The Supreme Court has held that an arbitral tribunal cannot rewrite the contract between the parties or grant relief against its terms, upholding the Bombay High Court's decision to set aside an arbitral award in a two-decade-old Thane land dispute. A bench of Justice Sanjay Kumar and Justice Sanjeev Sachdeva delivered the judgment on October 29 in Shreeram Builders v. Upendra Kantilal Thanawala and others (2026 INSC 1176).

Source: LiveLaw

The dispute began with an Agreement for Development signed on August 6, 2003, under which the Thanawala family gave Shreeram Builders rights over their undivided 2/9th share in land at Village Panchpakhadi in Thane. The price was fixed at Rs 915 per square foot on a projected floor space index of 25,000 square feet — a total consideration of Rs 2,28,75,000. The landowners terminated the agreement by a notice dated April 9, 2008, and the dispute went to a three-member arbitral tribunal.

A sixfold price rise that 'defied logic'

On December 10, 2011, the tribunal's majority held the termination illegal and granted specific performance — but at six times the agreed price. It raised the rate to Rs 5,490 per square foot, directed the builder to deposit Rs 10,91,30,164 for a sale deed, and awarded alternative damages of Rs 23,21,19,892 if specific performance was set aside. The Supreme Court said the six-times rate was adopted without any computation or reasoning and was 'completely beyond the scope of the agreement and defied logic'.

Source: Law Trend

The bench held that a tribunal draws its authority from the parties' agreement and must decide in accordance with the contract under Section 28(3) of the Arbitration and Conciliation Act, 1996. 'Even if the award proceeded on the premise that the subject agreement was an agreement to sell, it was not for the two learned arbitrators to rewrite its terms,' the court said, concluding that the arbitrators had 'completely supplanted them with new terms, as per their own fancies'. It also faulted the award for pulling in property the agreement had expressly excluded and for granting damages the agreement never provided for.

Rs 915 per sq ftRate agreed in the 2003 contract
Rs 5,490 per sq ftRate fixed by the tribunal majority — six times higher
9% per yearInterest on the refund ordered by the Supreme Court
2003Year the development agreement was signed

The Principal District Judge, Thane, had upheld the award in January 2020, but the Bombay High Court set it aside in March 2024. While refusing to revive the award, the Supreme Court used its power under Article 142 of the Constitution to order the landowners to refund every amount they had received, with simple interest at 9 per cent a year from the date of each payment until repayment, since the agreement itself required a refund on termination and no construction had taken place. Deposits the builder had made with the courts will also be returned with accrued interest, and both sides will bear their own costs.

The ruling is a reminder to businesses and builders across India that arbitration is not a route to a better bargain than the one signed: a tribunal that replaces the contract's price or terms with its own numbers risks seeing the entire award struck down, even decades into a dispute.