The Supreme Court has refused to restore an arbitral award that replaced the parties’ agreed obligations with new terms in a Thane property dispute. While leaving the award set aside, it directed the landowners to return the consideration received with 9% simple interest, using Article 142 to avoid another round of litigation.
New Delhi: An arbitral tribunal cannot disregard the sequence of obligations fixed by a contract and impose a different bargain while granting specific performance, the Supreme Court has held in Shreeram Builders v. Upendra Kantilal Thanawala and others.
A Bench of Justices Sanjay Kumar and Sanjeev Sachdeva delivered the final judgment on October 29, 2026. It found no ground to restore the majority award overturned by the Bombay High Court, but also held that the landowners could not retain the builder’s payments after terminating the agreement.
A development agreement and a disputed conveyance
The dispute arose from an agreement dated August 6, 2003 concerning the respondents’ undivided two-ninths share in property at Panchpakhadi, Thane. The initial consideration was calculated at ₹915 per square foot on a projected floor space index of 25,000 square feet, producing an estimate of ₹2,28,75,000. The contract provided for adjustments linked to specified later events.
After the landowners terminated the agreement in April 2008, the dispute went to a three-member tribunal. Its majority award in December 2011 ordered specific performance, requiring the builder to deposit about ₹10.91 crore before a sale deed was executed. The award also provided alternative damages if the specific-performance relief was set aside. The third arbitrator dissented.
Following an earlier remand, the Thane District Judge upheld the award in 2020. The Bombay High Court set it aside on March 5, 2024, leading to the builder’s appeals.
The agreed sequence could not be replaced
The builder submitted that it had paid about 82% of the estimated consideration and deposited the balance in court in 2017. It also offered to accept the enhanced price fixed by the award. The Supreme Court explained that it was testing the validity of an arbitral award under Section 34, rather than hearing an ordinary appeal against a decree for specific performance.
The Court found that the full estimated consideration had not been paid by the contractual deadline of March 1, 2008. Acceptance of the first six instalments without protest cured the delay in those payments; it did not erase the agreement’s repeated insistence that time was essential.
The ultimate price also remained dependent on events such as sanction of the building plan, additional permissible floor space and construction of basements. Under the agreement, conveyance was linked to payment of all amounts due. Those conditions had not been satisfied when the award was made.
In paragraph 58, the Bench said that “it was not for the two learned arbitrators to rewrite its terms.” It also found that the award brought part of expressly excluded property within the proposed conveyance, affecting co-owners who were not parties before the tribunal.
Sixfold price increase lacked a reasoned basis
The majority had increased the agreed rate from ₹915 to ₹5,490 per square foot. In paragraph 59, the Court found that no computation or reasoning explained the sixfold increase. It also faulted adjustments based on an earlier memorandum of understanding that the later contract had superseded.
The Bench applied the unamended Section 34 because both challenges had been filed before October 23, 2015. It reiterated that a plausible contractual interpretation by an arbitrator ordinarily deserves deference. Here, however, the award replaced the express bargain, violating Section 28(3) of the Arbitration and Conciliation Act, 1996.
Refund ordered to avoid fresh litigation
The landowners’ success against the award did not entitle them to keep the money. Paragraph 62 records that Clause 54 required repayment of the consideration where the agreement ended without construction on their share. They had not made that repayment.
Exercising Article 142, the Court directed return of the amounts paid under the agreement with 9% simple interest per annum from each payment until actual refund. It explained that the contractual no-interest condition would have applied had the money been returned when the agreement was terminated in 2008. The builder’s court deposits may also be returned with accrued interest, if any. The appeals were disposed of on these terms, with each side bearing its own costs.
Case Title: Shreeram Builders v. Upendra Kantilal Thanawala and others
Case Number: Civil Appeal Nos. 9817–9818 of 2024
Court: Supreme Court of India
Bench: Justices Sanjay Kumar and Sanjeev Sachdeva
Citation: 2026 INSC 1176
Date of Judgment: October 29, 2026
Outcome: Final disposal; majority award not restored; refund with 9% simple interest directed under Article 142.