HIMLAND REAL ESTATE PVT. LTD.  Vs OMAXE LTD. -Judgment by Delhi High Court

$~64
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 26.04.2022
+ O.M.P. (COMM) 204/2022 and IA Nos. 6350/2022 & 6351/2022
HIMLAND REAL ESTATE PVT. LTD. ….. Petitioner
Through: Mr Gaurav Puri, Mr Sarthak Gupta,
Ms Yashika Verma, Mr Shashank Mishra, Advocates.
versus

OMAXE LTD. ….. Respondent
Through:

CORAM:
HON’BLE MR. JUSTICE VIBHU BAKHRU

VIBHU BAKHRU, J. (ORAL)
1. The petitioner (hereinafter �HREPL�) has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter the �A&C Act�) impugning an Arbitral Award (hereinafter the �impugned award�) dated 03.12.2021 delivered by the Arbitral Tribunal comprising of Justice (Retd.) K. Ramamoorthy as the Sole Arbitrator (hereinafter the �Arbitral Tribunal�).
2. The impugned award was rendered in the context of disputes that have arisen in connection with the Memorandum of Understanding dated 04.03.2006 (hereafter the �MOU�) entered into by the parties to develop a residential township project in the Revenue Village of Jhar Mazri, Tehsil Nalagarh, District Solan, Himachal Pradesh (hereafter the �Project�).
3. On 29.10.2005, HREPL and the respondent (hereafter �Omaxe�) entered into a Memorandum of Understanding for the development of a residential township project on a land admeasuring 270 bighas. Thereafter, on 14.02.2006, the aforesaid Memorandum of Understanding was terminated by HREPL, however, by its letter dated 04.03.2006, HREPL withdrew its notice of termination. And, on the same day, that is, on 04.03.2006, the parties entered into the MOU for executing the Project.
4. HREPL avers that on 10.05.2006, after obtaining the No Objection Certificates (NOCs) from the various departments of the Government of Himachal Pradesh, it was granted permission by the Revenue Department, Government of Himachal Pradesh to purchase land admeasuring 151.05 bighas situated at revenue estate of Jhar Mazri, Tehsil Nalagarh, District Solan for the Project. It is stated that in between the months of May, 2006 to January, 2007, HREPL purchased the said land.
5. On 07.06.2006, HREPL issued a legal notice alleging that Omaxe had violated the terms of the MOU as it failed to pay the entire expenses for obtaining the requisite permissions and sanctions for development of the Project. It further stated that in the event the payments as demanded were not made, HREPL would forfeit the security deposit furnished by Omaxe. Omaxe responded by a notice dated 22.06.2006 and denied the allegations made by HREPL in the said notice. It alleged that HREPL had not provided title documents for the entire land, which was proposed to be developed.
6. On 03.07.2006, HREPL replied to the legal notice dated 22.06.2006, issued by Omaxe and stated that it had fulfilled all its obligations under the MOU and further, submitted a list of the NOCs received by it at its own expense.
7. By a legal notice dated 21.04.2007, Omaxe unilaterally terminated the MOU alleging failure on the part of HREPL in fulfilling its obligations under the MOU. This was followed by another notice dated 21.09.2007 issued by Omaxe invoking the Arbitration Clause as contained in Clause 35 of the MOU.
8. Before the Arbitral Tribunal, Omaxe raised a total of five claims: (i) a sum of ?2,00,00,000/- on account of refund of security deposit (Claim No.1); (ii) a sum of ?1,37,68,750/- as interest on security deposit (Claim No.2); (iii) a sum of ?17,86,00,000/- as compensation for the losses and damages on account of the loss of profit per cost (Claim No.3); (iv) a sum of ?50,00,000/- on account of expenses incurred on manpower and resources (Claim No.4); and, (v) a sum of ?2,00,00,000/- on account of loss in goodwill and reputation (Claim No.5). HREPL raised counter-claims aggregating a sum of ?8,68,37,688/-. The respondents� counter claims were premised on the basis of the value of 151.5 bighas of land and the amount spent by it on development of the site and the amount paid to various government authorities.
9. By the impugned award, the Arbitral Tribunal partially allowed the claims preferred by Omaxe. The Arbitral Tribunal awarded a sum of ?2,00,00,000/- (Claim no. 1) along with interest at the rate of 18% per annum till the date of the award and future interest at the rate of 15% per annum from the date of the award till the date of payment, in favour of Omaxe. The Arbitral Tribunal also awarded costs quantified at ?7,00,000/-. The counter-claims raised by HREPL were rejected.
