An arbitrator can interpret a property agreement, but cannot replace its clear terms with a different deal. The Supreme Court reinforced this principle in Shreeram Builders v. Upendra Kantilal Thanawala and Others, decided on 29 October 2026.
The dispute involved a builder and landowners in Thane, Maharashtra. The outcome carried a lesson for both sides: the builder could not force the land transfer under the disputed award, but the landowners could not keep the builder’s money either.
What Was the Agreement About?
The builder and the landowners signed an agreement in August 2003 concerning the landowners’ undivided two-ninths share in a property.
The estimated consideration was ₹2.2875 crore, calculated using a rate of ₹915 per square foot on a projected development area of 25,000 square feet. However, the agreement allowed the final amount to change depending on specified events, including building-plan approval, additional development potential and basement construction.
The agreement also fixed payment deadlines. The landowners were required to transfer their share only after receiving all amounts due.
An undivided share means owning a proportion of the whole property without a separately marked portion.Why Did the Dispute Begin?
The builder did not complete payment of the estimated consideration by the contractual deadline of 1 March 2008. Building-plan approval had also not been obtained, leaving conditions affecting the final price unresolved.
The landowners terminated the agreement in April 2008. The dispute then went to arbitration, as provided in their agreement.
Arbitration is a process in which appointed decision-makers hear a dispute outside the usual court process.The Arbitrators
An arbitrator is like a referee for a legal disagreement: they hear both sides, examine the agreement and evidence, and give a decision.
In this case, there were three arbitrators—all retired judges:
| Arbitrator | Appointed by |
|---|---|
| P.S. Mudholkar | The builder |
| V.P. Patil | The landowners |
| Justice S.D. Pandit | The other two arbitrators, as the third member or “umpire” |
How Did the Arbitrators Decide?
Pandit and Mudholkar decided in favour of the builder. Their award directed the builder to deposit approximately ₹10.91 crore and required the landowners to execute a sale deed for their share.
An arbitral award is the decision given by an arbitrator or arbitration tribunal.
Patil disagreed and rejected the builder’s claim. He issued a separate decision known as a dissenting award.
The disputed ruling was therefore a 2–1 majority award, rather than one person’s decision.
The arbitrator awarded:
- Transfer the land even though the builder has not met all the agreed conditions.
- Increase the agreed rate sixfold without a clear explanation.
- Include extra property that both sides had agreed to leave out.
An arbitration award is the formal decision given by an arbitratorWhy Did the Supreme Court Reject the Award?
The Bombay High Court set aside the award. The builder approached the Supreme Court, which refused to restore it.
The Supreme Court identified several problems:
- The agreed payment conditions had not been fulfilled. The award ordered a transfer despite the contractual requirements remaining unmet.
- The final consideration remained unresolved. Events affecting the amount payable had not occurred.
- The agreed rate was increased sixfold. The award raised it from ₹915 to ₹5,490 per square foot without explaining the calculation.
- Some excluded property was brought into the proposed transfer. This also affected the interests of co-owners who were not before the tribunal.
The Court’s objection was that the arbitrators had replaced the parties’ agreed terms with new ones.
Arbitrators may reasonably interpret a contract, but cannot impose a different bargain on the parties.
What Were the Landowners Ordered to Do?
The landowners were not required to transfer their share under the disputed arbitration award, because that award remained set aside.
However, they could not retain the builder’s payments.
The agreement required them to return the consideration if the arrangement ended without construction on their share. They terminated the agreement in 2008 but did not refund the money.
The Supreme Court therefore directed them to:
- Return the amounts received from the builder under the agreement.
- Pay 9% simple interest per year, calculated separately from the date of each payment until its actual refund.
For the disputed transaction, the result was straightforward: the landowners retained their share instead of being compelled to transfer it under the award, but had to repay the builder with interest.
“Remained set aside” means the arbitration award stayed cancelled and could not be enforced.Why Was Interest Ordered?
The agreement contained a no-interest refund condition. The Court explained that this would have applied had the landowners returned the money when they terminated the agreement in 2008.
Instead, they retained it for years. The Court therefore directed repayment with reasonable interest.
The Court used Article 142, its constitutional power to pass orders needed to do complete justice in a case.
It also directed that the builder’s money deposited with the courts could be returned, along with any interest accrued on those deposits.
The 9% rate applies to this particular order. It is not a fixed refund rate for every property dispute.
What Should Landowners and Builders Check Before Signing?
A property development agreement should clearly explain:
- Payments: How much must be paid and by when.
- Approvals: Who must obtain permissions and what happens if they are delayed.
- Sharing terms: How land, constructed space or revenue will be shared.
- Transfer conditions: What must happen before ownership is transferred.
- Property exclusions: Which portions fall outside the agreement.
- Termination and refunds: When the arrangement can end, when money must be returned and whether interest applies.
Both parties should understand the order in which their obligations must be performed. A dispute-resolution clause cannot make up for unclear commercial terms.
A Strong Joint Venture Starts with Clear Terms
For landowners exploring a joint venture, finding a developer is only the beginning. Verified Realestate’s JV partnership approach brings property verification and careful planning into the conversation early, helping owners assess the proposed arrangement before committing. Clear terms on approvals, sharing ratios, payments, timelines and exit conditions can give both sides a stronger foundation for moving forward.