Indiabulls vs. Bliss & Imagine: Bombay High Court Grants Arbitration Extension Amidst Jurisdictional Disputes and Bias Allegations.


23 April 2025 Arbitration Law >> Business & Commercial Law  

The Bombay High Court recently addressed two petitions filed by Indiabulls Infraestate Ltd. ("Indiabulls") under Section 29-A of the Arbitration and Conciliation Act, 1996 ("the Act"), seeking a one-year extension of the mandate of the Arbitral Tribunal overseeing disputes with Bliss Habitat Pvt. Ltd. ("Bliss") and Imagine Realty Pvt. Ltd. ("Imagine"). The two arbitral proceedings, though involving separate respondents, are being conducted jointly as a composite matter.

Justice SOMASEKHAR SUNDARESAN, presided over the proceedings, ultimately granting a six-month extension to the Arbitral Tribunal's mandate, which had initially expired on August 31, 2023. However, the court firmly rejected a request from Bliss and Imagine's counsel, Mr. Chetan Kapadia, to substitute the current Sole Arbitrator.


 

 

The core of the dispute revolves around high-end apartments booked by Bliss and Imagine in Indiabulls Blu, a project located in Worli, Mumbai. Indiabulls contends that despite the project's completion and receipt of the occupation certificate, Bliss and Imagine failed to pay the outstanding balance. Consequently, Indiabulls cancelled the apartment reservations after providing opportunities for payment. Notably, Bliss and Imagine had also availed loan facilities from Indiabulls Housing Finance Ltd. ("IHFL") for these properties, secured by mortgages on the units.

Prior to the current petitions, parallel arbitration proceedings ("IHFL Arbitration") were initiated by IHFL against Bliss and Imagine, seeking a declaration regarding the validity of loan account acceleration and closure. In those proceedings, an application by Bliss and Imagine to implead Indiabulls was dismissed by the Learned Sole Arbitrator, who reasoned that the cause of action differed from the Indiabulls Arbitration, which concerned the legitimacy of the allotment cancellations. A subsequent application to club the two arbitrations was also rejected. An award was ultimately issued in the IHFL Arbitration, ruling in favor of IHFL. Bliss and Imagine, however, believe they were unfairly treated due to alleged collusion between Indiabulls and IHFL, claiming the market value of the units was significantly higher than the credited foreclosure value.

Meanwhile, the Indiabulls Arbitration commenced following an application under Section 11 of the Act, with the parties consenting to the same Learned Sole Arbitrator who was presiding over the IHFL Arbitration. Pleadings were completed, and Bliss and Imagine subsequently sought to club the Indiabulls Arbitration with the ongoing IHFL Arbitration, a request that was ultimately denied.

A key point of contention arose when the Learned Sole Arbitrator scheduled the pronouncement of the award in the IHFL Arbitration for February 28, 2023. On the same day, Bliss and Imagine filed an application seeking a decision on their earlier request for clubbing the arbitrations before the IHFL award was issued. This application was rejected, and the IHFL Arbitration award was issued on the same day. Arguments in the Indiabulls Arbitration concluded in May 2023, and judgment was reserved. Subsequently, Indiabulls sought to introduce further documents, leading to further arguments and delaying the pronouncement of the award before the initial mandate expiry.

In their response to Indiabulls' Section 29-A petitions, Bliss and Imagine raised jurisdictional objections, arguing that since the arbitration was conducted in New Delhi, the Delhi High Court held jurisdiction, despite Mumbai being the agreed seat. They also sought the substitution of the Learned Sole Arbitrator, alleging inordinate delay and bias. They argued that the delay, even accounting for the Covid-19 pandemic and statutory extensions, was unacceptable, and that the rejection of their attempts to link the two arbitrations demonstrated bias.

Justice SOMASEKHAR SUNDARESAN, if available from other context] firmly dismissed the plea for substitution. The court emphasized that the current petitions concerned the Indiabulls Arbitration, not the IHFL Arbitration, and that grievances regarding the outcome of the latter should be addressed through a Section 34 challenge, which the court noted had already been initiated. The court underscored the principle of minimal court interference in arbitration and stated that the power to substitute an arbitrator under Section 29-A(6) is not absolute and must align with the grounds for substitution outlined in Sections 14 and 15 of the Act, such as de jure or de facto inability to perform functions or undue delay. The court found no such grounds to be convincingly established.

The court also took issue with Bliss and Imagine's contradictory stance on jurisdiction, simultaneously arguing against the Mumbai High Court's authority while seeking relief (substitution) from it. The court pointed out that Bliss and Imagine themselves had previously approached the Mumbai High Court under Section 11 of the Act, and by virtue of Section 42 of the Act, this court retained jurisdiction over subsequent proceedings related to the same arbitration agreement. Their approach to the Delhi High Court was deemed "misconceived or perhaps mischievous or perhaps, both," suggesting an intent to delay the arbitration's conclusion.

Regarding the alleged delay, the court acknowledged the impact of the Covid-19 pandemic and statutory extensions, as well as the six-month contractual extension willingly agreed upon by Bliss and Imagine. The court found their argument that this consent was "constrained" unpersuasive.

While acknowledging Indiabulls' belated attempt to introduce further documents after judgment was reserved, which contributed to the delay, the court stated that this could not be solely attributed to the Learned Arbitral Tribunal for the purpose of substitution. The court also noted that the fact that Indiabulls felt the need to introduce further evidence at such a late stage might suggest uncertainty about the outcome of the Indiabulls Arbitration, despite the result in the IHFL Arbitration.

The court concluded that the allegations of bias were premature and should be raised, if at all, in a Section 34 challenge after the award is issued. The advanced stage of the Indiabulls Arbitration, where judgment had already been reserved, further militated against substitution.

Ultimately, the Mumbai High Court extended the mandate of the Learned Arbitral Tribunal by six months from the date of the order, expressing hope for an expeditious ruling on Indiabulls' pending application and the final pronouncement of the award within the extended timeframe.

Addressing costs, the court noted the contradictory conduct of Bliss and Imagine in challenging the court's jurisdiction while seeking relief. While also noting Indiabulls' late application for document submission, the court imposed costs of ?1,50,000 jointly and severally on Bliss and Imagine, payable to Indiabulls within four weeks. This imposition was without prejudice to the Learned Arbitral Tribunal's power to assess costs in the final arbitral award.


Section 11, Arbitration and Conciliation Act - 1996  

Section 29, Arbitration and Conciliation Act - 1996  

Section 34, Arbitration and Conciliation Act - 1996

Arbitration and Conciliation Act, 1996