Supreme Court Upholds Bombay High Court Setting Aside Shreeram Builders Award, Rules Arbitrators Cannot Rewrite Development Agreement or Order Premature Conveyance Before Contractual Obligations
Supreme Court Rejects Shreeram Builders Specific Performance Award Over Thane Land, Directs Refund With Nine Percent Annual Interest Using Article 142 Constitutional Powers for Justice
Facts
Shreeram Builders contracted with members of the Thanawala family on 6 August 2003 concerning development and eventual conveyance of their undivided 2/9th share in adjoining Thane lands. After the owners terminated the agreement in April 2008, a majority arbitral award dated 10 December 2011 found termination illegal and directed specific performance on payment of ₹10.91 crore, having increased the contractual FSI rate sixfold. The Principal District Judge, Thane, ultimately upheld the award under Section 34; the Bombay High Court set it aside under Section 37 on 5 March 2024. The builder appealed to the Supreme Court.
Issues
Whether the Section 37 court could set aside an award sustained under Section 34; whether the tribunal could compel conveyance despite unfulfilled payment, plan-sanction and other contractual conditions, revise FSI consideration, or adjust unrelated payments; whether the document’s description or stamp duty controlled its true character; and whether the owners must return consideration retained after termination.
Petitioner’s Arguments
Shreeram Builders maintained that the transaction effectively contemplated sale of the owners’ share, irrespective of its title as a development agreement or payment of 1% stamp duty. It relied on substantive contractual clauses, earlier admissions by the owners, their acceptance of six late instalments without notice, and the builder’s tender of later cheques. It asserted readiness to pay even the enhanced consideration fixed by the arbitral majority, urged restoration of specific performance, and contended that the High Court had impermissibly substituted its contractual assessment for that of the tribunal.
Respondent’s Arguments
The landowners contended that the agreement was structured for development and stipulated a binding sequence: timely instalments, approved plans and determination of variable FSI-linked consideration before conveyance. Payment deadlines were expressly essential, and the builder had not completed payment or secured municipal sanction. They defended the High Court’s conclusion that the majority award ignored express contractual protections, wrongly adjusted payments under a superseded memorandum, rewrote the per-square-foot rate and awarded conveyance and contingent damages beyond the agreement.
Analysis of the Law
Under Section 28(3) of the Arbitration and Conciliation Act, an arbitral tribunal must decide in accordance with the contract. A plausible interpretation receives judicial deference, but not an award that supplants unambiguous terms or creates a new bargain. The Constitution Bench in Gayatri Balasamy clarified that Section 37 review can test an award against the same Section 34 grounds, even after prior judicial affirmation. Because the Section 34 applications preceded 23 October 2015, the unamended public-policy standard governed. Article 142 separately empowers the Supreme Court to grant complete-justice relief without validating the defective award.
Precedent Analysis
Sasan Power Ltd. v. North American Coal Corp. (2016) 10 SCC 813: contractual substance, not nomenclature, identifies legal character. Gayatri Balasamy v. ISG Novasoft (2025) 7 SCC 1: appellate scrutiny under Section 37 is coterminous with Section 34. Ssangyong Engineering v. NHAI (2019) 15 SCC 131 and BCCI v. Kochi Cricket (2018) 6 SCC 287: applicability of the 2015 amendment. Associate Builders v. DDA (2015) 3 SCC 49, OPG Power Generation (2025) 2 SCC 417 and SEAMEC v. Oil India (2020) 5 SCC 164: reasonable interpretation is protected; rewriting a contract is not.
Court’s Reasoning
The 1% stamp duty did not conclusively prove a development-only arrangement; the agreement combined development rights with a future conveyance. Yet its contractual sequence was decisive. Instalments were repeatedly late, the entire estimated price was not paid by 1 March 2008, no sanctioned plan fixed the final FSI-based amount, and conveyance was conditional upon full payment. Acceptance of earlier late payments cured those particular defaults, not every subsequent deadline. The majority improperly increased the rate from ₹915 to ₹5,490 per sq. ft., set off sums under a superseded MoU, overlooked excluded bungalow/chawl areas and granted contingent damages. These substantive departures justified setting the award aside.
Conclusion
The Supreme Court declined to restore the majority award or grant specific performance, upholding the Bombay High Court’s intervention. However, the owners could not terminate the agreement and retain the consideration they had received. Exercising Article 142, the Court directed them to refund amounts actually paid under the agreement with simple interest at 9% per annum from each payment date until actual refund; the builder’s court deposits must also be returned with any accrued interest. Both appeals were disposed of accordingly, with parties bearing their own costs.
Case: Shreeram Builders v. Upendra Kantilal Thanawala & Ors.
Court: Supreme Court of India
Case Number: Civil Appeal Nos. 9817–9818 of 2024; 2026 INSC 1176
Judge: Justice Sanjay Kumar and Justice Sanjeev Sachdeva (authored by Sanjay Kumar, J.)
Date: 29 October 2026
Result: Appeals disposed of; majority award not restored; Article 142 refund of sums paid under agreement with 9% simple interest; court deposits returned; no costs.
