Bombay High Court

Sun Rock Municipal Employee Co ... vs Aqeel Aslam Merchant And Anr on 4 November, 2025

   2025:BHC-OS:20071


                       Ashwini Vallakati                                               F-J-907-ARBP-834-2016.doc



                                   IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                           ORDINARY ORIGINAL CIVIL JURISDICTION
                                           ARBITRATION PETITION NO. 834 OF 2016

                            Sun Rock Municipal Employee Co-Operative Housing                    ...Petitioner
                            Society
                                   Versus
                            Aqeel Aslam Merchant & Anr.                                         ...Respondents


                            Ms. Aditi Naikare, for the Petitioner.
                            Mr. Vishal Kanade a/w Mr. Sagar Amrut Rane, i/b. Ashish
                            Pawar, for Respondents.


                                                  CORAM           : SOMASEKHAR SUNDARESAN, J.

                                                  DATE            : November 4, 2025

                       Judgement:

1. This is a Petition filed under Section 34 of the Arbitration and

Conciliation Act, 1996 ("the Act") challenging an arbitral award dated

April 15, 2016 ("Impugned Award") passed by a Learned Arbitral

Tribunal disposing of disputes and differences between the Petitioner,

Sun Rock Municipal Employee Co-Operative Housing Society

("Society") and the Respondents, Aqeel Aslam Merchant and Adeel

Aslam Merchant ("Developers").

2. Initially, on October 21, 1999, the Society had executed a Digitally signed by ASHWINI JANARDAN development agreement with one M/s Grand Builders (" Grand ASHWINI JANARDAN VALLAKATI VALLAKATI Date:

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Builders") for redevelopment of the building of the Society, which was

followed by a Supplemental Development Agreement dated July 4,

2000. the building was located in the Coastal Regulatory Zone - II area

("CRZ-II") under environmental law. The building of the Society had

been constructed way back in 1977. The building comprised twelve flats

distributed over a structure entailing the ground floor and three storeys,

housing, in all, twelve members.

3. After the building was vacated and demolition was underway,

the benefit of using transferable development rights ("TDR") in CRZ-II

area became unavailable due to regulatory changes. The building stood

damaged and redevelopment could not progress on the agreed terms.

4. Eventually, the Society and the Developers executed a

Development Agreement dated April 18, 2006 (" Development

Agreement') and a Power of Attorney dated April 19, 2006 (" Power of

Attorney"), which was followed by a Supplementary Agreement dated

August 1, 2007 ("Supplementary Agreement"), and a Deed of

Rectification dated August 6, 2007 ("Rectification Deed"). The

Development Agreement, Supplementary Agreement, Rectification

Agreement and all related documents are collectively called " the

Agreements".

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5. As stated above, thebuilding was located in the CRZ-II zone.

The applicable floor space index ("FSI")1 being 1 and in the absence of

any ability to enhance development potential in the building by loading

TDR onto it, the members of the Society agreed to receive a carpet area

equivalent to what they already had, without enhancement. That apart,

such carpet area would include the proportionate allocation of common

area that was developed. All the grievances underlying the disputes that

were adjudicated in the arbitration relate to this core factual issue. All

twelve members executed the Development Agreement.

6. On July 24, 2007 the Municipal Corporation of Greater

Mumbai ("MCGM") sanctioned a plan for construction of a building

with a basement, ground floor and seven floors. About a week later, on

August 1, 2007, the parties entered into the Supplementary

Development Agreement, which is the instrument that provided for

including the duct area, flower beds, balconies, chajjas, amenities area

etc. into the computation of carpet area to which the members would be

entitled. The consideration for such development was that the carpet

area entitlement of each member would be commercially contracted to

include the balcony and share of common areas and amenities. The

This would broadly mean the total built-up area of the building is equal to the total area of the plot it stands on

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area so sacrificed would accrue to the benefit of the Developers.

7. The Rectification Deed entails the Society and its members

providing irrevocable consent to the Developers to modify, alter and

make necessary changes to the approved plans. The Developers were

meant to have exclusive rights over the terrace floor and refuge floor,

with an entitlement to deal with the same in their absolute discretion.

The Developers were also required to pay a sum of Rs. 25 lakhs towards

full and final consideration.

