Arbitral Tribunal Cannot Rewrite the Contract, Award Granting Specific Performance at Six Times Agreed Rate Set Aside, Refund With 9% Interest: Supreme Court in Shreeram Builders v. Upendra Kantilal Thanawala [2026 INSC 1176]

In Shreeram Builders v. Upendra Kantilal Thanawala & Ors. (2026 INSC 1176), the Supreme Court held that the majority arbitral award violated Section 28(3) of the Arbitration and Conciliation Act, 1996 because the two arbitrators "not only construed the express terms of the agreement contrarily but completely supplanted them with new terms" (para 61). A Bench of Justice Sanjay Kumar and Justice Sanjeev Sachdeva upheld the Bombay High Court's judgment dated 05.03.2024 setting aside the award, but, finding that the landowners had themselves failed to refund the consideration under Clause 54, directed refund of all amounts paid with simple interest @ 9% per annum under Article 142 (paras 61–62).

Status: Appeals disposed of; majority award dated 10.12.2011 remains set aside; respondents to refund amounts received with 9% simple interest; deposits in court to be returned to the appellant (para 62).

Headnote: Arbitral Tribunal Cannot Rewrite the Contract

Arbitration and Conciliation Act, 1996 – Sections 28(3), 34 (unamended) and 37 – Patent illegality – Public policy of India – Award rewriting contract terms – Development agreement or agreement to sell – Nomenclature not decisive – Stamp duty – Sequence of contractual obligations – Time as essence – Consideration not determined – Excluded property – Supersession of prior MoU – Alternative relief of damages – Constitution of India, Article 142 – Refund with interest.

Held: (i) The nomenclature of a document or the stamp duty paid on it does not decide its nature; it is the rights and obligations it creates that determine its legal character (para 14).

(ii) Under Gayatri Balasamy, appellate jurisdiction under Section 37 is coterminous with Section 34; since both Section 34 applications were filed before 23.10.2015, the unamended Section 34 applied (para 44).

(iii) Whatever the label of the agreement, it fixed a binding sequence of obligations. The majority award wrongly treated the arbitration as a regular suit for specific performance and ignored that sequence (paras 52–53, 58).

(iv) The consideration remained fluid (FSI at plan sanction, regularised land, basements) and was not fully paid by 01.03.2008, while the conveyance was to follow only full payment; directing conveyance, including part of the excluded bungalow property, was contrary to the agreement (paras 54–58).

(v) Adjusting payments under the superseded MoU, fixing a new rate of six times the agreed ₹915 per sq. ft. without reasoning, and awarding damages in the alternative were beyond the contract and opposed to public policy (paras 59–60).

(vi) Since the landowners terminated the agreement but kept the money despite Clause 54, the Court under Article 142 directed refund with 9% simple interest from each payment (para 62).

(paras 14–62)

Case Details: Shreeram Builders v. Upendra Kantilal Thanawala (2026 INSC 1176)

Final Outcome: Appeals disposed of; High Court's setting aside of the majority award upheld; respondents directed under Article 142 to refund all amounts received under the agreement with simple interest @ 9% per annum from each payment till refund; appellant's deposits in court to be returned with accrued interest; parties to bear own costs.

Case: Shreeram Builders v. Upendra Kantilal Thanawala & Ors.

Neutral Citation: 2026 INSC 1176

Case No.: Civil Appeal Nos. 9817–9818 of 2024

Court: Supreme Court of India (Civil Appellate Jurisdiction) – Reportable

Date of Decision: 29 October 2026

Bench: Justice Sanjay Kumar (author) and Justice Sanjeev Sachdeva

Relevant Acts & Sections: Arbitration and Conciliation Act, 1996 – Sections 28(3), 33(4), 34 (unamended) and 37; Constitution of India – Article 142

Impugned Order: Bombay High Court judgment dated 05.03.2024 allowing the respondents' Arbitration Appeal (ST.) No. 93127 of 2020 and disposing of the appellant's Arbitration Appeal (ST.) No. 5662 of 2020 (para 6)

Source: Supreme Court of India (official website)

Key Holdings of the Supreme Court

• A document's title and the stamp duty paid do not decide whether it is a development agreement or an agreement to sell; its contents do (para 14).
• The appellate court under Section 37 can test the award afresh on the anvil of Section 34, even after the Section 34 court upheld it (para 44).
• The majority award ignored the agreed sequence of obligations and dealt with the dispute as a regular specific performance suit (paras 52–53, 58).
• Waiver of delay for six accepted instalments did not wipe out the stipulation that time was of the essence (para 56).
• Arbitrators cannot substitute a new price, adjust payments under a superseded MoU, include excluded property, or grant alternative damages the contract never contemplated (paras 58–60).
• The award violated Section 28(3); the High Court rightly set it aside (para 61).
• Landowners who terminated the agreement but kept the money must refund it with 9% simple interest (para 62).

