[Cites 9, Cited by 0]
Bombay High Court
Shruti Surendra More vs Ms Akme Properties on 6 March, 2026
2026:BHC-OS:5772
arbp-395-2025.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMMERCIAL ARBITRATION PETITION NO. 395 OF 2025
1. Shruti Surendra More
Age: 57 years, Occupation: Housewife,
Indian Habitant, residing at Flat No. 202,
New Deepali Co-operative Housing Society Ltd.,
Navin Thakkar Cross Road, Vile Parle (East), Mumbai
400 057 and
Presently residing at 709, Kankuwadi SRA Co-
operative Housing Society Ltd., P.M. Road,
Kankuwadi, Vile Parle East, Mumbai - 400 057,
through Power of Attorney Holder, Mr. Surendra
More.
2. Mr. Purushottam M. Makwana,
deceased through his legal heirs:
2a. Smt. Manjula Purushottam Makwana, Adult,
Indian Inhabitant, residing at 1C-91 Kalpatru Garden,
Ashok Nagar, Opp. Ganesh Temple, Kandivali (East),
Mumbai 400101 through Power of Attorney Holder,
Mr. Mayur P. Makwana
2b. Mr. Shailesh Purushottam Makwana,
residing at Room No. 7, Vile Parle, (East), Mumbai -
400047, through Power of Attorney Holder,
Mr. Mayur P. Makwana
2c. Mr. Chandresh Purushottam Makwana
Adult, Indian Inhabitant, residing at 1C-91 Kalpatru
Garden, Ashok Nagar, Opp. Ganesh Temple,
Kandivali (East), Mumbai 400101 through Power of
Attorney Holder, Mr. Mayur P. Makwana
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2d. Mr. Mayur Purushottam Makwana,
Adult, Indian Inhabitant, residing at 1C-91 Kalpatru
Garden, Ashok Nagar, Opp. Ganesh Temple,
Kandivali (East), Mumbai 400101 through Power of
Attorney Holder, Mr. Mayur P. Makwana
...Petitioners
Versus
1. M/s. Akme Properties
A. Partnership Firm having Office at 1st Floor,
Woodhouse, Above Nexworld, Near Haryana
Bhavan, Charkop, Sector 6, Kandivali
(West), Mumbai - 400067
2. New Deepali Co-operative Housing Society
Ltd., Navin Thakkar Cross Road, Vile Parle (East), ...Respondents
Mumbai - 400 057.
------------
Mr. Anoshak Daver, a/w, Mr. Dhaval Shethia, Mr. Sachin Masurkar & Mr.
Nimish Achrekar, i/b, Sachin Masurkar, for the Petitioners.
Ms. Vinaya More, for the Respondent No. 1.
------------
CORAM : SHARMILA U. DESHMUKH, J.
RESERVED ON : February 03 , 2026
PRONOUNCED ON : March 06, 2026
JUDGMENT :
1. By this Arbitration Petition filed under Section 34 of the
Arbitration and Conciliation Act 1996 (for short "Arbitration Act"), the
challenge is to the Arbitration Award of Learned Sole Arbitrator dated
17th December 2022.
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2. The arbitration proceedings were initiated at the instance of the
Respondent No. 1 invoking the arbitration clause contained in the
Development Agreement dated 30th July, 2016 executed between the
Respondent No 1 and Respondent No. 2-Co-operative Housing Society.
Clause 26.1 of the Development Agreement provided that all disputes
and differences between the society and the developer in connection
with the agreement shall be referred to the arbitration of three
arbitrators one to be appointed by society and one to be appointed by
the developer and the arbitrators so appointed to appoint a third
arbitrator to act as the presiding arbitrator.
3. The present Petitioners are members of the Respondent No. 2
Society. The building of the society was extremely dilapidated and
notice was issued by the Corporation under Section 354 of Mumbai
Municipal Corporation Act. The present Petitioners and one other
member were non consenting members and no agreement for
permanent alternate accommodation was signed by them with
Respondent No. 1. The other members of the Respondent No 2 Society
executed the agreement for permanent alternate accommodation with
the Respondent No 1 and handed over possession of their respective
premises.
