Delhi High Court Orders Omaxe To Refund ₹3.35 Crore After Developer Stopped Assured Returns

The Delhi High Court has upheld an arbitral award directing Omaxe Ltd. to refund ₹3.35 crore to two co-allottees of a commercial unit in Omaxe Novelty Mall at Lawrence Road, Amritsar.

A Division Bench of Justice V. Kameswar Rao and Justice Manmeet Pritam Singh Arora also upheld the interest awarded by the tribunal and ₹25 lakh in costs. It further imposed ₹2 lakh in costs on Omaxe, payable equally to the two co-allottees within two weeks.

The court ruled that Omaxe could not compel the co-allottees to continue with the allotment after it had stopped paying the assured monthly returns. “Having itself discontinued payment of the assured returns, the Appellant forfeited any right to compel the Respondents to continue with the allotment and accept possession,” the court observed.

The dispute concerned a commercial unit in the mall. Joginder Singh Nijjar and another co-allottee were among five persons allotted the unit under an agreement dated May 2, 2008. The two together held a 33.33% share.

Between February 10 and November 26, 2007, ₹10.05 crore, or 95% of the basic sale price, had been paid to Omaxe. Under an addendum dated May 2, 2008, Omaxe agreed to pay assured monthly returns of ₹9.84 lakh until possession was offered. The payments continued until April 30, 2010.

The allotment agreement stipulated a 36-month construction period, which expired on May 1, 2011. Omaxe did not complete the project by that date.

The project had also run into objections from the Archaeological Survey of India (ASI). The ASI said the project fell within the regulated area of the Maharaja Ranjit Singh Summer Palace and directed that construction beyond 15 metres be stopped.

Omaxe later obtained permission on February 22, 2012, to construct up to 24 metres, with an additional two metres for ancillary structures. A completion certificate was issued on July 8, 2015, although it was later cancelled and ultimately restored in 2019.

The co-allottees had already terminated the agreement through a legal notice dated April 18, 2013, seeking a refund with interest and invoking arbitration. The Supreme Court appointed former Supreme Court judge Justice B.S. Chauhan as sole arbitrator on September 17, 2018.

Before the tribunal, Omaxe argued that the ASI restrictions constituted force majeure and that the delay was beyond its control. The tribunal rejected the argument, finding that Omaxe had commenced construction without the mandatory ASI clearance despite being aware of the requirement.

On March 20, 2020, the tribunal awarded ₹3,35,04,650 as the principal refund and ₹4,16,94,674 as interest, taking the total to ₹7,51,99,324. It also awarded future interest at 12% on the total amount and ₹25 lakh in costs.

Omaxe challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, but a Single Judge dismissed the challenge on July 19, 2023. It then approached the Division Bench in appeal.

Before the Division Bench, Omaxe argued that time was not the essence of the contract and that the assured-return arrangement compensated the co-allottees for delay. The court rejected the argument, noting that Omaxe had stopped paying assured returns from May 1, 2010, almost three years before the agreement was terminated.

The court also upheld the tribunal's rejection of the force majeure defence. It observed that Omaxe had entered into the allotment agreement despite knowing that it did not have the requisite ASI clearance.

“In our considered opinion, the said finding of fact returned by the Arbitral Tribunal rejecting the Appellant's submission that the period of suspension of construction from 2008 to 2012 was a force majeure event, is unexceptional and is in conformity with the evidence on record,” the court observed.

The court declined to interfere with the tribunal's award of 14% interest for the relevant pre-award period. The tribunal had considered contractual provisions allowing Omaxe to charge allottees interest between 18% and 24% before fixing the rate at 14%.

The court dismissed Omaxe's appeal and imposed ₹2 lakh in costs, payable equally to the two co-allottees within two weeks.

For Petitioner (Omaxe Ltd.): Senior Advocate Ramesh Singh and Advocates Mukti Bodh, Mala Diwadi and Nanya Hage, with Neha Chaturvedi.

For Respondent (Joginder Singh Nijjar & Anr.): Advocates Shobhana Takiar, Shivam Takiar, Prateek Dhir and Kuljeet Singh.