Arbitrators Can Order Discovery on Unsold Plots for Fair Dispute Resolution: Delhi High Court

"Arbitrator's Directions on Interrogatories and Document Production Essential for Fair Adjudication" – Delhi High Court delivered a notable judgment in the case of M/s Agarwal Associates (Promoters) Limited vs. M/s Sharda Developers, dismissing the petition challenging an arbitral order that permitted the delivery of interrogatories and the discovery of documents related to a land dispute. The court ruled that the arbitrator’s directions were within jurisdiction and necessary for the resolution of the dispute, emphasizing that such procedural decisions cannot be labeled as beyond the agreement’s scope.

The dispute arose between M/s Agarwal Associates (Promoters) Ltd. (the seller) and M/s Sharda Developers (the buyer) over agreements for the sale of plots in the Aditya World City project in Ghaziabad. The buyer alleged that despite payment, possession of the plots was never offered, and the seller concealed the status of the project. The buyer sought specific performance of the agreements or alternative reliefs, leading to arbitral proceedings.

During the arbitration, the buyer filed applications under Order XI Rule 1 CPC and Order XI Rules 12 and 14 CPC for interrogatories and discovery of documents related to unsold plots in the project, which the Sole Arbitrator allowed. The seller challenged this order in the Delhi High Court, arguing that the interrogatories and discovery requests were beyond the scope of the agreements.

The primary contention raised by the seller was that the arbitrator's order granting interrogatories and discovery related to other unsold plots went beyond the agreement's terms, which explicitly excluded any rights or interests in other plots. The seller argued that the arbitral tribunal lacked jurisdiction to pass such an order.

owever, the court observed that the seller had previously offered similarly situated alternate plots to the buyer. Therefore, it could not now refuse to provide information about those plots. The court also noted that the documents and interrogatories requested were essential for resolving the dispute, ensuring the fair adjudication of the arbitral proceedings.

The court emphasized the limited scope of judicial interference under Article 227 of the Constitution of India in arbitral matters. Citing precedents, the court reiterated that it would not intervene unless there was a manifest lack of jurisdiction or bad faith in the arbitrator’s order. The court found no such irregularities in the arbitrator’s decision.

“The direction to disclose information about unsold plots is not reflective of any bad faith, nor does it travel beyond the terms of the agreement. The information is crucial to ensure fair and expedient arbitral proceedings,” the court observed.

The Delhi High Court dismissed the seller's petition, upholding the arbitrator’s order on the delivery of interrogatories and discovery of documents. The court found the arbitrator’s directions to be within the jurisdiction and crucial for the resolution of the ongoing dispute.

Date of Decision: October 3, 2024

M/s Agarwal Associates (Promoters) Limited vs. M/s Sharda Developers