Case at a Glance
A 2003 ‘Agreement for Development’ for land in Village Panchpakhadi, Thane, ended in termination by the landowners in April 2008 after instalment cheques were returned. A majority arbitral award granted the developer specific performance on payment of Rs 10,91,30,164, but the Bombay High Court set it aside under Section 37. The Supreme Court agreed that the award violated Section 28(3) of the Arbitration Act by rewriting the contract, but held the landowners could not keep the money paid to them. Using Article 142, it directed refund of all amounts with 9% simple interest from each payment date.
On 6 August 2003, five members of the Thanawala family, who held a 2/9th undivided share in about 16,414 sq yd across three parcels in Village Panchpakhadi, Thane, executed an ‘Agreement for Development’ with the appellant firm. The consideration of Rs 2,28,75,000 was based on 25,000 sq ft of FSI at Rs 915 per sq ft. Rs 55,00,000 was paid as earnest money and the balance of Rs 1,73,75,000 was payable in ten instalments of Rs 17,37,500, the last by 1 March 2008. The first six were paid late, by 2 to 47 days, and accepted without protest. Cheques for the seventh to ninth instalments were returned on 16 April 2008, the tenth was never tendered, and the landowners terminated the agreement by legal notice of 9 April 2008.
In arbitration, the majority (the umpire Justice S.D. Pandit and P.S. Mudholkar) granted specific performance on payment of Rs 10,91,30,164 and rejected the counter-claim, while V.P. Patil dissented. The Principal District Judge, Thane, after a remand, dismissed the Section 34 challenges on 25 January 2020. On 5 March 2024, the Bombay High Court allowed the landowners’ Section 37 appeal and set aside the award. The Supreme Court ordered status quo on the land in August 2024.
The Key Question Before the Court
Was the majority award granting specific performance patently illegal for rewriting the parties’ contract in breach of Section 28(3), and if so, can the landowners keep the money already paid by the developer?
When the Tribunal Rewrites the Bargain
The Court began by noting that “the nomenclature of a document would not be decisive as to its nature”, citing Sasan Power Ltd. v. North American Coal Corporation (India) Ltd., (2016) 08 SC CK 0139, (2016) 10 SCC 813. The landowners had “literally washed their hands off the whole project” and took no built-up area, but what really mattered were “the terms thereof, stipulating sequential performance of obligations”. The majority wrongly treated the matter as “a regular suit for specific performance of an agreement to sell”. Not issuing a Clause 7 notice for the six late instalments cured those delays, but did not wipe out the time-of-essence stipulations; and the consideration was never fixed, being open to change under the FSI, adverse-possession and basement clauses.
Applying the unamended Section 34 and the line of cases including Associate Builders v. DDA, (2014) 11 SC CK 0074, (2015) 3 SCC 49, Ssangyong Engineering v. NHAI, (2019) 05 SC CK 0037, (2019) 15 SCC 131, and Gayatri Balasamy v. ISG Novasoft Technologies Ltd., (2025) 04 SC CK 0302, (2025) 7 SCC 1, the Court found the award had included an excluded bungalow property, relied on a superseded 2002 MoU for adjustments, and imposed a rate of Rs 5,490 per sq ft without reasons, while the alternative award of damages had no foundation in the contract. The High Court was correct that Section 28(3) was violated. Yet the landowners could not keep the developer’s money: “It was not open to them to retain the said amount when they wished to retract from the agreement.”
What the Court Actually Held
- The majority award granting specific performance rewrote the contract and violated Section 28(3) of the Arbitration and Conciliation Act, 1996; there were no grounds to uphold it.
- The alternative award of damages was without foundation, as the agreement provided for none, and was opposed to public policy.
- Invoking Article 142, the Court directed the landowners to refund all amounts paid under the agreement with simple interest at 9% per annum from the date of each payment until refund.
- Amounts deposited by the developer in court are to be returned with accrued interest; the appeals were disposed of with parties bearing their own costs.
Why This Judgment Matters
- It illustrates the limits of arbitral power: a tribunal cannot rewrite commercial terms in the name of specific performance.
- It protects developers from forfeiture even when they lose: landowners who walk away must return what they received.
- It is a useful guide on how acceptance of delayed instalments affects time-of-essence clauses in development agreements.
What Should Advocates Take Away From the Judgment?
For Landowners and Developers
- Draft payment and time-of-essence clauses carefully and issue contractual notices when payments are late.
- Terminating an agreement does not entitle landowners to retain amounts already paid.
For Counsel
- Challenge awards that add property, rely on superseded documents or fix rates without reasons as violating Section 28(3).
- Pre-2015 arbitrations are tested under the unamended Section 34 (Ssangyong Engineering v. NHAI).
- Where an award falls, seek restitution with interest as consequential relief.
Key Takeaways
- Label of the agreement is not decisive; its terms are.
- Award rewriting the contract violates Section 28(3).
- Acceptance of late instalments does not erase time-of-essence clauses.
- Refund with 9% simple interest ordered under Article 142.
Frequently Asked Questions
Did the developer get the land?
No. The Supreme Court agreed with the High Court that the specific performance award could not stand.
What relief did the developer get?
Refund of all amounts paid under the agreement with simple interest at 9% per annum from each payment date, plus return of its court deposit with accrued interest.
Why was the award held illegal?
It rewrote the contract, including by adding excluded property, relying on a superseded MoU, fixing a rate of Rs 5,490 per sq ft without reasons and awarding damages the agreement did not provide for.
Conclusion
Shreeram Builders balances two principles: an arbitral tribunal must enforce the contract the parties made, not a better one, and a party that exits a contract cannot keep the other side’s money. The result is restitution rather than specific performance.
Practical takeaway: In development-agreement disputes, an award that alters consideration or property cannot survive Section 28(3), but restitution with interest remains available to the paying party.
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