Bombay HC upholds Rs 2.67 crore award against builder over Goregaon redevelopment delay

The Bombay High Court has refused to set aside an arbitral award in a case of delay in the redevelopment of a housing society in Goregaon. The award directed Kumar Urban Development Private Limited to pay Rs 2.67 crore with interest. The court said that where both parties have agreed on a reasonable pre-estimate of liquidated damages, proof of exact monetary loss or legal injury is not required in the circumstances of this case.

Justice Arati Sathe dismissed the builder's petition. The petition challenged an arbitral award of March 3, 2017, made in its dispute with Jal Ratna Deep Co-operative Housing Society Limited. The judgment was delivered on October 23, 2026.

The dispute concerns the redevelopment of five buildings with 97 flats at Bangur Nagar, Goregaon (West). Under Clause 26 of the original development agreement of January 12, 2011, if the delay went beyond 60 days, the builder was to pay Rs 10 lakh for every week, or part of a week.

The arbitrator had fixed liquidated damages for 62 weeks at Rs 6.20 crore. From this, a security deposit of Rs 1.10 crore and hardship compensation/corpus of Rs 2.425 crore were deducted. The award then ordered the builder to pay the society a total of Rs 2.675 crore with interest.

The builder challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996. It argued that the society had not proved any actual monetary loss or legal injury from the delay. Its counsel said there was no demonstrated commercial basis for the Rs 10 lakh a week figure, and that it was also not shown to be a reasonable pre-estimate of damages.

The builder also said the society's members had continued to live in their old homes and had not been moved to alternative accommodation. It said the members also retained the security deposit and hardship compensation. It contended that damages had been awarded without identifying any compensable loss.

The society opposed the challenge. It said the amount was fixed in the contract as liquidated damages and was a reasonable pre-estimate of the likely consequences of delay. Its counsel said the arbitrator had recorded findings of delay and breach, so no interference with the award was needed under Section 34.

The High Court read Clause 26 of the development agreement with Section 74 of the Indian Contract Act, 1872. It noted that the clause clearly states that Rs 10 lakh a week is liquidated damages and not a penalty. The court accepted the society's submission that the amount, arising from the commercial understanding of both parties, is a reasonable pre-estimate of loss. According to the court, once the evidence had proved delay and breach, no further proof of exact loss or legal injury was needed in this case.

The judgment also refers to the arbitrator's findings on the builder's conduct. These include about five months of inaction on the application for an Intimation of Disapproval (IOD), another inaction of roughly 11 months in the IOD process, and the society's repeated efforts to get the project moving. The arbitrator had also recorded that the society had become exasperated by the delay and had lost trust in the builder.

The High Court said the arbitrator had weighed the evidence and formed a possible view of the dispute. Since the scope for interference with an arbitral award under Section 34 is limited, the court found no reason to set the award aside.

The petition was dismissed. The court directed that if any amount has been deposited in court, it be released within one month of the date the judgment is uploaded on the High Court website. No costs were imposed. Senior Advocate Jhal Andhyarujina appeared for the builder, and Advocate Rohan Cama for the housing society.