Case Note & Summary
The matter originated from a development agreement dated 29 October 1993 between the petitioner, Caprihans India Limited, and the respondent, Hindoostan Mills Ltd, under which the respondent granted development rights of its land at Byculla, Mumbai to the petitioner. The agreement required the petitioner to pay land value and allot constructed area to the respondent, while the petitioner was entitled to recover the actual pro rata cost of construction from the respondent. The petitioner claimed that the actual cost of construction for the allotted 23,365 sq.ft. amounted to Rs.7,26,00,000/- and sought recovery of the same along with interest and other charges. The respondent denied liability and counterclaimed for, inter alia, a share of profits on the footing that the transaction was a joint venture, alternatively that its liability for construction cost was limited to Rs.775 per sq.ft. The dispute was referred to a three-member Arbitral Tribunal of retired judges. The Tribunal framed 18 issues. By a unanimous decision on most issues, the Tribunal rejected the respondent's case of joint venture and held that the development agreement was the only complete contract; it also rejected the respondent's counterclaims in entirety. On Issue No.6 concerning the quantum of construction cost, the Tribunal was divided. The Majority Award held that the petitioner was entitled to recover cost at the rate of Rs.775 per sq.ft., as mentioned in a separate Project Management Agreement between the respondent and a group company of the petitioner, instead of the actual cost claimed. The Majority Award was silent on the claim for interest and directed each party to bear its own costs. The Minority Award allowed the petitioner's claim in full, i.e., Rs.7,26,00,000/- with 9% interest per annum after adjusting the balance land cost, and also awarded costs of Rs.5 crores against the respondent. The respondent accepted the Awards. Aggrieved, the petitioner filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 in the Bombay High Court, seeking to set aside the Majority Award to the extent it awarded only Rs.775 per sq.ft. and failed to grant interest and costs. The petition was listed as Commercial Arbitration Petition No.37 of 2017. The Court heard arguments and reserved judgment on 25 April 2019, with judgment pronounced on 3 June 2019.
Issue of Consideration
Whether the Majority Arbitral Award, which awarded construction cost at Rs.775 per sq.ft. and was silent on interest and costs, is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996.
Case Details
2019 LawText (BOM) (06) 79
Commercial Arbitration Petition No. 37 of 2017
Fredun E DeVitre, Darshit Jain, Bindi Dave, Ieshan Sinha, Varada Balachandran, Aditi Chavan, Sumeet Tyagi, Pravin Dhage, Mustafa Doctor, Urvaksh Anklesaria, Ameet Hariani, Soura Subha Ghosh, Anirban Sen, Parinaz Nagporwala-Dastur
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Nature of Litigation
Petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging a majority arbitral award in a development dispute.
Remedy Sought
Petitioner seeks to set aside the majority award in part, specifically the decision restricting the construction cost to Rs.775 per sq.ft., and seeks the award of Rs.7.26 crores with interest and costs.
Filing Reason
The majority award, while allowing recovery of construction cost, limited it to a rate of Rs.775 per sq.ft. instead of the claimed actual cost; further, it was silent on interest and directed each party to bear own costs; the minority award had granted the full claim; petitioner was aggrieved by the majority's approach.
Previous Decisions
Arbitral Tribunal's Majority and Minority Awards dated 20.10.2016, where Majority awarded construction cost at Rs.775/sq.ft., silent on interest, no costs; Minority awarded Rs.7.26 crores with 9% interest and Rs.5 crores costs; all other issues decided in petitioner's favour unanimously and not challenged.
Issues
Whether the Majority Arbitral Award is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996, for not granting the actual construction cost of Rs.7.26 crores?
Whether the silence of the Majority Award on the claim for interest is a ground for setting aside?
Whether the direction that each party bear own costs is erroneous and liable to be set aside?
Judgment Excerpts
Petitioner is impugning under Section 34 of the Arbitration and Conciliation Act 1996 (the said Act) part of the Majority Arbitral Award dated 20th October 2016.
The Majority award has not awarded Rs.7,26,00,000/ as claimed by Petitioner, but has awarded cost of construction at Rs.775/ per sq.ft. for 23,365 sq.ft., subject to adjustment of Rs.1,47,95,800/.
The Majority award is silent on the claim for interest, in the sense it has neither allowed nor rejected.
Procedural History
1993: Project Management Agreement between respondent and KCOPL on 28.07.1993; Development Agreement between petitioner and respondent on 29.10.1993. Disputes arose over cost of construction and respondent's liability; claimant/petitioner invoked arbitration; Arbitral Tribunal framed 18 issues; on 20.10.2016, Majority Award held petitioner entitled to recover cost at Rs.775/sq.ft., silent on interest, no costs; Minority Award allowed full claim with interest and costs; respondent accepted award; petitioner filed Commercial Arbitration Petition No.37 of 2017 in Bombay High Court under Section 34 of the Arbitration Act; heard and reserved on 25.04.2019; pronounced on 03.06.2019.
Acts & Sections
- Arbitration and Conciliation Act, 1996: 34