8. Between May 2007 and November 2007, all the members of

the Society handed over possession of their premises to the Developers.

Sometime in December 2007, the then existing building stood

demolished. On March 29, 2008 the MCGM is claimed by the

Developers to have approved plans for a structure entailing a stilt and

two podiums with nine floors - with the design changing from three

flats per floor to two flats per floor. This facet is also controversial, with

the Society claiming that there is nothing to show such approval while

the Developers claim that this was clearly approved.

9. The relationship between the parties soured. The Developers

are said to have cut off access to the members of the Society to the

premises being redeveloped. On January 7, 2011, the Society issued a

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legal notice to the Developers terminating the Agreements. The disputes

between the parties led to Arbitration Petition No.272 of 2011 being

filed in this Court under Section 9 of the Act. Ad-interim reliefs were

granted by way of an order dated April 13, 2011 enabling the Society to

take inspection of the newly constructed building. By the same order

the Learned Arbitral Tribunal came to be constituted to adjudicate

disputes and differences between the parties.

10. It is the Petitioner's case that the Developers had converted

the area shown as a Society office into flat premises and included it in

their own flat area; converted the tenth and eleventh floor into a duplex

apartment for themselves and covered the refugee area on the eleventh

floor. According to the Society, it was discovered that the members of

the Society were not being provided even 60% of their erstwhile carpet

area.

11. In the arbitration proceedings the Society sought multiple

reliefs. It prayed for a declaration that the Agreements stood validly

terminated and the Developers have no right, title or interest in the

property; a declaration that the Developers committed several breaches;

a declaration that the Society would be entitled to demolish the

structure entirely and reconstruct a new building on its own; and an

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award of damages against the Developers in the sum of Rs.5 crores

toward cost of construction of a new building, rent, mental harassment

etc. In the alternative, it was prayed that the Developers should be

declared as liable to provide the Society and its members the exact

carpet area that they were occupying earlier with a declaration that the

Developers have no right, title or interest in the common areas such as

parking, terrace, refugee floor etc. A prayer for provision of a bank

guarantee in the sum of Rs.60 lakhs as agreed in the Development

Agreement too was sought.

Impugned Award:

12. The Impugned Award framed 23 issues to deal with. The

Learned Arbitral Tribunal repelled the contention that the Society's

claim was barred by limitation but went on to hold that there had been

no breach of the Agreements. The Impugned Award emphatically held

in favour of the Developers and against the Society to rule that the

Developers had been entitled by the Society to construct additional flats

without purchasing new TDR. It was held that the Developers proved

that the construction of the new building was in accordance with the

plan approved by the MCGM with the consent of the Society and in

conformity with the various resolutions of the Society passed from time

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to time.

Contentions of the Parties:

13. I have heard at length, Ms. Aditi Naikare, Learned Advocate

on behalf of the Society and Mr. Vishal Kanade, Learned Advocate on

behalf of the Developers. With their assistance, I have examined the

material on record. Each of them presented excellent crisp notes on

submissions to canvass the points that they wish the Court to endorse,

which would enable the Court to navigate the record.

14. The core ground on which the Impugned Award is being

attacked on behalf of the Society is that the "carpet area" that ought to

have been given to the members of the Society had to be in conformity

with the definition of the term "carpet area" as stipulated in the

Development Control Regulations. In other words, the members of the

Society ought to get carpet area equal to the original carpet area they

had when the Development Agreement was signed.

15. By invoking the definition of the term "carpet area" contained

in the Development Control Regulations, Ms. Naikare would contend

that the computation ought not to include common areas such as

balcony, flower beds, amenities etc. Any agreement in conflict with the

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legal definition would not be enforceable. The other ground of objection

is that the provision of a bank guarantee was an integral and operative

part of the Development Agreement, and the Developers had not

complied with the contractual obligation to provide the same, thereby

depriving the Society of its ability to invoke the bank guarantee when it

was of the view that there had been non-compliance by the Developers.