4. The Respondent No 1 initiated proceedings under Section 9 of
the Arbitration Act and vide order dated 23 rd March 2018, the present
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Petitioners and one Mr. Singh were directed to vacate their flat within
48 hours. Subsequently, the building was demolished by the
Corporation on 28th March, 2018.
5. The Respondent No. 1 filed an application under Section 11 of
Arbitration Act for appointment of arbitrator and this Court vide order
dated 16th September, 2018 appointed the sole arbitrator. The
Respondent No 1's claim was that the non-cooperative and obstructive
conduct of the present Petitioners and Mr. Singh had caused extensive
hardship not only to Respondent No 1 but also to the majority of the
society members and led to escalation and additional expenses
resulting in affecting the financial viability of the project which turned
into loss making venture. The reliefs sought in the Statement of Claim
reads as under:
(a) That this Hon'ble Tribunal may be pleased to order and direct the
Respondent No 1 to pay to the present Claimants for an amount of Rs.
1,76,78,020/- towards the proportionate loss suffered by these present
Claimants due to non co-operation by Respondent No1 under the
redevelopment project called "New Deepali CHSL."
(b) That this Hon'ble Tribunal may be pleased to order and direct the
Respondent No 2 to pay to the present Claimants for an amount of Rs.
1,76,78,020/- towards the proportionate loss suffered by these present
Claimants due to non co-operation by Respondent No 2 under the
redevelopment project called "New Deepali CHSL."
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(c) That this Hon'ble Tribunal may be pleased to order and direct the
Respondent No 3 to pay to the present Claimants for an amount of Rs.
1,76,78,020/- towards the proportionate loss suffered by these present
Claimants due to non co-operation by Respondent No 3 under the
redevelopment project called "New Deepali CHSL."
(d) That this Hon'ble Tribunal may direct the Respondent No 1 to make the
payment of outstanding purchase considerations for the additional area
purchased under the registered Development Agreement on ore before or at
the time of execution of the Tri-partite Agreement for Permanent Alternative
Accommodation for Flat No 202 and further direct the Respondent No 1 to
attend the office of Sub Registrar of Assurance for the purpose of registration
of their individual Tri-partite Agreement for Permanent Alternative
Accommodation.
(e) That this Hon'ble Tribunal may direct the Respondent No 2 to make the
payment of outstanding purchase considerations for the additional area
purchased under the registered Development Agreement on ore before or at
the time of execution of the Tri-partite Agreement for Permanent Alternative
Accommodation for Flat No 102 and further direct the Respondent No 2 to
attend the office of Sub Registrar of Assurance for the purpose of registration
of their individual Tri-partite Agreement for Permanent Alternative
Accommodation.
(f) That this Hon'ble Tribunal may direct the Respondent No 3 to make the
payment of outstanding purchase considerations for the additional area
purchased under the registered Development Agreement on or before or at
the time of execution of the Tri-partite Agreement for Permanent Alternative
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Accommodation for Flat No 11 and further direct the Respondent No 3 to
attend the office of Sub Registrar of Assurance for the purpose of registration
of their individual Tri-partite Agreement for Permanent Alternative
Accommodation.
(g) That pending the hearing and final disposal of the present proceedings,
this Hon'ble Tribunal may be pleased to direct Respondent Nos 1, 2 and 3 each
to furnish the Bank Guarantee and/or furnish an equivalent security
(including fixed term deposit) for the guaranteed amount of Rs. 1,76,78,020/-
each (Aggregate amount of Rs 5,30,34,060/) i.e. proportionate loss suffered
by these present Claimants due to non co-operation by Respondents No 1, 2
and 3 each under the redevelopment project called "New Deepali CHSL."
and /or direct the Respondent No 1 to deposit the same in a separate bank
account.
6. The Petitioners filed common statement of defence claiming
that the appointment of developer was by way of misrepresentation
and fraud. The counter claim sought declaration that the Development
Agreement dated 30th July, 2016 is void, illegal and not binding, for
damages and compensation in the sum of Rs. 50 Lakhs each and
security in the form of bank guarantee till the development is
complete. Alternatively, it was prayed that, in event, the Development
agreement is found binding, the Respondent No 1 to provide to the
Petitioner No. 2, flat admeasuring 712 sq. ft. as per his entitlement and
the third alternate prayer was to provide all benefits and entitlement
as are provided to other members of the society.