10. Thereafter, by an order dated 25.03.2022 passed by the Principal Secretary (Revenue) to the Government of Himachal Pradesh, the land admeasuring 151.05 bighas stood vested in the Government of Himachal Pradesh under Section 118 of the Himachal Pradesh Tenancy and Land Reforms Act, 1972. HREPL claims that it was due to the default on the part of Omaxe as it failed to put the said land to use prior to the stipulated deadline, prescribed under Section 118 of the Himachal Pradesh Tenancy and Land Reforms Act, 1972.
11. Aggrieved by the impugned award, HREPL has filed the present petition.
12. Mr Puri, learned counsel appearing for HREPL, contended that the Arbitral Tribunal had grossly erred in allowing the claims made by Omaxe. He stated that it was clear from the material on record that Omaxe had breached the terms of the MOU. And, the Arbitral Tribunal�s view that HREPL had breached the MOU, is wholly perverse and unsustainable.
13. He submitted that the impugned award is vitiated on the ground of patent illegality. He referred to Clause 8 of the MOU and submitted that in terms of the said clause, Omaxe agreed that it would bear all expenses in getting the required permissions, sanctions and clearances for development of the Project. It also agreed to reimburse all expenses, which were incurred by HREPL for development of the said land. He submitted that Omaxe had failed to establish that it had paid the necessary expenses and therefore, it was apparent that it was in breach of the MOU.
Reasons and Conclusion
14. At the outset, it is necessary to note that the impugned award rests on the finding that HREPL had breached the essential terms of the MOU inasmuch as, it had not made any attempt to obtain the lease deed from the Himachal Pradesh Government, without which promoting and developing a housing colony was impossible.
15. A plain reading of the MOU indicates that HREPL represented that it had purchased approximately 151.5 bighas of land falling in the Revenue Village of Jhar Mazri, Tehsil Nalagarh, District Solan, Himachal Pradesh. The land was referred to in the MOU as �the Said Land�. HREPL further represented that the �Said Land� did not have complete connectivity and therefore, it applied to the Himachal Pradesh Government for granting long term leasehold rights in respect of land, measuring approximately 235 bighas, situated at Village Jhar Mazri, Tehsil Nalagarh and District Solan, which connected and encompassed the Said Land. The said 235 bighas of land belonging to the State Government was referred to as �the Govt. Land� in the MOU.
16. The recitals under the MOU indicates that HREPL was planning to develop a residential township project on the Said Land along with Govt. Land and collectively, they were referred to as �the Total Land�. The Project was, thus, to be developed on land measuring 386.5 bighas approximately [151.5 bighas claimed to have been purchased by HREPL plus 235 bighas of Govt. Land]. It had, in the aforesaid context, approached Omaxe to participate in the Project. HREPL agreed to contribute the Said Land for the Project and Omaxe agreed to develop the Project on �the Total Land� (being �the Said Land� along with �the Govt. Land�). Recitals C, D, E and G of the MOU are relevant and set out below:
�C. The First Party has represented that it has Purchased approx. 151.5 Bighas of land vide fully paid agreements to sell in its favour executed by respective land owner(s) and has taken over actual physical possession of the land (1 Bigha = 900 sq. yds or 752.50 sq. mts.) having a clear frontage of 200 ft. abutting the Main Road coming from the side of Phase-l Industrial Area and falling in the revenue Village of Jhar Mazri, Tehsil Nalagarh and District Solan (H.P.) (hereinafter referred to as the �said Land�). The copy of the Sajra Plan showing the said Land In Orange colour and details of the sold Land is annexed hereto as Annexure-A.
D. The First Party is planning to develop a residential township project on the said Land measuring approx. 151.5 bighas and has applied for grant of necessary permissions, sanctions and approvals from the concerned authorities.
