Supreme Court Rules on Arbitration Award in Property Dispute: Jagjeet Singh Lyallpuri vs. Unitop Apartments & Builders

The Supreme Court, in Jagjeet Singh Lyallpuri (dead) Through Lrs. & Ors. vs. M/s Unitop Apartments & Builders Ltd., delivered a landmark judgment concerning arbitration in a property development dispute. The ruling clarified the scope of judicial intervention in arbitration awards and the procedure for setting aside such awards under the Arbitration and Conciliation Act, 1996.

Background of the Case

The dispute arose from an agreement dated 14.12.1996, wherein the appellants (landowners) entered into a joint development agreement with the respondent (a construction company) for constructing a residential-cum-commercial complex on land measuring 14 Kanals and 3 Marlas in Ludhiana, Punjab. The agreement stipulated that the respondent would fund the project and complete construction within three years from obtaining municipal approval. In return, the appellants were to receive 48% of the proceeds from the developed property.

Despite securing approval from the Ludhiana Municipal Corporation on 04.07.1997, the respondent allegedly abandoned the project in March 1999, leading to legal action. After multiple notices and attempts to settle, arbitration proceedings were initiated, culminating in an award on 13.01.2010, dismissing both claims and counterclaims.

The respondent challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996. The Additional District Judge upheld the award, prompting the respondent to appeal under Section 37 before the Punjab and Haryana High Court, which remanded the matter for fresh arbitration proceedings. Aggrieved, the appellants approached the Supreme Court.

Legal Issues Before the Supreme Court

• Whether the High Court had jurisdiction to remand the matter for fresh arbitration proceedings.
• Whether procedural lapses, such as lack of cross-examination, warranted setting aside the arbitration award.
• Whether the arbitration tribunal had adequately considered the financial losses claimed by the respondent.
• Whether the respondent was entitled to compensation for the incomplete construction.

Arguments by the Appellants (Jagjeet Singh Lyallpuri & Others)

• The arbitration award had already undergone scrutiny under Section 34, and the Additional District Judge had rightly upheld it.
• The High Court exceeded its jurisdiction under Section 37 by remanding the matter for fresh arbitration.
• The respondent had agreed to arbitration procedures, including reliance on affidavits, and had waived cross-examination rights.
• The High Court wrongly concluded that the arbitration award lacked due consideration.

Arguments by the Respondent (Unitop Apartments & Builders Ltd.)

• The arbitration tribunal did not allow proper evidence submission and cross-examination, violating principles of natural justice.
• The arbitrator failed to evaluate the construction costs and losses incurred by the respondent.
• The High Court correctly observed that the arbitrator had not addressed key claims separately.
• The project’s delay was attributable to the appellants’ failure to provide necessary property documents, preventing the respondent from obtaining financing.

Supreme Court’s Judgment

The Supreme Court set aside the High Court’s order, restoring the arbitration award. The Court ruled that:

• Courts have limited scope under Section 34 and Section 37 of the Arbitration and Conciliation Act, 1996, and cannot interfere unless the award is perverse or against public policy.
• The respondent had voluntarily agreed to rely on affidavits and had waived cross-examination rights before the arbitrator.
• The arbitrator had examined all claims, including financial loss allegations, and found them unsubstantiated.
• Section 19 of the Arbitration Act permits flexible procedural rules, and once agreed upon, parties cannot contest them retrospectively.

The Court observed:

“The procedure agreed upon by the parties in arbitration cannot be challenged after the award has been rendered. The scope of interference under Section 34 is limited, and the High Court erred in remanding the matter.”

Further, it held:

“Arbitration is meant to be a speedy dispute resolution mechanism. Interference by courts should be minimal, ensuring that parties do not misuse the appellate process to delay implementation of arbitral awards.”

Key Takeaways from the Judgment

• The scope of judicial interference in arbitration awards is narrow and limited to procedural violations or violations of public policy.
• Parties must adhere to agreed-upon arbitration procedures, and retrospective challenges to procedural consent will not be entertained.
• Arbitrators have discretion to conduct proceedings, and courts should not interfere unless clear injustice is established.
• Real estate development disputes must be resolved through arbitration, as litigation often leads to prolonged project delays.

Final Decision

• The Supreme Court set aside the Punjab and Haryana High Court’s order.
• The arbitration award dated 13.01.2010 was restored.
• The appellants were permitted to retain possession of the disputed land.
• The respondent’s claim for damages was dismissed.

Implications of the Judgment

This ruling reinforces the finality of arbitration awards and discourages unnecessary judicial interference. It strengthens confidence in arbitration as an effective dispute resolution mechanism and ensures that commercial contracts are upheld as per agreed terms.

Petitioner Name: Jagjeet Singh Lyallpuri (dead) Through Lrs. & Ors..
Respondent Name: M/s Unitop Apartments & Builders Ltd..
Judgment By: Justice R. Banumathi, Justice A.S. Bopanna, Justice Hrishikesh Roy.
Place Of Incident: Ludhiana.
Judgment Date: 03-12-2019.

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