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7. The Learned Arbitrator allowed the statement of claim in terms
of prayer clause (d), (e) and (f) i.e. direction to the present Petitioners
and Mr. Singh to make payment of outstanding purchase consideration
for the additional area purchased under the registered development
agreement and rejected prayer clauses (a) to (c) for making payment
towards the proportionate loss. The costs were quantified at Rs. 1 Lakh
to be paid by each of the Petitioners and Mr. Singh within a period of
two months failing which, interest to be paid. The counter claim filed
by the present Petitioners was dismissed with cost of Rs. 1 Lakh each
to be paid within a period of two months failing which, payment of
interest was directed.
8. Mr. Daver, learned Counsel appearing for the Petitioners would
submit that the findings of the impugned Award are contradictory in as
much as having rejected the claim for payment of proportionate loss,
the Learned Sole Arbitrator could not have come to a finding of delay
in handing over possession. He submits that there is patent illegality
as the Learned Arbitrator has travelled beyond the terms of the
contract and made the payment of monthly displacement subject to
execution of permanent alternate agreement without any reasoning
and contrary to Clause 4.1 and 4.2 of the Development Agreement.
9. He would submit that the impugned Award denies the benefit of
corpus funds/hardship compensation payable under Clauses 1.4 and 1.5
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of the Development Agreement to the Petitioners on ground of
hardship despite absence of forfeiture clause in the Development
Agreement. He submits even accepting the Petitioners admitted
reluctance in the cross-examination to sign the permanent alternate
accommodation, the same was justified as the Development
Agreement itself was under challenge. He submits that once the
Development Agreement is held to be valid, the terms are to be
enforced strictly and the learned Sole Arbitrator could not have
decided on principles of equity unless expressly provided in the
contract. He would further submit that as the Respondent No 1 has
failed to prove any loss, the denial of hardship compensation and
monthly displacement compensation on the ground of alleged
hardship amounts to equitable relief rather than enforcing the contract
which renders the award perverse and patently illegal. In support, he
relies on the following decisions:-
(I) Associated Engineering Co., Vs. Government of Andhra
Pradesh & Anr.1
(II) Ramnath International Construction Pvt. Ltd. Vs. Union of
India & Anr.2
(III) Vilayati Ram Mittal (P) Ltd. Vs. Reserve Bank Of India3.
1 S.C.R. (1991) 924
2 S.C.R. (2006) 570
3 2017 SCC OnLine Bom 8479, (2017) 6 AIR Bom R 619
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10. Per contra, Ms. More, learned Counsel appearing for the
Respondent No 1 would submit that under Clause 9.2 of the
Development Agreement, it was binding upon the members to sign the
permanent alternate accommodation agreement and not having done
so, the learned sole Arbitrator has rightly held that no monthly
displacement compensation would be payable until execution of the
agreement. She further submits that now the stage of execution of
permanent alternate accommodation is passed as the building is
completed and what is only required to be executed is tripartite
agreement between the member, developer and the society. She
submits that there is finding of fact about obstruction caused by the
Petitioners which cannot be re-appreciated under Section 34 of the
Arbitration Act. She would submit that the delay in re-development
was attributed to the Petitioners as rightly held by the learned
Arbitrator and in view of the hardship caused to Respondent No 1, the
benefit of corpus funds/hardship compensation has been denied. She
submits that the Respondent No 1 has expended substantial funds by
paying stamp duty on the prior unstamped agreements of the present
Petitioners. She submits that it is only in March 2018, upon an order
passed by this Court that the Petitioners vacated their flats and being
non co-operative are not entitled to monthly displacement
compensation. She would further submit that flats have been given for
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fit-out possession in 2023 and therefore no rental amount can be
claimed.
