NAV SANSAD VIHAR CO OPERATIVE GROUP HOUSING SOCIETY LTD v. HADISO CONSTRUCTION PVT LTD

Delhi High Court · 29 Jul 2026 · 2026:DHC:6130

Avneesh Jhingan

O.M.P. (COMM) 347/2023

2026:DHC:6130

civil petition_allowed Significant

AI Summary

The Delhi High Court set aside an arbitral award for failure to address jurisdictional objections regarding the validity of the contract and authority of signatories, emphasizing the necessity of reasoned awards under the Arbitration Act.

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O.M.P. (COMM) 347/2023
HIGH COURT OF DELHI
Date of Decision: 29.07.2026

O.M.P. (COMM) 347/2023, I.A. 16948/2023, I.A. 22688/2023
NAV SANSAD VIHAR CO OPERATIVE GROUP HOUSING SOCIETY LTD .....Petitioner
Through: Mr. Sandeep Bajaj, Mr. Soayib Qureshi & Mr. Mayank Biyani, Advs.

VERSUS

HADISO CONSTRUCTION PVT LTD .....Respondent
Through: Mr. Moni Cinmoy, Adv. Ms. Kanika Malhotra, Adv. for the impleader.

CORAM:

HON'BLE MR. JUSTICE AVNEESH JHINGAN AVNEESH JHINGAN, J. (ORAL)

JUDGMENT

1. This petition is filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for short „the Act‟) challenging award dated 29.04.2023.

2. With the consent of the parties, this petition is taken up for disposal today.

3. The relevant facts discerned from the record, reveal that the petitioner is a Group Housing Society (hereinafter referred to as „petitioner-society‟). The tender was invited for carrying out the construction work in the society. The respondent was the successful bidder and the work was awarded vide Letter of Award (LOA) dated 16.12.2020, signed by the President and the Secretary of society. 3.[1] Clause no. 12 of the agreement and term no. 29 of the tender document provides for dispute resolution through arbitration. The arbitration was invoked at the instance of the respondent by issuing notice dated 21.02.2022. The arbitrator was appointed by this court vide order dated 26.04.2022. The petitioner-society raised preliminary objections with regard to the validity of the agreement and the jurisdiction of the arbitral tribunal. The relevant portion of the Statement of Defence is reproduced below:

“1. The statement of claim is not maintainable and deserves dismissal particularly due to the fact that the genesis of the dispute i.e. the contract/agreement dated 17/12/2020 between the parties is illegal and bad in law, firstly for being an unregistered document, secondly, no approval for entering into contract was obtained from the GBM of the society and thirdly, it was not signed and executed by a duly authorized and competent person on behalf of the respondent Society, and is a collusive document. 2. The statement of claim also deserves dismissal as the tender accepting authority Mr. M.R. Khan, the then vice- president of the society did not seek prior approval of AGM/GBM for accepting a tender worth Rs. 12,46,42,667.40+GST, as per calculation sheet attached with this reply. The said approval is mandatory as per DCS Act and Rules. Moreover, the then Vice-President Mr. M.R. Khan had already resigned from the Management Committee in the year 2019 itself, and the said fact is duly recorded in the minutes of meeting of MC of the society held on 20/06/2019 (copy enclosed). In this regard, the then President AVM S.K. Arora had written a letter dated 19/06/2019 to the RCS, Delhi informing that the President and the Vice-President had resigned, and he had requested

the RCS to take appropriate action in the matter. In view of the aforementioned facts, Mr. M.R. Khan lacked authority to accept the tender or to execute any document in pursuance thereof. Thus, the whole tender process including awarding of tender, signing of contract etc. is illegal.” 3.[2] The case set up was that there was no approval of the General Body of the society for accepting the tender and there was a violation of Delhi Cooperative Societies, Act 2003 and the Delhi Cooperative Societies, Rules, 2007 (for short „the Rules, 2007‟). The arbitrator held that there was a violation of Rule 105 of the Rules, 2007. The work awarded and the agreement executed was held to be null and void. The relevant portion of the award is quoted below: “….I therefore hold that in view the provisions contained in Rule 105 of the Delhi Cooperative Societies Rules the award of work to the claimant and the contract executed between the claimant company and the respondent society, to the extent the contract pertained to the additions to /extension of the flats is concerned, was null and void. To this extent, the claimant is not entitled to any damages for the alleged breach of the contract. No damages can be recovered for the breach of a contract which is void ab initio. A person is not entitled to sue for the damages arising out of an unlawful agreement.” 3.[3] It would be apposite to note that the respondent has chosen not to challenge the award and no petition under Section 34 of the Act has been filed. 3.[4] The arbitrator held that the award of work and the agreement executed were void, despite this the claims were adjudicated by invoking Sections 65 and 70 of the Indian Contract Act, 1872 (for short „the Contract Act‟). The claims were partly allowed and sum of Rs. 97,71,174 (Rupees Ninety Seven Lakh Seventy One Lakh One Hundred and Seventy Four) was awarded along with interest @ 10% p.a.

