"Commercial Appeals Dismissed: Court Upholds Single Judge's Decision Against Draft Supplemental Agreement" "Arbitral award set aside due to non-execution and unenforceability of central document, with significant procedural and substantive flaws identified."

Case Note & Summary

Two concurrent Commercial Appeals (90 of 2020 and 91 of 2020) arising from an arbitral award dated February 14, 2017. The award was set aside by a Single Judge on January 28, 2020. The appeals involve a dispute regarding a Development Agreement and a Memorandum of Understanding (MoU) dated April 19, 1995, for the development of property owned by the Respondents and to be developed by the Appellant. The central issue is a "draft Supplemental Agreement" asserted by the Appellant but deemed non-existent by the Single Judge. The appeals were dismissed, supporting the Single Judge's finding that the draft Supplemental Agreement was neither executed nor enforceable.

Overview Appeals Overview: Appeals (90 of 2020 and 91 of 2020) stem from an arbitral award dated February 14, 2017, set aside by a Single Judge. Parties Involved: Ivory Properties & Hotels Private Limited (Appellant) and Ms. Bhanumati Jaisukhbhai Bhuta and Ms. Vasantben Ramniklal Bhuta (Respondents). Agreements and Disputes Development Agreement and MoU: Both dated April 19, 1995, for developing immovable property. Draft Supplemental Agreement: Central to the dispute; asserted by the Appellant but found non-existent and unenforceable by the Single Judge. Judicial Findings Impugned Judgment: Single Judge set aside the arbitral award, finding it patently illegal and arbitrary. Review Scope: Narrow scope under Section 34 of the Arbitration and Conciliation Act, 1996, without reappreciation of evidence. Existence of Supplemental Agreement: Found non-existent; only a draft with blanks and not executed. Arbitral Award and Its Flaws Arbitral Award: Concluded that the Development Agreement and MoU were amended by the draft Supplemental Agreement. Single Judge's Findings: Arbitrator failed to meet the basic standard of evidence appreciation; the draft Supplemental Agreement was not a mutually agreed bargain. Factual Background Original Agreements: Development Agreement and MoU executed on April 19, 1995. Changes and Disputes: Policy changes in 1998 affected the development plans; alleged oral agreement and draft Supplemental Agreement in 1999-2000. Arbitration Proceedings Invocation of Arbitration: Contested; letter dated February 14, 2002, purportedly invoking arbitration. Arbitral Award: Passed based on flawed conclusions regarding the draft Supplemental Agreement. Supplemental Agreement Analysis Blanks in Agreement: Critical sections left blank; no specific demarcation of areas or sizes. Judicial Conclusion: Draft Supplemental Agreement not enforceable; gaps and lack of mutual agreement. Conclusion Appeals Dismissed: Appeals under Section 37 of the Act dismissed, upholding the Single Judge’s judgment. Contesting the Supplemental Agreement Appellant’s Version: Events including a letter dated February 14, 2002, contested by Respondents. Respondents' Awareness: Claim they only became aware of the letter and the draft Supplemental Agreement in 2009. Letters from Solicitors and Arbitrator Solicitors’ Letters: Multiple letters to the Sole Arbitrator without mentioning the Supplemental Agreement. Arbitrator's Initial Letters: First letter in 2005 did not reference the Supplemental Agreement. Arbitrator's Ruling and Issues Conclusion on Agreement: Arbitrator concluded the existence of the Supplemental Agreement without proper adjudication. Perverse Decision: Arbitrator's decision is deemed perverse and contains inherent conflicts. Cross-Examination and Evidence Witness Testimony: Arbitrator wrongly claimed the Appellant’s witness was not cross-examined on key issues; testimony did not establish a firm date for the Supplemental Agreement. Arbitrator's Use of Clause 30 and Inchoate Agreement Clause 30: Arbitrator relied on Clause 30 of the Development Agreement but failed to address the incomplete nature of the Supplemental Agreement. Scope of Interference with Arbitral Awards Limited Scope: Judgment highlights the limited scope for challenging arbitral awards but identifies patent illegality in the Arbitrator’s findings. Limitation Issue Time-Barred Claim: Found time-barred under the Limitation Act, 1963; breach known in 1995. Conclusion Appeals Fail: Judgment of the Learned Single Judge is upheld; Arbitrator’s conduct and findings are deemed manifestly arbitrary. Costs Appellant’s Costs: Directed to pay costs of Rs. 40,00,000/- to the Respondents within four weeks. Stay on Costs: Stay on payment of costs granted for eight weeks to allow the Appellant to challenge the order before the Supreme Court.