Court grants permission for arbitration proceedings focused on damages from wrongful termination of development agreement
In a significant ruling, the Bombay High Court has allowed Vardhaman Builders to initiate a fresh round of arbitration proceedings against Narendra Balasaheb Ghatge and others, centered exclusively on claims for damages due to the alleged wrongful termination of a Development Agreement. Justice Sandeep V. Marne presided over the case, issuing the order on May 8, 2026.
The case stems from a Development Agreement dated August 27, 2005, which was terminated by the respondents on July 24, 2006, prompting Vardhaman Builders to pursue arbitration under the agreement's clause. The initial arbitration resulted in an award rejecting the claims for specific performance and damages, which was subsequently set aside by the High Court in a Section 34 petition.
The key issue at hand was whether the claims were time-barred, a matter that the High Court ruled should be decided by the Arbitral Tribunal, not the referral court. The court emphasized that the limitation applicable to filing a Section 11 application differs from the limitation concerning the claims themselves. The application was deemed within the limitation period under Article 137 of the Limitation Act, having been filed within three years of the invocation notice.
The decision also addressed the possibility of parallel proceedings, with the High Court permitting the continuation of fresh arbitral proceedings despite the pending appeal against the initial arbitral award. This aligns with a precedent set by the Supreme Court, which affirmed the High Court's direction on parallel proceedings in similar cases.
Justice Marne's order appoints Mr. Justice M.S. Sanklecha, a former judge of the Bombay High Court, as the sole arbitrator to adjudicate the disputes related to the damages claim. The arbitration will focus solely on damages from the wrongful termination, excluding any claims for specific performance.
The ruling underscores the court's commitment to ensuring the adjudication of claims that have not been conclusively resolved, while leaving substantive issues, including the merit of the damages claim and potential limitations, to be deliberated by the Arbitral Tribunal.
Bottom line:-
Arbitration - Application under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of arbitrator - Fresh arbitration reference restricted to claim for damages arising out of wrongful termination of a Development Agreement allowed, leaving the issue of limitation on claims to be decided by the Arbitral Tribunal.
Statutory provision(s):
Arbitration and Conciliation Act, 1996 Sections 11(6), 21, Limitation Act Article 137.
Vardhaman Builders v. Narendra Balasaheb Ghatge, (Bombay) : Law Finder Doc id # 2894904
