Delhi High Court rejects Lalit Modi’s challenge to arbitral award over Vasant Vihar property

The Delhi High Court has dismissed fugitive businessman Lalit Modi’s challenge to a 2016 arbitral award directing specific performance of an agreement to sell his Vasant Vihar property to BDR Builders and Developers Private Limited. [Lalit Modi Vs BDR Developers]

Justice Harish Vaidyanathan Shankar held that Modi had failed to establish either that the sole arbitrator was statutorily ineligible or that circumstances existed giving rise to justifiable doubts about his independence or impartiality.

The judgment was pronounced on August 18.

Interestingly, the judge disclosed in a postscript that he had initially been inclined to allow Modi’s petition but changed his view after examining the matter more closely.

“This Court considers it necessary to add this candid Post Script since, initially, during the hearing, this Court was of the view that the Petition should be allowed, but upon closer scrutiny and circumspection, and consideration of the relevant law, decided otherwise,” the Court said.

The dispute concerned a property measuring around 858 square yards at 32, Pashchimi Marg in Vasant Vihar. BDR Builders had extended financial assistance to Modi between 2009 and 2012, following which the parties entered into an agreement to sell the property in June 2014. Disputes were subsequently referred to arbitration.

The parties jointly appointed advocate Naresh Gupta as sole arbitrator in October 2016. During the proceedings, they informed the arbitrator that they had amicably settled their disputes.

An award passed on November 21, 2016 directed specific performance of the agreement and transfer of possession to BDR Builders. Modi and BDR director Rajesh Gupta also signed a separate “Acceptance”, stating that they accepted the award in its entirety and would not challenge it.

Modi challenged the award primarily on the ground that the arbitrator had prior professional links with BDR Builders and its directors and had failed to make the disclosure mandated under Section 12 of the Arbitration Act.

However, the Court said that mere non-disclosure does not automatically invalidate an arbitration. What must be shown is that the underlying circumstance either makes the arbitrator ineligible under Section 12(5) and the seventh schedule or gives rise to justifiable doubts about independence or impartiality under Section 12(3).

The documents relied on by Modi showed professional engagements between the arbitrator and BDR Builders dating from 2008 to 2012. The Court noted that the relevant entries in the fifth schedule concerning previous professional engagements refer to the three years preceding arbitration. The arbitration began only in 2016.

Modi had also relied on a typed copy of an alleged 2018 reply by the arbitrator which purportedly acknowledged his prior work for BDR, payment of professional fees and his wife’s acquisition of shares in a company after the arbitration.

The Court declined to rely on the document because its original had not been produced and its authorship and authenticity had not been established.

“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,” the Court said.

The Court consequently dismissed Modi’s Section 34 petition and allowed BDR Builders’ execution proceedings to continue for enforcement of the November 2016 award. The execution petition will next be listed before the roster bench on October 28.

Senior Advocate Inderbir Singh Alagh along with advocates Tushar Parashar, Amit Pandey and Bhanu Pratap Singh Phore appeared for Modi.

Advocates Prashant Mehta, Diksha Goswami, Prachi Kohli, Nitin Bajaj and Niharika Tiwari represented BDR Builders.

Advocate Nandni Sahni appeared for objector Romi Garg.

[Read Judgment]