Brief Facts of the Case

By an "Agreement for Development" dated 06.08.2003, five members of the Thanawala family (the respondents) agreed with Shreeram Builders and its partners in respect of their undivided 2/9th share in about 16,414 sq. yards of land at Village Panchpakhadi, Thane, excluding a bungalow, its garden and a chawl room. The price was ₹915 per sq. ft. of FSI, estimated at ₹2,28,75,000 for 25,000 sq. ft., subject to change at plan sanction (paras 2, 8, 15–17).

₹55 lakh was paid as earnest money and the balance was payable in ten instalments, the last by 01.03.2008. Six instalments were paid late and accepted; cheques for later instalments were returned, and the respondents terminated the agreement by notice dated 09.04.2008 (paras 18–19, 54–55).

A majority arbitral award dated 10.12.2011 held the termination illegal and granted specific performance on deposit of ₹10,91,30,164, computed at six times the agreed rate, with alternative damages of ₹23,21,19,892. The dissenting arbitrator dismissed the claim (paras 3, 38–39).

The Principal District Judge, Thane, upheld the award under Section 34, but the Bombay High Court set it aside under Section 37 on 05.03.2024. The builder appealed (paras 5–6, 40–43).

Issues Before the Supreme Court

1. Whether the agreement's title and the 1% stamp duty paid were sufficient to treat it as a mere development agreement (paras 13–14).
2. Whether the majority award, which granted specific performance at a new rate, was contrary to the terms of the contract and Section 28(3) of the Act (paras 52–61).
3. What relief should follow when the award fails but the landowners retain the consideration (para 62).

Court's Findings and Reasoning

Nomenclature not decisive (para 14): Relying on Sasan Power, the Court held that the rights and obligations under an agreement determine its character; parties may label a document to escape higher stamp duty, so the High Court should not have relied on the 1% stamp duty.

Scope under Sections 34 and 37 (paras 44–50): Section 37 jurisdiction is coterminous with Section 34 (Gayatri Balasamy). The unamended Section 34 applied, and an award against the terms of the contract or not a plausible view is patently illegal.

A complex hybrid agreement (paras 51–52): The agreement did not give the landowners any share in built-up area; they were only to be paid on FSI. But whatever its label, it fixed the order in which the parties were to perform their obligations, and that order was binding.

Award treated arbitration as a specific performance suit (paras 53–58): Payments were late and not completed by 01.03.2008; the consideration remained open to change; conveyance was to follow only full payment; and the award even brought part of the excluded bungalow property into the conveyance, though co-owners of the remaining 7/9th share were not parties.

Time remained of the essence (para 56): Failure to issue a Clause 7 notice cured the delay in the six accepted instalments, but did not wipe out the time stipulations.

New terms imposed (paras 59–61): The award adjusted ₹13,18,334 paid under the superseded 2002 MoU and ₹26,222 paid to a finance corporation, adopted six times the agreed rate without computation or reasons, and awarded alternative damages that the contract did not provide for, contrary to public policy.

Refund under Article 142 (para 62): Clause 54 required the respondents to refund the consideration on termination where no construction had been made on their share. Having kept the money since 2008, they were directed to repay it with 9% simple interest.

Final Outcome and Directions

• The appeals were disposed of; the majority award stays set aside (paras 61–62).
• The respondents must refund all amounts paid under the agreement with simple interest @ 9% per annum from the date of each payment till actual refund (para 62).
• The appellant's amounts in deposit with the courts are to be returned with accrued interest, if any (para 62).
• Parties to bear their own costs.

Legal Principle Laid Down

An arbitral tribunal must decide in accordance with the terms of the contract under Section 28(3). Where a contract fixes the sequence and conditions of performance and the price mechanism, the tribunal cannot treat the dispute as an ordinary specific performance suit, fix a new price, include excluded property, adjust payments under superseded agreements, or grant reliefs not contemplated by the contract; such an award is patently illegal and opposed to public policy even under the unamended Section 34 (paras 52–61).

