Delhi High Court Upholds DMRC's Arbitral Award Against Parsvnath Builders Amounting To ₹70 Lakhs

The Delhi High Court Bench of Justice Jasmeet Singh has upheld an arbitral award in favour of Delhi Metro Rail Corporation (“DMRC”) against Parsvanath Developers Limited (“PDL”) relating to development of commercial space in Tis Hazari Metro Station. The Court affirmed the view taken by the Arbitrator that DMRC was not in violation of its obligations under the Concession Agreement. DMRC had co-operated with PDL and the sub-licensee and the non-completion of the project was because of failure of PDL and the sub-licensee to present a proper application for requisite sanction by MCD. Facts The present petition was filed by the Petitioner i.e. PDL against the arbitral award dated 07.06.2017 (“Award”) passed in arbitral proceedings against DMRC whereby PDL's claims were disallowed and the tribunal allowed the counter claims of DMRC. DMRC had invited bids for commercial development of space at Tis Hazari Metro Station. PDL emerged as the successful bidder and the parties entered into a Concession Agreement on 25.02.2005 under which PDL was granted the property for 12 years along with a 6 months moratorium commencing 16.03.2005. PDL sub-licensed the space to M/s Spencer's Retail Limited (“Spencer”) by way of agreement dated 20.02.2006 at the rate of Rs. 13,40,006/month with periodic escalation. However, prior to sub-licensing the space, Spencer required a Health Trade License (“HTL”) and therefore applied for issuance of HTL to Municipal Corporation of Delhi (“MCD”). MCD issued a notice under Section 336, Delhi Municipal Corporation Act, 1957 to DMRC for erecting a building without sanction. Correspondences were exchanged between all the stakeholders and vide letter dated 31.07.2006, MCD rejected Spencer's application for issuance of HTL due to non-submission of sanction plans amongst other reasons. Spencer was directed to close its trade activities failing which it would be liable for prosecution. Subsequently, Spencer terminated the sub-licensee agreement as the required sanctions for the property could not be obtained. Parsvnath requested DMRC to issue a letter stating that Parsvnath had not raised any unauthorised constructions at stations and in any event, it was not required to obtain any prior sanction from MCD. Dispute arose between parties when DMRC raised invoices. After attempts to amicably settle the dispute failed, PDL invoked arbitration vide letter dated 04.04.2011. After the proceedings concluded, the arbitrator vide Award dated 07.06.2017 rejected the claims of PDL and allowed the counter claims of DMRC to the tune of Rs. 70,27,684.69 along with interest @ 6% till realisation. Aggrieved by this, Parsvnath filed the present petition. Contentions The Counsel for Parsvnath argued that the by-laws prevailing at that time required production for documents like sanction plans, completion certificate for obtaining HTL by MCD. These documents could only have been provided by DMRC. The Award is liable to be set aside on the ground that it failed to take into consideration that DMRC had not satisfied the pre-requisite which was crucial for grant of HTL. On the other hand, Counsel for DMRC argued that it had co-operated all along and the failure to obtain HTL could not be attributed to it. When Parsvnath requested DMRC to answer MCD, on the former's insistence DMRC issued a clarificatory letter dated 11.12.2006 indicating that the property did not require any sanction of any plan from local statutory bodies. It was further submitted that the Sub- Licence Agreement was terminated on ground of rejection of Spencer's application for HTL by MCD on 31.07.2006. And the application was rejected on account of non-submission of documents. In view of this chain of events, it was vehemently argued that Parsvnath and Spencer had not been able to properly present the application. Had it not been default on their the HTL could have been easily obtained. Thus, Parsvnath could not be permitted to take advantage of its own inability to file a proper application. Observations The Court observed that the only issue for consideration was whether the view taken by the Arbitral Tribunal that the breach of Concession Agreement was not solely attributable to DMRC was plausible or not. The Court noted that the Tribunal had looked at the letters exchanged between the parties in sufficient detail and concluded that the breach of Concession Agreement was not solely attributable to DMRC. It was pertinent to note that PDL had forwarded the letter received from MCD rejecting the request for HTL after an inordinate delay of over nine months and after Spencer had already terminated the Sub-License Agreement on 06.09.2007. Thus, there were delays on the part of PDL as well. On perusal of the correspondences exchanged between the parties, the Court held that the view taken by the Tribunal was a plausible one. It could be reasonably ...

Delhi High Court Upholds DMRC's Arbitral Award Against Parsvnath Builders Amounting To ₹70 Lakhs

Arpita Pande

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