Overview
In this case, the Delhi High Court considered the extent to which courts can interfere with an arbitral award relating to compensation for delayed possession of commercial property. The dispute arose out of an appeal filed under Section 37 of the Arbitration and Conciliation Act 1996, challenging the quantum of damages awarded by the Arbitral Tribunal and subsequently upheld by the Single Judge.
The appellant contended that the compensation of ?25 per square foot per month, awarded under the buyer’s agreement, was inadequate, considering the prevailing market rental value. The appellant argued that the delay resulted from the failure of the builder to communicate that the Occupancy Certificate had been obtained and, therefore, compensation ought to have been awarded at market rates.
The main issue before the Division Bench was whether the contractual compensation clause governed the dispute or whether the appellant was entitled to enhanced damages on the basis of alleged actual market losses.
Facts of the Case
A commercial office space buyer’s agreement was executed by the parties in May 2006 concerning office premises at Jasola Vihar, Delhi. The appellant paid more than 90% of the sale consideration. Under the agreement, the final instalment became payable after the builder informed the purchaser that the Occupancy Certificate had been obtained.
Although the respondent secured the Occupancy Certificate in June 2009, the appellant was informed about it on 12 January 2011.
During this period, possession was not handed over while the respondent continued demanding maintenance and other charges. The appellant maintained that he was willing to pay the remaining amount immediately upon receiving the required intimation.
The dispute was referred to arbitration. It was held by the Arbitral Tribunal that the respondent was responsible for the delay until 12 January 2011 and compensation at ?25 per square foot per month was awarded under the relevant contractual clause. For the period thereafter, the tribunal found that both parties contributed to the delay and declined further compensation. Proceeding under Section 34, the Single Judge extended compensation until possession was ultimately delivered in November 2014, but retained the contractual rate. Dissatisfied with the quantum, the present appeal was preferred by the appellant.
Legal Issues
- Whether the contractual compensation clause governed the delay by the builder in handing over possession.
- Whether the failure to communicate the Occupancy Certificate entitled the purchaser to damages based on prevailing market rental rates.
- Whether the arbitral award suffered from patent illegality requiring interference under Section 37.
- Whether the evidence produced was sufficient to establish higher actual losses.
Decision
The Delhi High Court dismissed the appeal and upheld the compensation awarded at ?25 per square foot per month. It was observed that interpretation of contractual terms falls within the jurisdiction of the Arbitral Tribunal and interference is allowed only when the award is patently illegal or entirely unreasonable.
The tribunal’s interpretation of the compensation clause was found to be a plausible view arising from the agreement.
It was further held that the appellant had failed to produce legally admissible evidence proving the entitlement to higher damages. The lease deeds and internet-based rental material relied upon were not proved in accordance with the requirements of the law of evidence and therefore could not be used as the basis of awarding market-rate compensation.
The Court also noted that the award included substantial interest in addition to contractual compensation, making the overall relief reasonable. Finding no perversity or patent illegality in the findings of the Arbitral Tribunal and the Single Judge, the appeal was dismissed.
Case Reference: - FAO(OS) (COMM) 100/2019 & CM Appln. 2389/2020 (DB, Before V. Kameswar Rao and Vinod Kumar, JJ., Delivered by V. Kameswar Rao, J.)