11. Rival contentions now fall for determination:
12. The challenge in the present Petition is confined to the findings
in paragraph 99 of the impugned award, which answers Issue No 5 as
framed in arbitration proceedings against the Petitioners regarding the
entitlement of the Petitioners to benefits under the Development
Agreement on par with other members. Paragraph 99 of the impugned
Award is reproduced for ease of reference:
"99 From the above discussion, it is thus abundantly clear
there was a delay in obtaining possession of Flat nos.202, 102 and
11 by the Society from Respondents no.1, 2 and 3. Also there was
excessively obstructive attitude displayed by these Respondents.
There can be no doubt that the delay would lead to increase in
the expenses to be incurred for the project of redevelopment.
However, the evidence produced by the Claimant before the
Tribunal on the extent of damages is not sufficient. In the
circumstances, Issue No.4 is answered in the affirmative. Issue
No.6 is answered as 'Not proved and Issue No.7 is answered in the
negative. As regards Issue No.5, since Respondents no.1 to 3 had
not handed over possession of their respective premises until the
order of the High Court dated 23 March 2018 and they are yet to
execute agreement for Permanent Alternate Accommodation no
Monthly Displacement compensation will be payable to them
until execution of the agreement. In the present facts of the case,
payment of Monthly Displacement compensation to Respondents
no.1 to 3 can start only from the date of execution of agreement
for Permanent Alternate Accommodation. These Respondents
will not be entitled to any amount for the prior period. As regards
the benefits of corpus fund / hardship compensation under
Clause 1.4-1.5 of the Development Agreement, apparently the
first installment thereof has already been paid to the members in
advance prior to signing of the Development Agreement. The
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balance however will not be payable to these Respondents since
they have caused hardship to the Claimant. Issue No.5 is
therefore answered accordingly."
13. The impugned Award thus makes the payment of monthly
displacement compensation contingent upon signing of permanent
alternate accommodation agreement and denies corpus fund/hardship
compensation on ground of hardship caused to Respondent No.1. Mr.
Daver has premised the Petitioner's entitlement to the monthly
displacement compensation and the corpus fund/hardship
compensation on the express terms of the contract. The relevant
clauses of the Development Agreement in this context reads as under:
"1.4 In consideration of the Society granting and transferring to
the Developer the aforesaid Balance Saleable Entitlements as
stated above, the Developer has agreed to pay the members for
alleviating hardship total monetary consideration/compensation
of Rs. 2500/- (Rupees Two Thousand Five Hundred only) per square
feet/foot of existing carpet area of the members ("Corpus
Fund/Hardship Compensation") as more particularly set out in
Column No. 6 of the Annexure "D" hereto.
1.5 The aforesaid consideration/compensation is a
predetermined lump sum amount for having given concurrence,
consent for and grant of the rights to undertake the Re-
development Project under the terms contained herein and is
inclusive of i) compensation for alleviating hardship suffered by
the Members for shifting/re-shifting, ii) compensation for allowing
the Developer to demolish their flats and iii) compensation for
having agreed to share the common areas with more persons after
the completion of the Re-development Project. iv) consideration
for utilizing the said Balance Saleable Entitlements. The aforesaid
consideration will be paid as follows-
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(a) Rs. 1,50,000/- out of the total amount already paid to the
members in advance prior to singing of this Agreement in
order to cause assistance to procure temporary alternate
accommodation.
(b) Eighty-Five percent (85%) (after deducting the above said
amount of Rs. 1,50,000/- already paid to the members as
mentioned in (a)) to each members as set out in Column No. 7
of Annexure "D" on handing over the complete vac ant
possession of the flats along with lock and keys by the
members to the Developer after procurement of IOD for
demolishing the existing structure, however, the cheque
(undated) for the same shall be handed over to the society at
the time of giving notice to vacate within 3 days upon receipt
of IOD and subject to confirmation from society about upto
date payment of taxes and rates and out to all the members
and the same shall handed over by the Society to the
respective members on the IOD subject to confirmation from
society about up to date payment of taxes and rates and
outgoings by the existing members and
(c) Balance Fifteen percent (15) on the Developer handing
over possession of new flats to all the Members after receipt
of |Occupation Certificate from MCGM Competent Authority
as set out in Column No. [8] of Annexure "D"
"4.1 The Developer shall pay compensation to all the members
of Rs. 100/- (Rupees One Hundred only) per square foot of their
existing carpet area, as per list attached, as "Monthly
Displacement Compensation" at the time of execution of this
Agreement. However, it is an admitted position that the society
previously has received notice u/s. 354 several times of the
Competent Authority Act and that the members and the society
have requested the Developers to give monthly compensation to
each of the member commencing from the date of the Re-
Development Agreement. The said notices issued u/s 354 are
annexed herewith as Annexure "J". The Developer, at the request
of the members and the society and considering humanitarian
reasons, have agreed to grant the monthly compensation to each
of the members upon execution of the Re-Development
Agreement. The Developers shall give post dated cheques for a
period of twelve months from the date of execution of the Re-
Development Agreement.
