Neeta Sawant CARBP 354 of 2024 v. Goregaon Pearl Cooperative

Judgment

1) The Petitioner has filed this Petition under section 34 of Arbitration and Conciliation Act, 1996 (Arbitration Act) challenging the award of the learned sole arbitrator dated 24 June 2023. By the impugned award, the Arbitral Tribunal has declared the Termination Notice dated 9 June 2018 terminating the Development Agreement (DA) and Power of Attorney (POA), both dated 26 September 2007, and of the Consent _______________________________________________________________________________________________________ PAGE NO. 1 OF 78 30 MARCH 2026 Neeta Sawant CARBP 354 of 2024 Terms dated 16 May 2017 as valid, legal and binding. The Tribunal has further declared that the contract of redevelopment is terminated with effect from 9 June 2018.

The Arbitral Tribunal has restrained the Petitioner from interfering with possession of Respondent-Society over the land and building in question. Petitioner is directed to the handover all original documents relating to redevelopment of the Society. The Arbitral Tribunal has also awarded claim in the sum of Rs.7,08,53,695.03/- in favour of the Respondent-Society. The Arbitral Tribunal has awarded costs of Rs.9,65,250/- in favour of the Respondent- Society. The counterclaims of the Petitioner are rejected. FACTS 2) Respondent is a Cooperative Housing Society registered under the provisions of the Maharashtra Cooperative Societies Act, 1960. The Society was formed by owners and occupiers of 60 flats in Buildings B-3, B-4 and B-5 at Survey No.7, CTS No.27 at Siddharth Nagar, Goregaon (West), Mumbai, which was a part of MHADA layout.

The Respondent-Society had 60 original members, who owned and occupied flats in the building of the Society. The Respondent-Society decided to go for redevelopment of its building. By resolution adopted on 18 June 2005, the Special General Body Meeting of the Society appointed Petitioner as the developer to carry out redevelopment of its building. A Redevelopment Agreement was executed between the Petitioner- Developer and Respondent-Society on 26 September 2007. A separate Power of Attorney was also executed in favour of the Petitioner on the _______________________________________________________________________________________________________ PAGE NO. 2 OF 78 30 MARCH 2026 Neeta Sawant CARBP 354 of 2024 same day.

The Municipal Corporation issued the Intimation of Disapproval (IOD) on 16 August 2007. In October/November 2007, the members of the society vacated their respective flats and handed over the possession thereof to the Petitioner. On 5 January 2008, the Petitioner issued Bank Guarantee of Rs. 5 crores in favour of the Respondent-Society. Commencement Certificate for construction of a building having two wings - Wing-A and Wing-B was issued by the Municipal Corporation on 17 June 2008, which was revalidated from time to time. On 4 August 2011, a stop work notice was issued to the Petitioner alleging that it carried out construction beyond the permissions. According to the Respondent-Society, the construction activities accordingly came to a halt on 4 August 2011.

In the meantime, MHADA issued no objection certificate for utilization of FSI 2.5 subject to various conditions. Petitioner purchased additional tit-bit land from the MHADA Authorities by paying consideration amount of Rs.8,18,03,435/- and by virtue of the same, the original plot area got increased from the original 2543 sq. mtrs to 3747.81 sq. mtrs. The Petitioner got the plans amended from MCGM for availing concessional/fungible FSI. According to the Petitioners, correspondence took place for execution of supplementary agreement for sharing the additional FSI between the Petitioner and Respondent-Society. By the year 2013, Petitioner had completed construction of RCC structure of ‘A’ Wing building upto 7 floors and RCC work of ‘B’ Wing building of 21 floors. _______________________________________________________________________________________________________ PAGE NO.

