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.
The Bench of Justice Harish Vaidyanathan Shankar held that Modi failed to establish either that the sole arbitrator was statutorily ineligible or that circumstances existed giving rise to justifiable doubts regarding his independence or impartiality.
The judgment was pronounced on August 18. In a candid postscript, the Court disclosed that it had initially been inclined to allow Modi’s petition but changed its view after a closer examination of the record and applicable law.
The dispute relates to an approximately 858-square-yard property at 32, Pashchimi Marg, Vasant Vihar. BDR Builders had provided financial assistance to Modi between 2009 and 2012, following which the parties entered into an agreement to sell the property in June 2014. Their disputes were subsequently referred to arbitration.
In October 2016, both sides jointly appointed advocate Naresh Gupta as the sole arbitrator. During the proceedings, the parties informed the arbitrator that they had amicably settled their disputes.
On November 21, 2016, the arbitrator passed an award directing specific performance of the agreement and transfer of possession of the property to BDR Builders. Modi and BDR director Rajesh Gupta also signed a separate “Acceptance”, acknowledging the award in its entirety and agreeing not to challenge it.
Modi later challenged the award under Section 34 of the Arbitration and Conciliation Act, primarily alleging that the arbitrator had prior professional links with BDR Builders and its directors and had failed to make the disclosure required under Section 12 of the Act.
The High Court, however, held that mere non-disclosure does not automatically invalidate an arbitral proceeding. It said Modi was required to establish either the arbitrator’s ineligibility under Section 12(5) read with the Seventh Schedule or circumstances giving rise to justifiable doubts about his independence or impartiality under Section 12(3).
The Court noted that the documents relied upon by Modi showed professional engagements between the arbitrator and BDR Builders between 2008 and 2012. However, the relevant entries in the Fifth Schedule concerning previous professional engagements cover the three years preceding the commencement of arbitration, which began only in 2016.
Modi also relied on a typed copy of an alleged 2018 reply purportedly issued by the arbitrator, which referred to his earlier professional work for BDR, payment of professional fees and his wife’s subsequent acquisition of shares in a company. The Court declined to rely on the document as its original had not been produced and its authenticity and authorship remained unestablished.
The Court observed that proceedings under Sections 12 and 34 of the Arbitration Act cannot be based on unproved or doubtful material, particularly where allegations concern the integrity of an arbitrator.
Accordingly, the Court dismissed Modi’s Section 34 petition and permitted 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.
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