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4.2 The Monthly Displacement Compensation shall be enhanced
by 10% after expiry of every 12 months till obtaining Full
Occupation Certificate for the Members' area and offering
possession of new premises to all the members of the Society and
the said compensation shall be paid to the members till handing
over the possession of the new flat.
4.3 The amount of Monthly Displacement Compensation shall be
paid by the Developer in the following manner:
(i) Monthly Displacement Compensation for first
12 months shall be paid in advance by the way of 12
(twelve) Postdated cheques at the time of execution of
this Development Agreement
(ii) Monthly Displacement Compensation for next
12 months shall be paid by the Developer with 10%
increase i.e.Rs.110/- per square foot of their existing
carpet area (after expiry of the first 12 months by way
of 20 (twenty) Post Dated Cheques which shall be
handed over one month before the expiry of the period
of twelve months.
(iii) The details of the Monthly Displacement
Compensation payable to the members are more
particularly provided in column 9and 10 of Annexure
"D" to this Agreement.
(iv) For the sake of clarity, it is provided that if any
of the issued cheque gets dishonored by the Developer,
then same amount shall be reimbursed to the members
within 15 days from the date of intimating the same to
the Developer.
(v) The parties herein agree that the developer
shall obtain Occupation Certificate and offer possession
to the respective member of the Society. The parties
further agree that the developer in the process of
obtaining Occupation Certificate shall intimate the
society and respective members about taking
possession of taking new flats in the newly constructed
building on the said property. It is further clarified that
the developer shall not be liable to pay monthly
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compensation from the date of which the developer has
offered possession. It is further clarified that from the
date the developer has offered possession of respective
member shall not deposit the post dated cheques which
have been received by the members towards monthly
compensations. It is further clarified that all such
postdated cheques shall be returned by the respective
member to the developer. In the event, the member
does not return any of such post dated cheques then
the developer shall be authorized to give stop payment
instruction to their banker in respect of such postdated
cheques issued by the developer to the member."
14. The agreement between the parties regarding payment of
corpus fund/hardship compensation as set out in Clauses 1.4/1.5
reproduced above is in consideration of the grant and transfer to the
Developer, the balance saleable entitlements. The compensation
amount was not linked only to the concurrence and consent given by
the members to Respondent No 1 but was also based on grant of rights
to redevelopment. The impugned Award denies the Petitioners the
benefit of balance corpus fund/hardship compensation on the ground
that hardship was caused to the Respondent No 1. Pertinently, the
Learned Sole Arbitrator rejected the claim of the Respondent No 1 for
proportionate loss by reason of non-co-operation of the Petitioners.
The effect of denial of the benefits under the Development
Agreement to the Petitioners results in indirectly allowing the
Respondent No. 1's claim for proportionate loss.
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15. The finding of fact in the impugned Award is the delay in
obtaining possession of the flats from the Petitioners. There must be
some evidence on record to justify that delay in handing over
possession has resulted into hardship. The finding of hardship is de-
hors any reasoning and suffers from perversity. The question to be
considered was whether the terms of the contract provide for
forfeiture of the corpus fund/hardship compensation for delay in
handing over possession. There is no clause in the development
agreement pointed out to this Court which makes the payment of
corpus fund/hardship compensation dependent on timely handing
over possession of their respective flats by the members. The contract
is also silent on the consequence of failure of the members to hand
over possession of their flats for purpose of redevelopment. The denial
of benefits amounts to forfeiting the Petitioner's right to the
payments which forfeiture can take place only under the express terms
of the development agreement. Having held that the Development
Agreement was valid and binding, the Learned Arbitrator was bound to
enforce the contract strictly in accordance with its terms including the
grant of benefits thereunder.
