Delhi High Court Says Consent Awards Open To Challenge, Upholds Award In Lalit Modi-BDR Builders Dispute

The Delhi High Court on 18 August dismissed Lalit Modi's challenge to a consent award directing specific performance of an agreement to sell his Vasant Vihar property in favour of BDR Builders and Developers Private Limited.

Justice Harish Vaidyanathan Shankar, however, held that a consent arbitral award, though subject to a narrower scope of interference, can be challenged under Section 34 of the Arbitration and Conciliation Act, 1996 to examine whether the settlement was lawful, whether consent was vitiated by fraud, coercion or undue influence, or whether any other statutory ground for setting aside the award was made out. The Bench observed:

“While the scope of interference with an award on agreed terms is undoubtedly narrower than that applicable to an adjudicatory award, there is no statutory embargo under the A&C Act against maintaining a petition under Section 34 merely because the award is a consent award. The distinction lies not in the maintainability of the challenge but in the limited nature of the scrutiny to be undertaken.”

The dispute arose from an Agreement to Sell dated 24 June 2014 between Modi and BDR Builders, following financial assistance extended by BDR Builders to Modi between 2009 and 2012. The agreement concerned an approximately 858-square-yard freehold property at 32, Pashchimi Marg, Vasant Vihar, New Delhi.

Under Clause 13 of the Agreement to Sell, which provided for resolution of disputes through a sole arbitrator, Modi and BDR Builders jointly approached Advocate Naresh Gupta on 5 October 2016. The first hearing took place on 18 October. After the parties filed their pleadings, Modi indicated on 29 October that a settlement might be possible.

On 14 November 2016, both sides informed the arbitrator that they had settled the dispute. As part of the settlement, BDR Builders gave up its Rs. 5 crore claim towards expenses and compensation.

Of the remaining Rs. 1 crore sale consideration, Rs. 12.80 lakh was adjusted towards tax deducted at source and Rs. 87.20 lakh towards licence fee permitting Modi to remain in the property until 31 March 2017. Modi agreed to specific performance of the sale agreement and to hand over vacant possession by that date.

The arbitrator consequently passed a consent award on 21 November 2016, incorporating the settlement and directing specific performance in favour of BDR Builders. On the same day, Modi and BDR Builders director Rajesh Gupta signed a separate “Acceptance”, acknowledging the award in full, recording that no further claims remained and undertaking not to challenge it.

At the parties' request, the award was engrossed on non-judicial stamp paper on 12 January 2017 for registration. The Court held that this neither altered the substantive terms of the award nor created a fresh award, but was merely consequential and ministerial.

Modi subsequently approached the Delhi High Court under Section 34 of the Arbitration and Conciliation Act, 1996, seeking to set aside the engrossed award. BDR Builders, meanwhile, filed a connected execution petition under Section 36 seeking enforcement of the 21 November 2016 award.

He alleged fraud and collusion and questioned the arbitrator's independence and impartiality, relying on his earlier professional services for BDR Builders and its directors. He also argued that changes were made after the 21 November award, when the arbitrator had become functus officio, meaning that his mandate had ended.

BDR Builders maintained that the award merely recorded a voluntary settlement signed by both parties, that the 12 January 2017 engrossment was only for registration and that the parties had jointly chosen the arbitrator with full knowledge of his earlier professional engagements.

The Delhi High Court on 18 August held that a consent arbitral award, though subject to a narrower scope of interference, can be challenged under Section 34 of the Arbitration and Conciliation Act, 1996 to examine whether the settlement was lawful, whether consent was vitiated by fraud, coercion or undue influence, or whether any other statutory ground for setting aside the award was made out.

Justice Harish Vaidyanathan Shankar, however, dismissed Lalit Modi's challenge to a consent award directing specific performance of an agreement to sell his Vasant Vihar property in favour of BDR Builders and Developers Private Limited. The Bench observed:

“To disregard this legislative benchmark and hold that every professional engagement, irrespective of its remoteness in time, is sufficient to establish justifiable doubts would render the statutory limitation otiose and defeat the legislative scheme."

Further, it held that Modi failed to establish any Seventh Schedule disqualification or circumstances raising justifiable doubts about the arbitrator's independence or impartiality. It noted that such findings cannot rest on unproved or doubtful material. It observed:

“Proceedings under Section 12 or Section 34 of the A&C Act are not intended to permit findings founded upon unproved or doubtful material, particularly where allegations affecting the integrity of an arbitrator are involved.”

Accordingly, the High Court dismissed Modi's Section 34 petition, holding that no statutory ground for setting aside the consent award had been made out, and permitted BDR Builders' execution petition to proceed for enforcement of the 21 November 2016 award.

The matter will be listed before the roster Bench on 28 October 2026.

Appearances for petitioner (Lalit Modi): Senior Advocate Inderbir Singh Alagh, with Advocates Tushar Parashar, Amit Pandey and Bhanu Pratap Singh Phore.

Appearances for respondent (BDR Builders and Developers Private Limited): Advocates Prashant Mehta, Diksha Goswami, Prachi Kohli, Nitin Bajaj and Niharika Tiwari.