Arbitrator Cannot Ignore Contractual Condition Precedent in Directing Sale Deeds, and Such Award Risks Being Beyond Jurisdiction

An arbitrator cannot direct execution and registration of sale deeds where the agreement makes that obligation conditional on completion of specified contractual requirements; relief granted in manifest disregard of an express condition precedent is beyond jurisdiction and vulnerable as being outside the reference. Where the award rests on that jurisdictional defect, a civil court should not sustain it as a rule of court. The document also notes that parties not joined to the arbitration or civil proceedings are not necessary parties to appeals confined to the legality of the award as between the contracting owner and builder.

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Issues: (i) Whether the interim award directing execution and registration of sale deeds was beyond the arbitrator's jurisdiction and contrary to the arbitration agreement; (ii) whether the civil court was justified in dismissing the challenge under Section 33 and making the interim award a rule of the court; (iii) whether the impleading applicants were proper and necessary parties to the appeals.

Issue (i): Whether the interim award directing execution and registration of sale deeds was beyond the arbitrator's jurisdiction and contrary to the arbitration agreement?

Analysis: Clause 11 of the agreement made the owners' obligation to execute sale deeds conditional upon issuance of the occupancy certificate and completion and delivery of the owners' share of apartments in all respects. The disputes referred to arbitration related to the builder's performance of its obligations and the appellant's entitlement to built-up area, parking spaces, and fixtures. The arbitrator nevertheless directed execution of sale deeds by treating the appellant's obligation as immediately enforceable, thereby ignoring the contractual condition precedent and travelling beyond the disputes referred. An arbitrator derives authority from the contract and cannot act in manifest disregard of its terms.

Conclusion: The interim award was in excess of jurisdiction and was invalid.

Issue (ii): Whether the civil court was justified in dismissing the challenge under Section 33 and making the interim award a rule of the court?

Analysis: Once the interim award was found to have been made contrary to Clause 11 and beyond the subject-matter of reference, the foundation for sustaining the civil court's order disappeared. The award was not severable from the jurisdictional defect in the directions compelling execution and registration of sale deeds. The civil court ought not to have upheld an award that disregarded the contractual limits governing the reference.

Conclusion: The civil court's order could not be sustained.

Issue (iii): Whether the impleading applicants were proper and necessary parties to the appeals?

Analysis: The dispute in the appeals was confined to the legality of the arbitrator's directions as between the owner and the builder under the development agreement. The impleading applicants were not parties to the arbitration or the civil court proceedings, and their claimed rights under separate transactions with the builder did not make their presence necessary for deciding whether the interim award was within jurisdiction.

Conclusion: The impleading applicants were not necessary parties and the application was dismissed.

Final Conclusion: The appeals succeeded, the interim award and the civil court's order were set aside, the arbitration proceedings were remitted for adjudication on the framed issues, and the arbitral reference was directed to continue before a new arbitrator.

Ratio Decidendi: An arbitrator cannot grant relief that ignores an express contractual condition precedent or travels beyond the disputes referred to arbitration, and any award rendered in manifest disregard of the contract is vulnerable for want of jurisdiction.

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