16. Insofar as the payment of monthly displacement compensation is
concerned, Clause 4.1, 4.2 and 4.3 of development agreement makes is
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clear that the liability to make payment under the head of monthly
displacement arose upon execution of the development agreement
and the execution of permanent alternate agreement was not the sine
qua non for the said payment. The Learned Sole Arbitrator has linked
the payment of the monthly displacement compensation with the
execution of permanent alternate accommodation without any such
clause in the development agreement which amounts to re-writing the
terms of the contract. At the highest, the Learned Sole Arbitrator could
have granted the monthly displacement compensation from the date
of handing over possession of 23rd March 2018 as the terminology itself
suggests that the compensation is required to be paid for
displacement. In any event, the contention of Ms. More is that there is
no question of execution of permanent alternate arrangement as the
possession of the building has already been handed over. The Learned
Arbitrator even otherwise could not have linked the payment to the
execution of permanent alternate accommodation.
17. As the Issue No 5 framed by the Learned Arbitrator was in
respect of entitlement of the Petitioners to rent and other benefits,
the entitlement was to be adjudicated in consonance with the terms of
the contract. The Learned Arbitrator being creature of contract was
mandated to enforce the contract strictly in accordance with the terms
of the contract and disregarding the express terms of the contract
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constitutes jurisdictional error vitiating the Award. The findings of the
Learned Arbitrator on disentitlement of the Petitioners is not premised
on interpretation of various clauses of the development agreement
but is a case of disregard of the express terms of the contract. In case
of interpretation of terms of the contract, the error, if any, would be an
error within jurisdiction incapable of interference under Section 34 of
Arbitration Act, unless there is error apparent on the face of the award.
18. The findings make it clear that the denial of the benefits under
the Development Agreement is premised on the principles of equity
which is not permissible under Section 28(2) of the Arbitration and
Conciliation Act which provides that the Arbitral Tribunal shall decide
ex aequo et bono or amiable compositeur only if the parties have
expressly authorised it to do so. The adjudication of the Petitioner's
claim outside the terms of the contract and based on principles of
fairness, equity and natural justice, suffers from perversity.
19. In Associated Engineering Company vs Government of A.P.
(supra), the Hon'ble Apex Court has held that the sole function of
Arbitrator is to arbitrate in terms of the contract and conscious
disregard of provisions of contract from which he has derived his
authority vitiates the award.
20. In light of the settled position in law, if the findings of the
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learned Arbitrator are considered, the impugned award, to the extent
of findings rendered in answer to Issue No 5 suffers from patent
illegality as the Learned Arbitrator has travelled beyond its jurisdiction
by disregarding the binding terms of the contract. The impugned
Award to the extent of findings in answer to Issue No 5 is hereby
quashed and set aside.
21. In Gayatri Balasamy vs ISG Novasoft Technologies Ltd 4, the
Constitution Bench has held that it is permissible for Court exercising
powers under Section 34 of Arbitration Act to sever bad part of the
Award while retaining the good part so long as the bad part is not
inseparably intertwined with the good part. In the present case, the
finding of the Arbitral Tribunal denying the benefits of corpus
fund/hardship compensation and monthly displacement compensation
is not inseparably intertwined with the other findings and arises out of
specific demand raised in the counter claim. Therefore the Award
needs to be modified by awarding the claim for corpus fund/hardship
compensation and monthly displacement compensation in favour of
the Petitioner.
22. Resultantly, Petition succeeds. The claim of the Petitioners for
corpus fund/hardship compensation is allowed on par with other
members of Respondent No. 2. Insofar as the monthly displacement
4 (2025) 7 SCC 1
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compensation is concerned, the same is allowed from 23 rd March, 2018.
The Respondent No 1 is directed to pay to the Petitioners the sum due
as observed in this order within period of eight weeks.
[SHARMILA U. DESHMUKH, J.]
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