Withdrawn Claim Cannot Be Revived In Arbitration: Delhi HC Upholds Setting Aside Of Award Against Omaxe

The Delhi High Court has upheld an order setting aside an arbitral award that granted buyers of a commercial unit about ₹1.05 lakh per month as assured returns from Omaxe Limited, after finding that the arbitrator had granted relief on a claim that was no longer part of the arbitration.

Explaining why, a Division Bench of Justices V. Kameswar Rao and Vinod Kumar held that the arbitrator “erred in awarding the AMR as compensation as it was beyond his jurisdiction,” noting that once the claim was withdrawn, “it goes out of the hands of the Arbitrator” and cannot be reintroduced in arbitral proceedings.

The case involved buyers of a commercial unit in a mall project developed by Omaxe Limited in Amritsar, who were later referred to as allottees in the proceedings.

The buyers had paid about ₹80.40 lakh in 2007 for the unit. Under a separate addendum, Omaxe had agreed to pay them a fixed monthly return of Rs 1,05,788.80 until possession was handed over.

However, the project was delayed due to objections from the Archaeological Survey of India. Construction resumed only in 2012, and possession was offered in 2015. The allottees claimed that Omaxe stopped paying the assured monthly returns from 2010 and delayed handing over the unit.

They initiated arbitration against Omaxe, seeking possession, compensation for delay, and payment of the pending monthly returns.

During the proceedings, however, the allottees withdrew their claim for the assured monthly returns in 2018, after it was pointed out that this claim arose from the addendum, which did not contain an arbitration clause. They chose to pursue this claim separately before another forum and later approached the National Company Law Tribunal in 2019.

Despite this, the arbitrator in 2019 directed Omaxe to hand over possession and awarded compensation by effectively granting the benefit of the monthly returns along with 10% interest on unpaid amounts.

Omaxe challenged the award before the High Court. The Single Judge upheld the direction to hand over possession but set aside the portion granting relief based on the monthly returns and the interest on them, holding that the arbitrator had no jurisdiction once the claim had been withdrawn.

The allottees appealed, arguing that the claim had been brought back during the proceedings and that the arbitrator was empowered to award compensation. Omaxe argued that once the claim was withdrawn, it could not be revived.

The Division Bench agreed with Omaxe. It noted that both parties accepted that the addendum providing for assured returns was not part of the arbitration agreement, which led to the withdrawal of the claim.

The court also emphasized that the allottees had pursued the same claim before the National Company Law Tribunal, which “finally put a bar on any type of claim of AMR before the Arbitrator.”

Rejecting the argument that the claim had been revived in later pleadings, the Court reiterated that a withdrawn claim cannot be reintroduced, directly or indirectly.

Emphasizing the limited scope of interference in such appeals, the Court dismissed the case.

As a result, Omaxe must hand over possession of the unit, but it is not liable to pay the claimed monthly returns or the interest on them, while the direction to hand over possession continues to operate.

For Appellants (Parveen Kapoor & Ors.): Senior Advocate Kaadambari Singh, Advocate Shraddha Sharma, Advocate Praveen Kapoor

For Respondent (Omaxe Limited): Senior Advocate Ramesh Singh, Advocate Mukti Bodh, Advocate Subhasish Panda, Advocate Mala Dwivedi, Advocate Nanya Hage, Advocate Pawan Agarwal