16. More importantly, Ms. Naikare would submit that the

building has been constructed in terms of a purported development plan

of 2011 which contains material deviations from the last plan approved

in 2009 which would indicate that the Developers had completely

violated the Development Agreement. Finally, it is a case of the Society

that the Developers have indulged in a fraud by making the Society

execute agreements, giving the Developers a free hand to do whatever

they desired, and that Agreements were therefore induced by

misrepresentation, fraud and undue influence.

17. Mr. Kanade on behalf of the Developers, on the other hand,

would contend that there were inherent restrictions owing to the

building of the Society falling within the CRZ-II area. It is contended

that there were multiple iterations of the precise terms of the

Development Agreement and the Society entered into the contract with

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eyes open, which can be seen from at least three resolutions prior to the

execution of the Development Agreement and seven more resolutions

prior to the Supplementary Agreement and the Rectification Deed. Mr.

Kanade would also contend that the Society's meeting held on August 9,

2007 clearly recorded the fact that each member would get carpet area

equivalent to their existing carpet area, but such area would be

measured exclusive of balconies and flower beds and other common

areas, in terms of the Supplementary Agreement and the Rectification

Deed.

18. Mr. Kanade would also point to correspondence that forms

part of the material on record to indicate that since the redevelopment

was not viable and possible in a conventional manner, it had been

agreed to include the common areas developed and incorporate the

same within the scope of the physical carpet area being made available

to the members. Mr. Kanade would contend that despite the grievance

of the Society, when one includes the balcony and other common areas,

the members of the Society would have received an additional area of

about 15 to 20 sq.ft. each over and above their earlier carpet area.

According to Mr. Kanade, this was the only way to make the

redevelopment viable since there could have been no exploitation of

additional area. He would submit that the amenities such as the

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podium, stilt parking, car lift, gymnasium, society office etc. have been

provided free of cost.

19. Mr. Kanade would seek to strongly repel the insinuation of

fraud, misrepresentation and coercion by pointing out that apart from

the verbal say so, there is nothing to demonstrate that the members of

the Society, all of them literate adults, did not know what they were

executing.

Analysis and Findings:

20. I have examined the material on record and the Impugned

Award, with the assistance of the Learned Advocates for the parties. It

is apparent that the initial plan for redevelopment contracted with

Grand Builders was in line with the conventional redevelopment but the

ability to load TDR on to the project to get more FSI and development

potential became impossible due to regulatory requirements applicable

to CRZ-II areas. Therefore, there was no scope for implementing such

redevelopment, leading to the parties eventually executing the

Agreements. It is evident that the approach was unconventional and at

first blush, it appears unbelievable that any party would agree to getting

lower than what they have in terms of carpet area, but on a minute

scrutiny of the manner in which the parties executed the Agreements, it

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is apparent that the parties consciously struck the bargain, well advised

by legal counsel.

21. The element of the Developers' contention before the Learned

Arbitral Tribunal that the Society owed payment obligations to Grand

Builders and that this was also taken care of by the Developers does not

inspire confidence since admittedly the Developers themselves had

ownership interests in Grand Builders. However, even discounting for

that, what is apparent is that the parties appear to have struck an

informed bargain in the Agreements.

22. Every member has executed the Development Agreement.

The parties can clearly be held to have indeed applied their mind to the

bargain and consciously entered into it. At the time of the arbitral

proceedings, the construction of the building was near complete.

Indeed, the Society needed the intervention of the Court under Section 9

of the Act to get access to the premises and see how the development

had been implemented. This did place the Society in a position where

suspicion about the Developers would be natural. However, it is clear

that the Learned Arbitral Tribunal's findings that the Society had

consciously agreed that each of its members would surrender 50% of the

FSI and that the Developers would undertake the entire redevelopment

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without any contribution from any member, are reasonable and

plausible findings. The Learned Arbitral Tribunal has also found that

the Society was well represented by legal counsel and that there was no

scope for a finding of coercion, fraud or misrepresentation. The

position that each member would get the same carpet area as they

originally had but that the computation of the carpet area would be

inclusive of balconies and flower bed area appears to be a conscious

bargain contracted by the members of the Society, as found by the

Learned Arbitral Tribunal.

