Failure To Deny Pleadings, No Cross-Examination: Delhi High Court Upholds Arbitral Award Against Proto Developers

The Delhi High Court has upheld an arbitral award directing Proto Developers and Technologies Ltd. to pay over Rs 12 crore to Antriksh Realtech Pvt. Ltd., holding that where a party fails to specifically deny a claim and does not cross-examine the opposing witness on a crucial issue, the arbitral tribunal is entitled to treat the evidence as unrebutted and the claim as established.

Rejecting Proto Developers' challenge to the Rs 9-crore counterclaim, the Court noted that the tribunal treated the claim of financial assistance as unrebutted since it was neither specifically denied nor tested in cross-examination.

A Division Bench comprising Justices Anil Kshetrapal and Amit Mahajan observed,

“A party that declines to cross-examine a witness on a crucial aspect cannot subsequently contend that the said statement of the witness ought not to be relied upon. In the present case, the absence of a specific denial in the pleadings to the counterclaim and the failure to cross-examine the witness of the Respondent No.1, RW-2, on the issue of financial assistance of Rs. 9 crores entitled the Tribunal to treat that part of the evidence as unrebutted and to draw the corresponding evidentiary inference.”

The dispute arose from a group housing project, “Antriksh Sanskriti," in Ghaziabad, where land owned by a housing society was initially developed in 2006 by Proto Developers' predecessor.

Due to financial constraints, a Collaboration Agreement dated 9 February 2010 inducted Antriksh Realtech as the developer with a majority share and defined the parties' respective obligations.

The agreement capped Antriksh's liability for certain statutory dues at Rs 11 crore.

However, disputes arose when substantial demands were raised by the Ghaziabad Development Authority, leading to repeated sealing of the project site.

Proto Developers claimed that Antriksh was responsible for all such payments, whereas Antriksh asserted that it had paid amounts beyond the cap on behalf of Proto and the housing society and sought reimbursement through counterclaims.

The arbitral tribunal, by award dated 1 July 2023, rejected Proto Developers' claims and partly allowed Antriksh Realtech's counterclaims, including a Rs 9 crore component towards financial assistance, awarding Rs 12,01,01,524 inclusive of interest up to the date of the award, along with future interest at 9% per annum.

A challenge under Section 34 of the Arbitration and Conciliation Act, 1996, was dismissed by a Single Judge of the Delhi High Court on 10 May 2024, following which Proto Developers and Technologies Ltd. filed the present appeal under Section 37.

It argued that the Rs 9 crore finding was unsupported by evidence, based only on oral testimony, that the contract had been misinterpreted and the counterclaims were time-barred.

Rejecting these submissions, the court noted that the challenge was, in essence, directed to the sufficiency and weight of evidence and not a case of complete absence of evidence.

It held that such issues fall within the exclusive domain of the arbitral tribunal and are not open to re-appreciation in proceedings under Sections 34 or 37.

The Court reiterated that once the arbitral tribunal has assessed the evidence, courts exercising jurisdiction under section 37 cannot re-evaluate or reweigh that material.

On contractual interpretation, the Court noted that the tribunal had drawn a distinction between “governmental and statutory liabilities” and “construction costs” and apportioned responsibility accordingly under the Collaboration Agreement, which constituted a plausible view.

On the Rs 9 crore counterclaim, the Court found that Proto Developers had neither specifically denied receipt of the amount nor cross-examined Antriksh Realtech's witness on the issue of financial assistance. It held that this justified the tribunal in treating the claim as unrebutted and drawing an adverse inference.

The Court also upheld the tribunal's finding on limitation, noting that reliance on the Supreme Court's COVID-19 extension orders constituted a plausible approach.

It further found no merit in the contention that the earlier decision was non-speaking, as the Single Judge had considered the contractual framework and applied the correct legal standard.

Finding no patent illegality, perversity, or jurisdictional error, the Court dismissed the appeal and upheld the arbitral award in favour of Antriksh Realtech.

For Petitioner (Proto Developers and Technologies Ltd): Advocates Ashwani Kumar Singh.