DDA Has No Obligation To Provide Infrastructure Before Full Payment On Plots Sold On 'As Is Where Is Basis: Delhi High Court

The Delhi High Court bench of Justice Jasmeet Singh observed that where DDA has sold plots to buyers on “as is where is basis”, the buyer cannot refuse to pay the balance sale consideration on the ground that DDA did not provide the requisite civic amenities. In such a situation, DDA has no obligation to provide the facilities as a pre-requisite to full payment. Facts The Petitioner i.e. M/s Sunlight Project Pvt Ltd (“Sunlight”) filed the present petition under Section 34, Arbitration and Conciliation Act seeking to set aside the arbitral award dated 14.09.2020 passed in favour of the Respondent i.e. Delhi Development Authority (“DDA”) wherein the Sole Arbitrator rejected all the claims of Sunlight. DDA advertised for open auction of plots located at Sector 20, Dwarka, New Delhi including a commercial plot. Sunlight emerged as the successful bidder with its bid amount being Rs. 17.51 crores for the commercial plot. After depositing the earnest money, Sunlight sought multiple extensions to furnish the balance amount, the final extension being till 28.01.2008. It was Sunlight's case that it had written to DDA on various occasions to provide infrastructural amenities/facilities like water connection so that Sunlight could use the plot. When DDA did not heed to Sunlight's requests, it filed a Writ Petition before this Court which was dismissed vide judgment dated 06.01.2017 as it involved disputed question of fact which could not be entertained in writ jurisdiction. Appeal against this judgment was also dismissed with liberty to Sunlight to invoke appropriate civil proceedings. Accordingly, Sunlight invoked arbitration proceedings. After hearing both the parties and considering all the material on record, the Sole Arbitrator vide Award dated 14.09.202 rejected all the claims of Sunlight. Aggrieved by the Award, Sunlight filed the present petition. Contentions The Counsel for Sunlight argued that the Award is patently illegal and against the public policy of India and therefore liable to be set aside. It was contended that the Sole Arbitrator's observation that Sunlight had not written to DDA informing the latter that the forfeiture of earnest money was unreasonable was untenable in law. It is a settled position of law that to assess the reasonableness of forfeiture of earnest money, the Sole Arbitrator had to make an independent assessment whether DDA has suffered any actual loss or not, as is provided in Sections 73 and 74 of Indian Contract Act. On the other hand, the Counsel for DDA submitted that the present petition ought to be dismissed as Sunlight had failed to bring out any patent illegality in the Award. It was contended that the justifiability of forfeiture of earnest money was not an issue in dispute and only the reasonableness of forfeiture was required to be adjudicated by the Sole Arbitrator. Additionally, Sunlight had admitted default in making balance payment and the fact of cancellation and forfeiture was also admitted before the Sole Arbitrator. Lastly, loss and prejudice caused to the general public by delay in construction of the plot caused loss which could not be quantified and the onus was on Sunlight to prove that the forfeiture was in the nature of penalty. Since Sunlight failed to prove the same, the Sole Arbitrator correctly rejected its claims. Observations The Court analysed the reasons given by the Sole Arbitrator for rejecting the claims of Sunlight. They were as follows – a) Sunlight's failure that there was an understanding between the parties that DDA was required to provide civic amenities before it could claim the balance bid amount, b) Non-payment of balance consideration was in actuality due to lack of funds, c) the issue was decided by this Court in writ petition and therefore could not be reagitated, d) Sunlight never challenged the forfeiture earlier, e) the burden of proof was on Sunlight to establish its assertions, f) no reliable data provided that DDA would earn more on re-sale, g) quantum of loss suffered by public authorities in such cases is difficult to prove and for this very reason forfeiture clause is included as a genuine pre-estimate of loss. The Court observed that based on the correspondences exchanged between the parties, the Sole Arbitrator had made a factual finding that the balance consideration was not paid because of insufficiency of funds and not non-availability of civic amenities. In fact, this fact was already adjudicated by this Court in the writ petition, and hence the same could not be re-agitated. The Court highlighted that the Sole Arbitrator had observed that as per the General terms and Conditions of the Auction, the plot was auctioned on “as is where is basis”. Sunlight was bound by these terms and was expected to know of the infrastructural facilities on the subject plot before bidding for it. The reliance on...

DDA Has No Obligation To Provide Infrastructure Before Full Payment On Plots Sold On 'As Is Where Is Basis: Delhi High Court

Arpita Pande

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