23. To be fair, today, the legal question being pressed into service

in furtherance of this Petition is that the Impugned Award erred by

ignoring the provisions of the Development Control Regulations and

that the bargain contained in the Agreements was contrary to law. The

Learned Arbitral Tribunal noticed the statutory definition of "carpet

area" as the net usable floor area within the building excluding the floor

area covered by the walls or any other areas specifically exempted from

FSI computation. The Learned Arbitral Tribunal has found that the

purpose of the definition and the regulatory framework was to regulate

and stipulate compliance obligations connected with development of

properties while the parties were free to bargain how to compute the

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carpet area for purposes of their inter se arrangements without violating

the Development Control Regulations.

24. It was found that instead of three flats per floor, the plan was

changed to two flats per floor and that led to more stories in the same

matrix of bargain among the parties. It was found reasonable and

plausible that since the Developers were executing the project on their

own without any contribution from the Society and with the constraint

of there being no possibility of loading further development potential to

commercially finance the project, the parties had executed the bargain

contained in the Agreements. The Learned Arbitral Tribunal appears to

have been reasonably convinced that the parties were conscious of the

position they were in therefore decided not to adopt the approach

regardless of how "carpet area" was regulatorily defined.

25. The key question to ask is whether such a finding is a

plausible finding or whether the scope of the Agreements would conflict

with the law. If a reasonable reading of the contract is not in conflict

with the law, it would not be possible to disturb the Impugned Award.

What is apparent is that the parties consciously struck the bargain that

they did in the Agreements. Multiple iterations of the manner of

computing the carpet area for purposes of the Agreements have been

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noticed and extracted in the Impugned Award. All along, the Society

had the assistance of legal counsel. It is when the relationship between

the parties soured and the Developers prohibited access to the Society

members that everything done by the Developers was suspected as

being violative. It is also noteworthy that even before purporting to

terminate the Agreements, the Society had pushed the Developers to

complete the project without further delay.

26. The Learned Arbitral Tribunal has examined all such material

and come to a view that it would be inappropriate to direct that a

building that is nearly complete should be demolished in order to strike

off the bargain between the parties. It is notable that the Society itself

had an alternate prayer for damages. In my opinion, the finding of the

Learned Arbitral Tribunal cannot be faulted. It has returned a well-

reasoned plausible view that is also backed extensively by the material

on record. The evidence led by the Architect engaged by the Court

Commissioner was examined as were the multiple iterations of the

consent of the parties for the contractual computation of carpet area,

even while ensuring that compliance with the Development Control

Regulations is not compromised.

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27. The Society had issued a notice on October 27, 2010 calling

upon the Developers to complete the work within three months. On

January 7, 2011, even before such three-month deadline, the Society

sought to terminate the Agreements. The Learned Arbitral Tribunal's

finding that the Developers had spent Rs. 11 crores to construct the

near-complete building, leading to specific relief of directing a

demolition of the building not being acceptable, cannot be faulted.

28. The non-provision of a bank guarantee as contracted, does

raise a concern about non-compliance with the Agreements by the

Developers. However, considering that the building had been

constructed and possession has been handed over, the findings by the

Learned Arbitral Tribunal that the non-provision does not lend itself to

serious intervention cannot be faulted. It is apparent that the Society

pressed specific relief before the Learned Arbitral Tribunal and this has

been refused in a reasoned manner.

29. There is one other facet of the matter that is significant - the

allegation that the Developers had formulated a modified plan that is at

variance with the sanctioned plan on which the municipal approvals

were based. The Learned Arbitral Tribunal found that the Society had,

at all times relevant to the conflict, called upon the Developers to

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complete the construction as per the updated plan. The Architect of the

Court Commissioner too has confirmed that the construction was

substantially in conformity with the plan that the Society claims had not

been approved by it. The Learned Arbitral Tribunal which is the master

of the evidence and the best judge of the quantity and quality of

evidence, has returned a reasoned plausible finding about the Society

and the Developers having had consensus on what the building

construction ought to have been, and which plan it was to conform to.

The evidence of both the architects was examined to return a finding

that the parties were free to contract on what terms they would

compensate one another, considering that TDR could not be loaded on

the project. It is noteworthy that the Society had indeed authorised the

Developers to modify and alter the plans.

