Punjab and Haryana High Court Sets Aside ₹5.18 Crore Arbitral Award Against Aditya Birla Fashion

The Punjab and Haryana High Court has set aside a Rs. 5.18 crore arbitral award passed in favour of landlord Dayanand and against Aditya Birla Fashion and Retail Limited in a dispute arising from a 2018 warehouse fire, holding that the award was contrary to the express terms of the lease deed and suffered from patent illegality.

“By awarding sum to compensate the losses arising from under valuation of the property, for the purposes of insurance, the Arbitrator has virtually re-written the contract, which is not permissible. This aspect has been completely omitted from consideration by the Arbitrator even though the appellant had specifically asserted that securing the leased-out premise against the incident of fire by way of insurance was the exclusive obligation of the claimant.” a Division Bench of Justice Ashwani Kumar Mishra and Justice Rohit Kapoor held.

The dispute concerned a fire that broke out on October 16, 2018, at a warehouse in Gurugram leased by Aditya Birla from Dayanand under a nine-year lease deed dated April 20, 2016.

Clause 13 of the lease required the landlord to insure the entire building and equipment against fire and other perils. The tenant was required to insure only its goods.

After the fire, the landlord's insurer assessed the loss. The surveyor concluded that the fire was caused by an electrical short circuit and was not intentional. The insurer paid Rs. 2,52,39,404 in full and final settlement. The landlord accepted the amount and executed a discharge voucher.

Arbitration was later invoked. On December 23, 2023, the arbitrator awarded Rs. 5,18,59,474 to the landlord. This included Rs. 2,47,75,446 towards damage to the premises and Rs. 2,60,46,520 towards loss of rent from October 2019 to August 2021. The arbitrator held that the fire was caused by the tenant's negligence and that the tenant was not entitled to terminate the lease.

The Exclusive Commercial Court at Gurugram dismissed the tenant's objections on August 28, 2025.

Allowing the appeal under Section 37 of the Arbitration and Conciliation Act, 1996, the High Court held that the Arbitrator ignored the allocation of responsibility under the contract. It noted that reports of the Police, Fire Department and the insurer's surveyor recorded that the fire was accidental and caused by short circuit. These findings were accepted by the landlord while settling the insurance claim.

The court observed that the premises were under-insured. It held that any shortfall arising from under-valuation for insurance purposes had to fall on the landlord under the lease.

The bench further noted that the damages awarded were not supported by proof of actual expenditure beyond what was assessed by the insurer. Reliance on valuation material and a Chartered Accountant's certificate was insufficient.

Holding that the award was contrary to the contract and suffered from patent illegality, the High Court set aside both the arbitral award dated December 23, 2023, and the Commercial Court's order affirming it.

For Appellant (Aditya Birla Fashion and Retail Limited): Senior Advocates Aashish Chopra assisted by Advocates Vijender Parmar, Rupa Pathania and Yash Pal Sharma. 

For Respondent (Dayanand):Senior Advocate Sumeet Mahajan assisted by Advocates Saksham Mahajan, Shrey Sachdeva and Radhika Dekshay