Bombay High Court Upholds Arbitral Award Granting Specific Performance Of Development Agreement Between BTRA & Nilkanth Enterprise

The Bombay High Court recently dismissed a petition under section 34 of the Arbitration and Conciliation Act, 1996 (Arbitration Act) upholding a 2017 arbitral award directing specific performance of a long negotiated development transaction concerning 57,000 sq. m. of land in Ghatkopar (West), Mumbai. Justice Somasekhar Sundaresan held that “there is nothing on record to show that Nilkanth was unwilling or incapable of performing its part of the bargain. This contention too does not present a case of any inherent contradiction, but effectively a finding that one of the parties was not ready and willing to perform and could not expect the other party to be accused of non-performance when BTRA did not desire to perform and indeed did not even call for performance by Nilkanth.” Background: The dispute arose out of negotiations dating back to 2003 when Nilkanth offered to acquire and develop Bombay Textile Research Association (BTRA)'s land. A series of letters led to payments of over Rs. 4.03 crore by Nilkanth which was followed by a stamped execution draft of a Development Agreement (DA) in December 2005 and Minutes of Meeting (MOM) modifying certain operational terms. When the deal stalled, Nilkanth filed a suit for specific performance in 2009. By consent terms in 2013, the dispute was referred to arbitration.The Arbitral Tribunal granted specific performance of the Enforced Agreement comprising the November 2003 Letter, the Execution Draft DA, and the 2005 MOM. BTRA had challenged the award on the ground that the Tribunal exceeded its jurisdiction and granted reliefs not prayed for. BTRA argued that the Tribunal enforced an agreement different from what was referred to arbitration, that the tribunal relied on a combination of instruments not forming part of the Suit Agreement, that the award was vague, contradictory and non executable since the letters referred to a “sale” while the DA referred to “development” and that the tribunal improperly relied on internal BTRA documents and an alleged privileged legal opinion. Opposing the plea, Nilkanth Enterprise argued that all instruments from 2003 letters to the 2005 MOM formed a continuous chain of negotiations culminating in a concluded contract and that the alleged "sale vs. development" dichotomy was artificial as all documents reflected a development transaction. Findings: The court held that the five instruments, three letters, the draft DA, and the MOM constituted a single negotiating continuum and the tribunal merely interpreted them as a composite agreement. It observed that “therefore, in my opinion the distinction sought to be drawn between the nature of the transaction discernible from the preceding correspondence, the Execution Draft DA, and the 2005 MOM is not of a nature that renders either the understanding of the parties to have been disrupted or that the specific performance as granted by the Learned Arbitral Tribunal being rendered incapable of execution.The inclusion of the November 2003 Letter into the mix does not result in any material difference between the relief sought and the relief granted.” Justice Sundaresan held that the plaint,original claim and amended claims all referred to the same chain of documents and the arbitral tribunal acted within its mandate. The court rejected BTRA's allegations of inherent contradictions holding that Nilkanth's readiness and willingness was supported by evidence including payments made and steps taken for permissions. “There is nothing on record to show that Nilkanth was unwilling or incapable of performing its part of the bargain. This contention too does not present a case of any inherent contradiction, but effectively a finding that one of the parties was not ready and willing to perform and could not expect the other party to be accused of non-performance when BTRA did not desire to perform and indeed did not even call for performance by Nilkanth”, the court observed. The court further observed that BTRA had itself recognised in its internal board minutes that an agreement had been reached. It also said that the nature of the transaction, that is development and not outright sale, remained consistent. On Privileged Opinion, the court held that the dispute over an opinion of the then Advocate General was inconsequential especially when BTRA and Nilkanth were aligned when seeking permissions. It held that “in my opinion, the controversy sought to be raised as to whether such opinion could have been relied upon and whether it is a breach of privilege is unnecessary. It is an opinion taken by BTRA when totally aligned with Nilkanth. The contention that the Learned Arbitral Tribunal has not squarely dealt with the facet of privilege does not lead to perversity of the nature that would cut to the root of the Impugned Award and render its findings implausible.” The court rejected the...

Bombay High Court Upholds Arbitral Award Granting Specific Performance Of Development Agreement Between BTRA & Nilkanth Enterprise

Mohd Malik Chauhan

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