30. Now, it must be clarified that nothing contained in either the

Impugned Award or in this judgement shall act as a declaration or

endorsement by this Court of whether any regulatory requirement of the

municipal authorities was not complied with. The municipal authorities

may examine the matter and independently come to its findings on the

nature and scale of non-compliance, if any, and take appropriate action

in accordance with law. Mr. Kanade has instructions to submit that the

Developers would not be able to claim any benefit of this judgement

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since this ruling is purely a matter of a private dispute over a private

contract and its adjudication that cannot bind the municipal authorities

actions, which too of course have to be in compliance with law. Mr.

Kanade would contend that the Developers would have full answers to

any allegation of violation of municipal approvals and therefore we do

not comment on any facet of municipal approvals one way or the other.

31. In any case, in my opinion, if there is any violation of

regulatory requirements, the regulatory consequences for the same can

be visited upon the Developers. The core question for purposes of these

proceedings is whether the computation of carpet area as a matter of

contract can be at variance with the definition of the term in the

Development Control Regulations, without compromising on the

statutory compliance requirements governing the development. Once

this has become evident, the core of the challenge stands eroded.

Scope of Review:

32. The standard of review under Section 34 of the Act cannot be

lost sight of. The jurisdiction under Section 34 of the Act is well covered

in multiple judgements of the Supreme Court including Dyna

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Technologies2, Associate Builders3, Ssyangyong4, Konkan Railway5 and

OPG Power6. Even implied reasons that are discernible, may be inferred

by the Section 34 Court, to support the just and fair outcome arrived at

in arbitral awards. To avoid prolixity, I do not think it necessary to

burden this judgement with quotations from these judgements. Suffice

it to say (to extract from just one of the foregoing), in Dyna

Technologies, the Supreme Court held thus:

"24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as in- terpreted by various courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibil- ity of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided un- der the law. If the courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom be- hind opting for alternate dispute resolution would stand frustrated.

Dyna Technologies Private Limited v. Crompton Greaves Ltd - (2019) 20 SCC 1

Associate Builders vs. Delhi Development Authority - (2015) 3 SCC 49

Ssangyong Engineering & Construction Co. Ltd. v. National Highways Authority of India - (2019) 15 SCC 131

Konkan Railways v. Chenab Bridge Project Undertaking - 2023 INSC 742

OPG Power vs. Enoxio - (2025) 2 SCC 417

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25. Moreover, umpteen number of judgments of this Court have cat- egorically held that the courts should not interfere with an award merely because an alternative view on facts and interpretation of con- tract exists. The courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardon- able under Section 34 of the Arbitration Act."

[Emphasis Supplied]

Conclusions:

33. To summarise, notwithstanding the excellent effort by Ms.

Naikare to bring to bear the best effort to displace the Impugned

Award:-

a) It cannot be said that the Society was defrauded and

deceived as was claimed by the Society in the arbitral

proceedings. The onus of proving fraud is on the party

alleging fraud, and this has not been demonstrated;

b) That the parties were faced with a peculiar situation

and adjusted for each other's constraints by surrendering

some of the FSI even while retaining physical space by

including within the computation of the carpet area, the

areas attributed to the flower bed, balconies and amenities,

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would show that the findings of the Learned Arbitral

Tribunal in this regard cannot be regarded as perverse;

c) That the construction was in line with the plan that

the Society too was seeking compliance with, and that the

Society had granted permission for modification of the plans,

is borne out by the record. Therefore, the findings in this

regard by the Learned Arbitral Tribunal, as a matter of

adjudication of a private contract, without eroding any right

of any statutory municipal body to take appropriate action

for any violation of regulatory requirements, it would be

difficult to interfere with the well-reasoned and articulate

findings in the Impugned Award.

34. In the result, no case is made out for interference by the

Section 34 Court. I am not inclined to interfere with the Impugned

Award, which is hereby upheld. There is nothing perverse in the

Impugned Award to warrant intervention. The Impugned Award is well

reasoned and does not lend itself to being set aside.

35. It is also clarified out of abundant caution that nothing

contained in this judgement, which is purely on the premise of

examining whether an interpretation of private contract by the Learned

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Arbitral Tribunal is untenable, will bind or restrict any municipal

authority in its assessment, of course in accordance with law, as to