Background:

The petitioner, M/s Aggarwal Associates (Promoters) Ltd. (the "seller"), was defending two claim petitions filed by the respondent, M/s Sharda Developers (the "buyer"). During the course of the arbitration, the buyer sought to deliver interrogatories and sought the discovery and production of documents via applications under Order XI, Rule 1 CPC and Order XI, Rules 12 and 14 CPC. These applications were allowed by the Sole Arbitrator. The seller challenged this order, arguing that the arbitral tribunal's direction to provide information related to unsold plots in the project went beyond the scope of the original agreement.

The Agreement and Dispute:

The case arose from two agreements related to the sale of plots in a project known as "Aditya World City" in Ghaziabad. The agreements were for plots No. 129 and No. 130, and the seller had informed the buyer that the plots were not yet available for possession due to the land not being fully acquired by the concerned authorities. The seller offered the buyer alternate plots but claims that the buyer did not respond.

The buyer, on the other hand, contended that despite making payments as per the agreement, the possession of the plots was never offered. The buyer alleged that the seller was deliberately withholding information regarding the actual status of the project and was negligent in responding to multiple communications from the buyer.

As a result, the buyer invoked arbitration, seeking the execution of a transfer deed for the plots or, alternatively, compensation in the form of market value for similarly situated plots, in addition to other claims.

Seller's Objection to Interlocutory Orders:

The seller raised several objections to the orders passed by the Sole Arbitrator, particularly with regard to the direction to deliver interrogatories and produce documents. The primary contention was that these orders exceeded the scope of the agreement and were irrelevant to the dispute. Specifically, the seller argued that the interrogatories sought by the buyer pertained to information about unsold plots in the project that were outside the scope of the agreement, which clearly excluded any right to the other plots.

However, the arbitrator allowed some of the interrogatories and production of documents, reasoning that these were directly related to the dispute at hand. The seller further argued that this order amounted to a jurisdictional error, contending that the arbitration tribunal had acted beyond the terms of the contract.

Judicial Oversight and Scope of Intervention:

While judicial intervention in arbitral proceedings is limited under the Arbitration and Conciliation Act, 1996, the court acknowledged that there are exceptions where intervention may be warranted. The court cited previous precedents, emphasizing that such intervention should only occur in cases of extreme perversity, bad faith, or when the tribunal's orders grossly violate the jurisdictional boundaries of the arbitration agreement.

In this case, the court recognized that the seller had itself communicated to the buyer that the plots in question were unavailable due to the land's non-acquisition. The court noted that the seller had offered alternative plots and that the interrogatories regarding the unsold plots were relevant to the dispute, which concerned the buyer’s entitlement to possession or compensation. The court reasoned that the questions raised were not mere fishing expeditions, as they directly related to the subject matter of the dispute, ensuring fairness in the proceedings.

Furthermore, the documents sought for discovery—such as government correspondence on the land’s status and the latest sale deeds—were deemed necessary for a proper resolution of the issue. The court upheld the arbitrator’s decision to allow the production of such documents, including the government communications and project layout details.

Conclusion: Judicial Discretion and Limited Intervention

The court concluded that there was no merit in the seller’s challenge and found no evidence of any jurisdictional error or bad faith by the Sole Arbitrator. The challenge under Article 227 of the Constitution of India was dismissed, reinforcing the notion that while judicial oversight is available, it must be exercised with restraint and only in cases of exceptional circumstances.

This case serves as a reminder of the limited scope of judicial intervention in arbitral proceedings. Courts should only intervene in the face of significant errors or misconduct by the arbitral tribunal. The case also highlights the importance of ensuring fairness in arbitral proceedings by allowing relevant discovery and interrogatories that could aid in the fair adjudication of the dispute.

The case underscores the need for careful consideration of the arbitrator's decisions and the principle that such decisions should be respected unless they manifestly exceed the tribunal's jurisdiction or are manifestly unjust.

  Arbitration and Conciliation Act, 1996