4. Learned counsel for the petitioner-society inter-alia contends that after having concluded that the award of work and the agreement executed were void, thereafter arbitrator had no jurisdiction to proceed with the adjudication of claims. It is submitted that one of the preliminary issues raised that the agreement was not signed by the competent authority and it was a collusive document was not adjudicated and this issue goes to the root of jurisdiction of the arbitrator to adjudicate the claims.

5. Learned counsel for the respondent defends the impugned order and submits that there was an arbitration clause in the agreement and also in the tender document. Reliance is placed on section 16 of the Act to contend that despite the agreement having been held void, the clause for arbitration still survives. Further, that the tender was not held to be void.

6. Heard the learned counsel for the parties at length and perused the records with their able assistance.

7. Section 31(3) of the Act mandates reasoned award. It is settled law that an arbitral award cannot be equated with the judgment of the court. Be that as it may, issues going to the root of jurisdiction are to be considered. The minimum requirement is that the reasons for accepting or rejecting such issues should be evident from a reading of the award as a whole. It is fruitful to cite following decisions of the Supreme Court: 7.[1] In Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd. (2019) 20 SCC 1, it was held that an arbitral award cannot be equated with a judgment of the Court. The relevant extract of the judgment is as follows:

“34. The mandate under Section 31(3) of the Arbitration Act is to have reasoning which is intelligible and adequate and, which can in appropriate cases be even implied by the courts from a fair reading of the award and documents referred to thereunder, if the need be. The aforesaid provision does not require an elaborate judgment to be passed by the arbitrators having regard to the speedy resolution of dispute.”

7.[2] In Som Datt Builders Ltd. v. State of Kerela (2009) 10 SCC 259, it was held as follows:

“25. The requirement of reasons in support of the award under Section 31(3) is not an empty formality. It guarantees fair and legitimate consideration of the controversy by the Arbitral Tribunal. It is true that the Arbitral Tribunal is not expected to write a judgment like a court nor is it expected to give elaborate and detailed reasons in support of its finding(s) but mere noticing the submissions of the parties or reference to documents is no substitute for reasons which the Arbitral Tribunal is obliged to give......” (emphasis supplied)

8. From reading of the award it is evident that having held the agreement to be null and void, the arbitrator proceeded to adjudicate the claims by relying upon Sections 65 and 70 of the Contract Act. It would be apposite to mention that Sections 65 and 70 of the Contract Act shall not bestow the jurisdiction on the arbitrator to adjudicate the dispute.

9. Section 16 of the Act stipulates that an arbitration clause forming a part of the contract shall be treated as agreement independent to the other terms of the contract and that the decision of the arbitral tribunal holding the contract to be null and void by itself shall not invalidate the arbitration clause. The issue raised by the petitioner-society in the arbitral proceedings was that the agreement was not signed by a person authorised and it was a collusive document. In other words, the agreement was not between the petitioner-society and the respondent. The arbitrator has upheld this objection for declaring the agreement to be null and void in absence of the approval of the General Body of the society. The decision on the issue as to whether the agreement was executed between the parties would have a direct bearing on the applicability of Section 16 of the Act and goes to the root of jurisdiction of the arbitrator to adjudicate the claims. The award is vitiated with patent illegality. There is failure to deal with an issue of jurisdiction and non recording of reasons on this issue brings the award within the teeth of Section 31(3) of the Act.

10. In view of the above, the award is set aside being bereft of reasons and the other issues involved in the matter need not be gone into.

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11. All pending applications stand disposed of.

12. Needless to say the parties shall be at liberty to avail remedies in accordance with law for redressal of the grievance if any survives.

NAV SANSAD VIHAR CO OPERATIVE GROUP HOUSING SOCIETY LTD v. HADISO CONSTRUCTION PVT LTD

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