claim and pendente lite interest at 12% per annum.

DLF’s counter-claims for the balance sale consideration and other charges were rejected.

DLF challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, alleging violation of the public policy of India, erroneous refusal of specific performance, misinterpretation of the contractual clauses, and wrongful rejection of its counter-claims.

Whether the arbitral award was liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 on the ground that it conflicted with the public policy of India or suffered from patent illegality?

Whether DLF had misrepresented the status of land-use conversion and statutory approvals, thereby entitling Klassik to seek refund of the amount deposited?

Whether Klassik was bound to execute the Buyers’ Agreement and whether its refusal entitled DLF to cancel the allotment and forfeit the deposited amount?

Whether delay in obtaining conversion and construction approvals was protected by the force majeure clause, and whether time was of the essence of the contractual arrangement?

Whether DLF was entitled to recover the balance sale consideration and other amounts through its counter-claims despite the findings of breach and delay against it?

The Court applied Sections 34(2)(b)(ii) and 34(2-A) of the Arbitration and Conciliation Act, 1996, under which a domestic arbitral award may be set aside if it conflicts with the public policy of India or contains patent illegality appearing on its face; however, an award cannot be set aside merely for an erroneous application of law or by reappreciating evidence.

Relying on MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163, the Court reiterated that judicial interference is limited to cases involving perversity, arbitrariness, violation of fundamental policy of Indian law, conflict with basic notions of justice or morality, or patent illegality going to the root of the matter.

The Court also relied on OPG Power Generation (P) Ltd. v. Enexio Power Cooling Solutions (India) (P) Ltd., (2025) 2 SCC 417, holding that a mere violation of municipal law does not by itself constitute a violation of public policy; something more, such as an infraction of the fundamental policy of Indian law, is required.

On contractual fairness, Central Inland Water Transport Corpn. v. Brojo Nath Ganguly, (1986) 3 SCC 156, and Pioneer Urban Land & Infrastructure Ltd. v. Govindan Raghavan, (2019) 5 SCC 725, establish that courts will not enforce unconscionable or one-sided terms imposed where the weaker party has no meaningful choice.

The Court further applied Energy Watchdog v. CERC, (2017) 14 SCC 80, which holds that force majeure does not cover mere onerous or self-induced performance, and Saradamani Kandappan v. S. Rajalakshmi, (2011) 12 SCC 18, concerning the significance of stipulated time periods in modern contracts relating to immovable property.

The Court found that the Sole Arbitrator’s interpretation of Clause 7(a) was a plausible one.

The contractual language indicated that DLF had taken steps toward conversion and was merely awaiting communication from the authority; however, the evidence showed that the first relevant communication regarding land-use conversion was in November 2009, while final approval for commercial construction was obtained only in January 2013.

DLF’s witness also admitted that construction had commenced without the requisite commercial conversion, and DLF produced no satisfactory evidence showing that approvals were being actively pursued when the allotment was made.

The Court therefore upheld the finding that DLF’s representations were misleading and that the purported allotment of fifth-floor premises in April 2008 was not supported by the requisite approvals.

The Court further held that Klassik was not obliged to sign the Buyers’ Agreement without being permitted to question its terms, particularly when the agreement allegedly contained unilateral provisions and the project’s approval status remained uncertain.

DLF could not invoke its force majeure clause because the delay resulted from its failure to take timely steps for conversion and sanctions; such delay was not an event beyond its control.

In light of the contractual one-year refund provision where final allotment was not possible, the Arbitrator’s direction to refund the deposited amount was justified.

The Court also held that the award reflected a reasoned and structured assessment of the pleadings, documents, correspondence and evidence, and that DLF’s objections effectively sought reappreciation of evidence and substitution of the Arbitrator’s plausible interpretation, which was impermissible under Section 34.

It held that DLF had failed to establish any ground under Sections 34(2) or 34(2-A) of the Arbitration and Conciliation Act, 1996.

The direction requiring DLF to refund ₹66,19,500 to Klassik with interest at 9% per annum from 21 March 2008 until filing of the claim and pendente lite interest at 12% per annum was sustained, as was the rejection of DLF’s counter-claims.

The pending applications were also dismissed.