Article 227 cannot be invoked when interrogations and findings permitted by the court are not in the nature of fisheries inquiry: Delhi HC

THE Delhi High Court considered that the scope of the review under Article 227 is extremely narrow; the same cannot be invoked when the interrogations and discovery permitted by the court have correlation and nexus with the subject matter of the litigation.

The bank of Judge Manoj Jainupon hearing two complaint petitions, it considered that when the seller offered alternative land in similar projects after the agreement was frustrated, it could not refuse to disclose such information about the same land. The interrogations and discoveries permitted by the party do not fall into the category of fisheries investigation and are related to the subject matter of the dispute.

Factual overview:

The parties enter into two agreements with identical terms, except for one agreement relating to lot no. 129, and the other referring to installment No. 130. The petitioner (seller) claimed that it had entered into a consortium agreement to develop a township in Uttar Pradesh. The project would be financed exclusively by the seller.

The seller has been registered as a “Private Developer” by the Ghaziabad Development Authority (GDA) develop an integrated municipality. The seller also claimed ownership and possession of most of the land, and the rest would be acquired by the GDA and then transferred to the seller. Through the vendor, the consortium was developing a township called “ADITYA WORLD CITY” on the project land.

The seller had the right to excavate land of different sizes and areas, sell it with or without construction, receive the sale proceeds and sign the necessary agreements/deeds to transfer the land to potential buyers. The interviewee (buyer) invoked arbitration, alleging non-compliance with the terms of the agreement, and presented their petition.

The buyer requested the execution of the transfer deed of the land in question or the delivery of possession of an alternative land in a similar situation. Alternatively, the buyer prayed that the seller be instructed to pay the current market value of comparable land, along with damages and litigation costs.

During the proceedings, the applicant/buyer moved two separate applications under Order XI, Rule 1 CPC and Order XI, Rules 12 and 14 CPC, which were allowed by the court see a common order. The buyer sought interrogations and discovery regarding alternative land in the area in these applications. This petition is filed under Article 227, seeking to annul the order passed by the court.

Submissions:

The petitioner/seller presented the following allegations:

• Due to GDA’s inability to acquire the land and transfer it to the seller, the deal was frustrated because some of the reserved land fell on this land and the seller was unable to offer these lands. The buyer’s only recourse was to request a refund and interest. However, the seller informed the prospect of similar land in the projects, but the buyer did not respond. Therefore, the prayers made in the orders exceeded the terms of the agreement, and any discovery/interrogation directed at the seller fell outside the scope of the arbitration as the agreement.
• The agreement prohibits the buyer from seeking damages, compensation or other claims. The Arbitration Court may not exceed the terms of the agreement. By allowing enforcement, the arbitrator acted outside the jurisdiction, constituting a deliberate departure from the contractual terms.
• The court did not have jurisdiction to allow the discovery/interrogation request regarding any other plot as mentioned in Clause 2 of the Agreement. The impugned order was in bad faith, leaving no remedy to the seller. Therefore, the petition under Article 227 is maintainable and the impugned order must be set aside.

The interviewee/buyer made the following observations:

• The seller’s conduct from the beginning was one of total lack of will and indifference. Possession of the land was never offered despite payment being made by the buyer as per the contract. The seller consistently concealed the true status of the project from the beginning and repeatedly avoided communications directed to him.
• The seller never communicated the impossibility of handing over possession of the land due to local conditions. Furthermore, the seller did not offer any alternative lot or refund.

Court Analysis:

The bench observed that the seller presented a particular case in relation to the plots falling on land not yet acquired by the GDA. The seller informed the buyer of the unavailability of land due to the pending acquisition of the land. Thereafter, the seller offered similarly located land within the project and invited the buyer to request verification so that alternative available land could be delivered accordingly. The seller told the buyer that similarly located land within the project is ready to be offered.

The seller cannot invoke Clause 2 of the contract to claim that the buyer cannot seek information about these lands after offering alternative lands within the project. The buyer cannot be prevented from seeking information about land offered by the seller in the same project. Under clause 2 of the agreement, the buyer is not entitled to ownership of other lots.

In the present case, the buyer does not claim any such rights, but seeks information about the lots, and the request for such information cannot be compared with the creation of any rights or titles over the lots. Furthermore, until the interrogatories are served and answered and the required correspondence or documents are produced, it will not be clear whether the land on which these lots are supposed to exist has been acquired. Once this information is provided, it will become clear how many unsold alternative lots are available in the sector in question.

The bench further observed that the interrogatories and documents requested for production are neither irrelevant nor unrelated to the matter. Interrogations and discovery appear to be crucial to dispute resolution and would contribute to the efficiency of the arbitration process. The buyer was simply seeking the production of information received from the GDA regarding the non-subdivision of the land.

The applicant’s request for interrogatories does not present a fisheries inquiry approach, and the requested interrogatories and findings have a direct correlation and nexus to the matter. The court does not err in law by allowing interrogation and discovery requests since the seller offered alternative installments at an earlier time.

While dismissing the petitions, the court recorded that if an order cannot be challenged under the provisions of the A&C Act, the jurisdiction under Section 227 cannot be invoked. However, the remedy available under Article 227 is not affected by however clause in Section 5 of the A&C Act. However, the scope of review is extremely narrow, and the present case has not shown any reason why the impugned order was perverse and for the court to intervene in the matter by exercising the power under Article 227.

Case title: M/s Agarwal Associates (Promoters) Limited v. M/s Sharda Developers

Case number: CM(M) 3265/2024 and CM APPL. 49570/2024, CM APPL. 49571/2024; CM(M) 3266/2024 and CM APPL. 49573/2024, CM APPL.49574/2024

Plaintiff’s Lawyer: Mr. Divyakant Lahoti, Mr. Kartik Lahoti, Mr. Adith Menon, Ms. Vindhya Mehra and Ms. Anushka Awasthi, Advocates.

Defendant’s Lawyer: Dr. Amit George, Ms. Roshan Santhalia and Mr. Dushyant Kishan Kaul, Advocates.

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