3 OF 78 30 MARCH 2026 Neeta Sawant CARBP 354 of 2024 3) On 14 March 2014, MCGM issued offer letter approving proposal for utilization of pro-rata FSI of 3.5 on payment of premium of Rs.10,54,17,300/-. It appears that the said amount was not paid by the Petitioner. On 12 September 2014, Petitioner issued a letter to the Respondent-Society seeking its consent for amalgamation of adjoining project of Kapil Vastu Society with Respondent-Society’s land. The Respondent-Society requested the Petitioner to complete the project as per 2.4 FSI and accommodate all 60 members by granting them possession by letter dated 28th January 2015. Thereafter, correspondence took place between the Petitioner and Respondent wherein the Respondent-Society complained about stoppage of entire work.

The Petitioner cited the reason of pending issues for sanction of additional FSI. Apprehending that the Respondent-Society would encash the bank guarantee, Petitioner filed Suit (L.) No.921/2015 in this Court, which was withdrawn on 7 January 2016. Respondent-Society thereafter invoked and encashed the bank guarantee of Rs.5 crores and appropriated Rs.2.5 crores towards arrears of tent and balance 2.5 crores towards share of profits and utilization of additional 1.00 FSI. The Respondent revoked the Power of Attorney on 16 August 2016. 4) In the above backdrop, Respondent-Society filed Arbitration Petition (L) No. 160 of 2017 under Section 9 of the Arbitration Act seeking various interim measures.

On 7 July 2017, parties arrived at an amicable settlement and filed Consent Terms under which the liability of the Petitioner was fixed at Rs.7.62 crores and it was agreed that out of the encashed amount of bank guarantee, Rs.2.5 crores would be adjusted _______________________________________________________________________________________________________ PAGE NO. 4 OF 78 30 MARCH 2026 Neeta Sawant CARBP 354 of 2024 towards arrears of rent and balance Rs.2.5 crores towards Society’s share of profits in the additional FSI. Petitioner gave commitment to clear the balance amount towards transit rent and issued postdated cheques. Petitioner agreed to complete A-Wing building with part Occupancy Certificate by 30 June 2018 plus grace period of 4 months.

It also agreed to complete B-Wing building on or before 31 December 2017 with grace period of three months. According to the Respondent Society, Petitioner committed breaches of Consent Terms and all the postdated cheques issued towards payment of rent, etc were dishonored. The Society filed Contempt Petition (L) No.24 of 2018 before this Court wherein a direction was issued by this Court on 6 March 2018 for payment of sum of Rs.5,42,16,436/- in four monthly installments. According to the Respondent-Society, except paying sum of Rs.1,72,72,145/-, the Petitioner did not make the payment as directed by this Court in the Contempt Petition. On 3 June 2018, the Society resolved to terminate the Development Agreement, Consent Terms and Power of Attorney.

The decision of termination was communicated to the Petitioner by notice dated 9 June 2018. The Respondent-Society filed Petition under Section 9 of the Arbitration Act seeking injunctive reliefs against the Petitioner post termination. By consent of the parties, the disputes were referred to arbitration by appointing a sole arbitrator by converting Section 9 petition into Section 17 application. 5) After the Arbitral Tribunal comprising of the sole Arbitrator was constituted, the Respondent-Society pressed its application for interim measures. The Arbitrator passed order dated 17 September 2018 _______________________________________________________________________________________________________ PAGE NO.

5 OF 78 30 MARCH 2026 Neeta Sawant CARBP 354 of 2024 under Section 17 of the Arbitration Act granting various injunctive reliefs in favour of Respondent-Society permitting the Society to engage new developer and directed Petitioner to handover possession of the entire project to the Society. Petitioner challenged the order of interim measures of the learned Arbitrator by filing Appeal before this court, which was dismissed by order dated 14 December 2018. The Hon’ble Apex Court also dismissed the SLP preferred by the Petitioner-Developer and this is how order of the Arbitrator making interim measures attained finality. The flat purchasers attempted to intervene in the arbitration but the learned Arbitrator rejected the intervention application by order dated 27 February 2019.