Precedents Relied Upon

• Gayatri Balasamy v. ISG Novasoft Technologies Ltd., (2025) 7 SCC 1 – Relied upon – Section 37 jurisdiction is coterminous with Section 34 (para 44).
• Ssangyong Engineering & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 – Relied upon – amended Section 34 applies only to applications filed on or after 23.10.2015; award creating a new contract breaches fundamental justice (paras 44, 50).
• ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705 and Renusagar Power Co. Ltd. v. General Electric Co., (1994) Supp 1 SCC 644 – Relied upon – public policy and patent illegality (para 45).
• Associate Builders v. DDA, (2015) 3 SCC 49 and UHL Power Co. Ltd. v. State of H.P., (2022) 4 SCC 11 – Considered – a plausible interpretation by the arbitrator is not interfered with (para 49).
• OPG Power Generation Pvt. Ltd. v. Enexio Power Cooling Solutions, (2025) 2 SCC 417 and SEAMEC Ltd. v. Oil India Ltd., (2020) 5 SCC 164 – Relied upon – award against contract terms or not a plausible view is patently illegal (para 50).
• Sasan Power Ltd. v. North American Coal Corporation (India) Ltd., (2016) 10 SCC 813 – Relied upon – rights and obligations, not the name, decide a document's character (para 14).
• Basant Singh v. Janki Singh, AIR 1967 SC 341 – Referred – admissions in other proceedings can be considered (para 42).

Important Paragraphs of the Judgment

Selected paragraphs reproduced verbatim from the judgment. For the full text, refer to the judgment PDF below.

Para 14: "The settled legal position is that the nomenclature of a document would not be decisive as to its nature."

Para 53: "The fundamental error writ large in the majority award is that it dealt with the matter as if it was a regular suit for specific performance of an agreement to sell and not as an arbitration arising out of a contract that visited obligations upon the parties thereto with a binding sequence as to how they were to perform their respective parts."

Para 56: "The failure on the part of the respondents to issue a notice under Clause 7, therefore, had the effect of curing the delay in the payment of those six instalments which were accepted by the respondents without protest. However, it did not mean that either the time stipulations or the oft-repeated insistence in the agreement that time shall be the essence thereof stood wiped out."

Para 58: "Even if the award, on the analysis undertaken, proceeded on the premise that the subject agreement was an agreement to sell and was not just for development, it was not for the two learned arbitrators to rewrite its terms."

Para 61: "Thus, the two learned arbitrators not only construed the express terms of the agreement contrarily but completely supplanted them with new terms, as per their own fancies."

Para 62: "It was not open to them to retain the said amount when they wished to retract from the agreement."

Practical Impact of the Ruling

• For arbitral tribunals: Interpret and enforce the contract as written; do not re-price the bargain or grant reliefs the contract does not provide (paras 58–61).
• For developers and landowners: Payment schedules, conditions precedent to conveyance and excluded areas in development agreements will be enforced in their agreed sequence (paras 52–58).
• For drafting: Labelling a document a "development agreement" to save stamp duty does not settle its legal character (para 14).
• For parties terminating contracts: A party that terminates and invokes the contract must also honour its refund obligations; retained money can attract interest (para 62).
• For courts under Sections 34 and 37: Pre-23.10.2015 applications are tested under the unamended Section 34, including the broader public policy grounds (paras 44–48).

FAQs on Arbitral Awards Rewriting Contracts

1. What did the Supreme Court decide in Shreeram Builders v. Upendra Kantilal Thanawala?

It upheld the setting aside of a majority arbitral award that granted specific performance on new terms, holding it violated Section 28(3), and directed the landowners to refund the money received with 9% simple interest (paras 61–62).

2. Was the 2003 agreement a development agreement or an agreement to sell?

The Court found it a complex document with features of both, but held it unnecessary to label it, because its terms fixed a binding sequence of obligations that the award ignored (paras 51–52, 61).

3. Why was the award held to rewrite the contract?

It ignored that conveyance was conditional on full payment of a still-undetermined price, fixed a new rate of six times ₹915 per sq. ft. without reasons, included excluded property, adjusted payments under a superseded MoU and awarded alternative damages (paras 57–60).

4. Did accepting late instalments mean time was no longer of the essence?

No. Not issuing a Clause 7 notice cured the delay in those six instalments only; the time stipulations remained (para 56).

5. Why did the Court order a refund with interest?

Under Clause 54 the landowners had to return the consideration on termination where no construction was made on their share; having kept it since 2008, they were directed under Article 142 to repay it with 9% simple interest (para 62).

Keywords: 2026 INSC 1176, Shreeram Builders v. Upendra Kantilal Thanawala, Section 28(3) Arbitration Act, arbitral tribunal cannot rewrite contract, patent illegality, unamended Section 34, Section 37 appeal, development agreement vs agreement to sell, specific performance in arbitration, Article 142 refund with interest, Justice Sanjay Kumar, Supreme Court reportable judgment

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Download Judgment PDF – Shreeram Builders v. Upendra Kantilal Thanawala

Judgment PDF: 2026 INSC 1176 – Shreeram Builders v. Upendra Kantilal Thanawala & Ors. (Civil Appeal Nos. 9817–9818 of 2024) – Download Judgment PDF

Source: Supreme Court of India (official website).