E. The First Party has also represented that the said Land does not have total connectivity with each other and as such, the First Party has applied to the Govt. for grant of long term lease hold rights of land measuring 235 Bighas approx. situated at Village Jhar Mazri, Tehsil Nalagarh and District Solan (H.P.) which connects and encompasses the above Said Land. The said 235 Bighas of land belongs to the State Government (hereinafter referred to as the �Govt. Land�). The lease as and when granted shall be in the name of the First Party at the entire cost and expenses of the First Party. The Sajra Plan depicts/shows the Govt. Land in Green colour and details of the Govt. Land is annexed hereto as Annexure-B.
G. The First Party is planning to develop a Residential Township Project on the said land along with the said Govt. land (hereinafter jointly referred to as the �Total Land�) and has approached the Second Party to participate in the said Project for its grand success and has agreed to contribute the Said Land for the said Township Project. The Second Party has accepted the offer and agreed to develop the said Total Land after all permissions, sanctions, approvals from the competent authority are procured by the First Party with the help of the Second Party. The First Party shall also obtain necessary permission for extension of the Main Road from Industrial Area, Phase-I and connecting the proposed township project.
17. The terms of the MOU also indicate that HREPL had agreed to take steps for transferring the Govt. Land in the name of Omaxe. And, if HREPL was successful in doing so, it had agreed to give up any claim of leasehold rights in respect of the Govt. Land. However, if the Govt. Land was not transferred in the name of Omaxe, then HREPL would enter into a lease for the Govt. Land and takeover physical possession of the same for the purposes of developing parks, roads, or any other development as permitted by the concerned authorities. Admittedly, HREPL could not acquire the Govt. Land.
18. The Arbitral Tribunal had further examined the material on record as well as the evidence led by the parties and concluded that HREPL had failed to produce any evidence to show that it had taken any effective steps in this regard after receiving a sum of ?2 crores from Omaxe, as security deposit.
19. In view of the above, the Arbitral Tribunal accepted Omaxe�s claim for refund of security deposit of ?2 crores along with interest at the rate of 18% per annum quantified at ?5,25,00,000/-. In addition, the Arbitral Tribunal also awarded future interest at the rate of 15% per annum on the awarded amount from the date of the award. The Arbitral Tribunal did not accept Omaxe�s claim for loss of profits; expenditure incurred; and loss of goodwill. The Arbitral Tribunal was of the view that Omaxe had not made any substantial investment in the Project and therefore, a claim for such damages was impermissible.
20. This Court is unable to accept that the finding of the Arbitral Tribunal to the effect that HREPL was in breach of its obligations under the MOU, is erroneous. In any view of the matter, the said decision cannot be stated to be patently illegal. It is well settled that this Court does not sit as a court of appeal to re-examine the disputes between the parties. The scope of examination under Section 34 of the A&C Act is limited to determining whether the arbitral award falls foul of any of the grounds as set out under Section 34 of the A&C Act. In the present case, the Arbitral Tribunal�s view is clearly a plausible view. Thus, the award cannot be impeached on the grounds of patent illegality or being in conflict with the public policy of India.
21. HREPL also assails the impugned award on the ground that the Arbitral Tribunal has rejected its counter-claims. Clearly, the decision of the Arbitral Tribunal to reject the counter-claims cannot be faulted, in view of its finding, that HREPL was in breach of its contractual obligations.
22. The petition is unmerited and, accordingly, dismissed. All pending applications are also disposed of.

VIBHU BAKHRU, J
APRIL 26, 2022
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O.M.P. (COMM) 204/2022 Page 1 of 1