6) One of the flat purchasers filed a suit seeking specific performance of agreement for sale executed in her favour in which City Civil Court passed order of temporary injunction restraining the society from alienating or creating third party interests in the flat allotted to her by the Petitioner-developer. In Appeal from Order filed by the Society, the order of temporary injunction was set aside by this Court on 14 October 2019. The Special Leave Petition preferred by the developer was dismissed by the Apex Court on 20 January 2020 and the order passed in the Appeal from Order attained finality. The arbitral proceedings were conducted before the learned sole Arbitrator. At the conclusion of the proceedings, the Arbitral Tribunal has made Award dated 24 June 2023, upholding the termination of Petitioner-developer and restrained it from interfering with possession of the Society of land and building.

Petitioner is directed to handover all original documents relating to _______________________________________________________________________________________________________ PAGE NO. 6 OF 78 30 MARCH 2026 Neeta Sawant CARBP 354 of 2024 redevelopment to the Society. The Arbitral Tribunal has also awarded monetary claim in the sum of Rs. 5,13,20,822.32/- in favour of the Respondent-society comprising amount of Rs.55,58,211/- towards costs incurred, Rs.3,72,24,290/- towards amount agreed to be paid under the Consent Terms alongwith interest of Rs.85,38,321.52/-. The Arbitral Tribunal has also awarded costs of Rs.9,65,250/- in favour of the Respondent-society. All the counterclaims of the Petitioner have been rejected.

7) The Award has been corrected by the Arbitral Tribunal by order dated 26 June 2023 by correcting the figure of interest from Rs.85,38,321.52/- to Rs. 2,80,71,194.03/-. This is how the final claim amount has been enhanced to Rs.7,08,53,695.03/-. 8)

