Article 227 Cannot Be Invoked When Interrogatories & Discoveries Allowed By Tribunal Are Not In Nature Of Fishing Inquiry: Delhi HC

The Delhi High Court has held that the scope of review under Article 227 is extremely narrow; the same cannot be invoked when the interrogatories and discoveries allowed by the tribunal have a co-relation and nexus with the subject matter of the dispute.

The bench of Justice Manoj Jain, while hearing two claim petitions, held that where the seller offered alternate plots in similar projects upon the frustration of the agreement, it cannot refuse to divulge such information regarding the same plot. The interrogatories and discoveries allowed by the party do not fall into the category of fishing inquiry and are related to the subject matter of the dispute.

Factual Overview:

The parties enter into two agreements having identical terms, except one agreement pertained to plot no. 129, and the other pertained to plot No. 130. The petitioner (seller) claimed it had entered into a consortium agreement to develop a township in Uttar Pradesh. The project was to be solely financed by the seller.

The seller was registered as a "Private Developer" by the Ghaziabad Development Authority (GDA) to develop an integrated township. The seller also claimed ownership and possession of most of the land, and the remainder was to be acquired by the GDA and then transferred to the seller. Through the seller, the consortium was developing a township called "ADITYA WORLD CITY" on the project land.

The seller was entitled to carve out plots of different sizes and areas, sell them with or without construction, collect the sale proceeds, and execute the necessary agreements/deeds to transfer plots to prospective buyers. The respondent (buyer) invoked the arbitration, alleging a breach of the terms of the agreement, and filed their Statement of Claim.

The buyer sought either the execution of the transfer deed for the plots in question or the delivery of possession of a similarly situated alternate plot. Alternatively, the buyer prayed that the seller be directed to pay the current market value of a comparable plot, along with compensation and litigation costs.

During the proceedings, the claimant/buyer moved two separate applications under Order XI Rule 1 CPC and Order XI Rules 12 and 14 CPC, which were allowed by the tribunal vide a common order. The buyer sought interrogatories and discovery regarding alternate plots in the area in these applications. The present petition is filed under Article 227, seeking to set aside the order passed by the tribunal.

Submissions:

The petitioner/seller made the following submissions:

• Due to the GDA's inability to acquire the piece of land and transfer it to the seller, the agreement was frustrated as some of the reserved plots fell on this piece of land, and the seller could not offer those plots. The only recourse to the buyer was to seek a refund and interest. However, the seller informed the prospects of similar plots in the projects, but the buyer did not respond. Therefore, the prayers made in the applications exceeded the terms of the agreement, and any discovery/interrogatory directed towards the seller fell outside the purview of arbitration as the agreement.
• The agreement prohibits the buyer from seeking damages, compensation, or other claims. The Arbitral Tribunal cannot exceed the terms of the agreement. By allowing the application, the arbitrator has acted beyond the jurisdiction, constituting a deliberate departure from the contractual terms.
• The tribunal did not have the jurisdiction to allow the prayer for discovery/interrogatory concerning any other plot, as mentioned in Clause 2 of the Agreement. The impugned order was bad in faith, leaving the seller no remedy. Therefore, the petition under Article 227 is maintainable, and the impugned order must be set aside.

The respondent/buyer made the following submissions:

• The seller's conduct from the outset was of a complete lack of willingness and indifference. The possession of the plots was never offered despite the payment being made by the buyer as per the agreement. The seller consistently concealed the project's actual status from the beginning and repeatedly evaded communications addressed to them.
• The seller never communicated regarding the inability to hand over the possession of the plots due to site conditions. Furthermore, the seller did not offer any alternate plots or provide a refund.

Analysis of the Court:

The bench observed the seller put forth a particular case regarding the plots falling on a piece of land not yet acquired by the GDA. The seller communicated the same to the buyer regarding the non-availability of plots due to the pending land acquisition. After that, the seller offered similarly situated plots within the project and invited the buyer to reach out for verification so that the alternate available plots could be handed over accordingly. The seller told the buyer that similarly situated plots within the project are ready to be offered.

The seller cannot invoke Clause 2 of the agreement to claim that the buyer cannot seek information regarding those plots after offering alternative plots within the project. The buyer cannot be restrained from seeking information about the plots the seller offered in the same project. Under Clause 2 of the agreement, the buyer has no right to title concerning other plots.

In the present case, the buyer is not claiming any such rights but is seeking information about the plots, and requesting such information cannot be compared with creating any rights or titles in the plots. Furthermore, until the interrogatories are delivered and answered and the required correspondence or documents are produced, it will not be clear whether the land on which these plots are supposed to exist has been acquired. Once this information is provided, it will clarify how many alternate unsold plots are available in the sector in question.

The bench further observed that the interrogatories and the documents requested for production are neither irrelevant nor unrelated to the subject matter. The interrogatories and discovery appear to be crucial for the dispute adjudication and would contribute to the efficiency of the arbitration process. The buyer was simply seeking the production of information received from GDA regarding the non-allotment of the piece of land.

The request for interrogatories by the claimant does not showcase an approach of fishing inquiry, and the requested interrogatories and discovery have a direct co-relation and nexus with the subject matter. The tribunal is not in juridical error in allowing the applications for interrogatories and discovery, as the seller offered alternative plots at an earlier point in time.

While dismissing the petitions, the bench recorded that if an order cannot be challenged under the provisions of the A&C Act, the jurisdiction under Article 227 cannot be invoked. Nonetheless, the remedy available under Article 227 is not affected by the non-obstante clause in Section 5 of the A&C Act. However, the scope of review is extremely narrow, and the present case did not show any reason for the impugned order to be perverse and for the court to interject in the matter, exercising the power under Article 227.

Case Title: M/s Agarwal Associates (Promoters) Limited v. M/s Sharda Developers

Citation: 2024 LiveLaw (Del) 1123

Case Number: CM(M) 3265/2024 & CM APPL. 49570/2024, CM APPL. 49571/2024; CM(M) 3266/2024 & CM APPL. 49573/2024, CM APPL.49574/2024

Counsel for the Petitioner: Mr. Divyakant Lahoti, Mr. Kartik Lahoti, Mr. Adith Menon, Ms. Vindhya Mehra and Ms. Anushka Awasthi, Advocates.

Counsel for the Respondent: Dr. Amit George, Ms. Roshan Santhalia and Mr. Dushyant Kishan Kaul, Advocates.

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