Aggrieved by the Award dated 24 June 2023, as corrected on 26 June 2023, the Petitioner-developer has filed the present Petition under Section 34 of the Arbitration Act. SUBMISSIONS 9) Mr. Narula, the learned counsel appearing for the Petitioner submits that the Award of the Tribunal is grossly perverse as being rendered contrary to the contractual terms, violates public policy doctrine and is patently illegal. He first attacks various findings recorded in the award relating to validity of the termination notice. He submits that the findings of the Arbitral Tribunal in para-103 of the award that _______________________________________________________________________________________________________ PAGE NO. 7 OF 78 30 MARCH 2026 Neeta Sawant CARBP 354 of 2024 the FSI was pegged at 2.4 is contrary to the Development Agreement dated 26 September 2007, clause-2 whereof permitted utilization of all available FSI and additional TDR by dividing the benefits between the parties. That specific admissions were made by the witness of Respondent-Society in answer to Question Nos.94 and 95 in this regard. That finding recorded in para-121 of the Award about amendment of plans without intimation of Society is contrary to clauses-9(a) and 9(g) of the Development Agreement, which did not require any prior intimation for amendment of the plans. That Consent Terms dated 16 May 2017 only condoned the previous alleged breaches and therefore, supplemental terms were arrived at between the parties. That under clause 39 of the Consent Terms, Respondent was required to issue NOC to MHADA for grant of further FSI, but it failed to communicate the withdrawal of revocation of POA to MHADA. That clause 40 of the Consent Terms required the Society to withdraw the termination notice and grant unconditional NOC for additional FSI and clause 41 required the Respondent-Society to grant NOC for obtaining finance. That such NOCs were not issued by the society thereby breaching the conditions of the Consent Terms. That the agreement between the parties is reciprocal in nature and since Respondent-Society failed to adhere to its contractual obligations, provisions of Section 67 of the Indian Contract Act, 1872 (Contract Act) became applicable, thereby relieving the Petitioner of the consequences of any breaches on its part. He relies on judgment of the Apex Court in Nathulal vs. Phoolchand 1 . 1 (1969) 3 SCC 120 _______________________________________________________________________________________________________ PAGE NO. 8 OF 78 30 MARCH 2026 Neeta Sawant CARBP 354 of 2024 10) Mr. Narula further submits that the findings of the Arbitral Tribunal in para-166 of the award about the arrangement for grant of NOC for additional FSI not being inflexible is contrary to the express conditions of the Consent Terms. That further finding of the arbitrator in para-169 of the award that Respondent-Society factually granted NOC is contrary to the record since NOC dated 28 July 2017 was delivered to the Petitioner only on 26 September 2017, by which date the due date to perform had already passed by. That the observations of the arbitrator in para-170 of the arbitral award about non-payment of premium is perverse and recorded in ignorance of payment of Rs.3,32,31,778/- which remained credited to the Petitioner’s account. That in view of failure to issue NOC by the Society, Termination Notice was illegal and contrary to the agreed terms. That the Arbitral Tribunal ought to have dismissed Society’s claim. 11) Mr. Narula further submits that the Arbitral Tribunal has construed the contract in such a way that no fair-minded person would ever do so. He relies on judgment of the Apex Court in Associate Builders Versus. Delhi Development Authority 2 . 12) Mr. Narula then proceeds to attack the award by contending that non-return of amounts spent by the Petitioner in the project which are benefits enjoyed by the society is contrary to the fundamental policy of Indian law. He submits that the award permits the Society to unjustly enrich itself by retaining the amounts towards rent, cost of construction, cost of purchased FSI, etc . That the Arbitral Tribunal has grossly erred in 2 (2015) 3 SCC 49 _______________________________________________________________________________________________________ PAGE NO. 9 OF 78 30 MARCH 2026 Neeta Sawant CARBP 354 of 2024 not treating the various amounts spent by the Petitioner as ‘benefits’ received by the Society. That Petitioner paid sum of Rs.8,18,03,435/- for acquiring additional tit-bit plot area and sum of Rs.20,61,140/- for FSI for R.G. area. That Petitioner also incurred huge amount of cost for construction of the two buildings. That additionally Respondent-Society appropriated amount of Rs.2.5 crores towards their share in the additional FSI. That all these amounts spent by the Petitioner which are ultimately enjoyed by the Respondent-society are erroneously not treated as benefits by the Society. He submits that Arbitral Tribunal’s refusal for restoration of benefits to the Petitioner upon termination of contract and non-award of damages in view of Clause-22 of the DA is contrary to Sections 64 and 73 of the Contract Act. He relies on judgment of the Madras High Court in Mundakath Mathu vs. Chalora Illath Vishnu Nambudripad and others 3 in support of his contention that upon avoidance of the contract, a party avoiding it is under statutory obligation to restore the benefits. He submits that a party cannot reject the contract yet retain the advances derived therefrom. Mr. Narula further submits that Clause 22 of the DA is in the teeth of provisions of Section 23 of the Contract Act as it seeks to prohibit a party from approaching the Court for recovery of damages which is against the public policy of India. That this issue was specifically raised before the Arbitrator. He also relies on judgments of the Apex Court in Asian Techs Limited vs. Union of India and Ors. 4 , Board of Trustees for the Port of Calcutta vs. Engineers-De-Space-Age 5 and of Delhi High Court in MBL 3 4 5 ORDER 113) I accordingly proceed to pass the following order: (i) The Award of the learned Arbitrator dated 24 June 2023, except to the limited extent as indicated in para (ii) below, is upheld. (ii) The Award is set aside only to the extent it rejects Petitioner’s counterclaim for return of benefit received by the Respondent- society in the sum of Rs. 8,18,03,435/- for purchase of tit-bit land, Rs. 20,61,150/- for purchase of RG FSI and Rs. 2,50,00,000/- adjusted towards FSI benefit from bank guarantee amount. 28 (2025) 7 SCC 1 _______________________________________________________________________________________________________ PAGE NO. 77 OF 78 30 MARCH 2026 Neeta Sawant CARBP 354 of 2024 114) With the above directions, the Petition is partly allowed and disposed of. Considering the facts and circumstances of the present case, I deem it appropriate not to make any further order as to costs. [SANDEEP V. MARNE, J.] NEETA SHAILESH SAWANT Digitally signed by NEETA SHAILESH SAWANT 20:38:01 +0530 _______________________________________________________________________________________________________ PAGE NO. 78 OF 78 30 MARCH 2026