Contract Terms Rule Both Ways: Supreme Court on a 2003 Development Agreement

On August 6, 2003, a family of landowners in Thane signed what they called an "Agreement for Development" with a builder for their undivided 2/9th share in a compact parcel of about 16,414 square yards in Village Panchpakhadi. The price was Rs 915 per square foot of FSI, the floor area the land could carry, on an estimated 25,000 square feet. That came to Rs 2,28,75,000, to be paid in full by March 1, 2008. It was not paid in full. On April 9, 2008, the landowners terminated the agreement.

Twenty three years after the agreement, the Supreme Court decided on October 29, 2026 who was right. Its answer turns on the words of the contract, and it carries lessons for anyone in Bengaluru who signs, or buys into, a development agreement, a joint development agreement or an agreement to sell.

The short answer. In Shreeram Builders v. Upendra Kantilal Thanawala, Civil Appeal Nos. 9817 and 9818 of 2024, a bench of Justices Sanjay Kumar and Sanjeev Sachdeva upheld the Bombay High Court's March 5, 2024 decision setting aside a 2011 arbitral award that had granted the builder specific performance at six times the agreed rate. The court said the arbitrators "completely supplanted" the contract's terms. But it also held the landowners had to return the money they received, and, using Article 142 of the Constitution, directed refund with simple interest at 9 percent a year from each payment. The trade-off: the contract's words were enforced strictly against both sides, so the builder lost the land, while the landowners lost the use of money they should have returned in 2008.

What did the agreement actually say?

The Supreme Court quoted Clause 3: the development right was given "at the price/consideration of Rs. 915/- per square feet," a total of Rs 2,28,75,000, calculated on an estimated available FSI of 25,000 square feet on the landowners' share. The clause added that if more FSI became available when the plan was sanctioned, the price would rise. Other clauses linked more payments to regularisation of land said to be in the landowners' adverse possession, at Rs 450 per square foot for extra FSI, and to construction of basements.

Clause 53 said that on any default in paying instalments within time, the agreement "would come to an end" and the builder's rights would automatically end. Clause 54 said that if Clause 53 applied and no construction had been done on the landowners' share, they would pay back the consideration received "without interest." Clause 51 said the agreement superseded all earlier agreements, including a 2002 memorandum of understanding.

What did the arbitrators award, and why was it set aside?

The majority award of December 10, 2011 held the termination illegal and granted specific performance. Citing the passage of time and land price escalation, it fixed the price at six times the agreed rate, Rs 5,490 per square foot, a total of Rs 13,72,75,000, and directed the builder to deposit Rs 10,91,30,164 within three months, after which the landowners were to execute a sale deed. The award also included part of the property the agreement had expressly excluded, and gave credit for a payment made under the superseded 2002 memorandum.

The Supreme Court agreed with the High Court that this was a rewriting of the contract, contrary to Section 28(3) of the Arbitration and Conciliation Act, 1996. It said the total consideration "hinged upon later events that did not materialize by the date of the award," that even the estimated price "was to be paid in full by 01.03.2008, but it was not paid," and that a conveyance was to follow only after full payment. On the six times rate, it said "no computation exercise was undertaken" and the direction "defied logic." It concluded that the arbitrators "not only construed the express terms of the agreement contrarily but completely supplanted them with new terms, as per their own fancies."

Why did the landowners still have to refund with interest?

The court turned to the landowners' own obligations. They had terminated for default, which engaged Clause 53. Clause 54 then required them to return the consideration, because no construction had been done on their share. "It was not open to them to retain the said amount when they wished to retract from the agreement," the court said.

The no-interest condition, it reasoned, "would have applied had the respondents returned the monies on 09.04.2008," but they did not and retained the money "till date." Using Article 142 to do complete justice rather than send the parties into another round of litigation, it directed refund of the amounts paid under the agreement with simple interest at 9 percent a year from the date of each payment until refund, and release of the builder's deposits in court with any accrued interest. Parties bear their own costs.

How did the case travel through the courts?

The dispute went first to a three member arbitral tribunal under the agreement's arbitration clause. Its majority award of December 10, 2011 favoured the builder; the dissenting arbitrator would have dismissed both the claim and the counter-claim. The landowners' application for an additional award was dismissed on February 18, 2012 as time-barred, with costs of Rs 35,000.

Both sides then challenged the award in the Thane district court. On March 29, 2017 it ruled for the builder. The Bombay High Court, by consent, sent the matter back on June 26, 2019. On January 25, 2020 the district court upheld the award in full. On March 5, 2024 the High Court set it aside. The Supreme Court ordered status quo on the land on August 12, 2024, and decided the appeals on October 29, 2026.

Before the Supreme Court, the builder said it had paid about Rs 1,87,63,226 of the estimated price, had deposited the balance of Rs 41,11,744 with the Thane court on July 15, 2017, and was willing to pay the enhanced price fixed by the award. The court said its task was only to test the award under Section 34, not to act as an appellate court in a specific performance suit.

How do the key figures compare?

Was it an agreement to sell or a development agreement?

The parties fought over the label. The majority award and the Thane district court treated the document as an agreement to sell. The High Court disagreed, noting that the first page recorded an agreement value of Rs 2,28,75,000 and stamp duty of Rs 2,29,000, or 1 percent, and that, as the Supreme Court recorded, the High Court treated 1 percent as the duty payable on development agreements while an agreement to sell had to suffer 5 percent. The Supreme Court said it was not necessary to decide that label, because the award fell anyway for rewriting the contract.

For buyers and landowners, the point is practical. The stamp duty paid on a document can become evidence of what the parties intended it to be. Karnataka has its own stamp duty schedule, which PropNewz explained in our guide to Karnataka stamp duty and registration fees.

What should Bengaluru landowners and buyers take from this?

Where a project is built under an agreement between landowners and a developer, the same questions about price, deadlines and termination arise. PropNewz explained how joint development agreements work in our guide to joint development agreements. If such an agreement collapses, the dispute can run for years, as this one did. For arbitration clauses specifically, today's report on a Telangana High Court order on flat buyers' arbitration notices shows how the first procedural step matters.

1. Read how the price is fixed: per square foot of FSI, a lump sum, or a share of built-up area.
2. Check whether the price can change with sanctioned FSI, regularisation or basements, and how.
3. Note every payment deadline and what happens on default, including automatic termination.
4. Check the refund clause on termination, including whether interest is payable.
5. Confirm that earlier memoranda or agreements are superseded, and that payments under them are accounted for.
6. Check the stamp duty paid and whether it matches the nature of the document.
7. If you are buying a flat in a project built under such an agreement, ask whether any dispute or arbitration between landowner and developer is pending.

Frequently asked questions

What did the Supreme Court decide in Shreeram Builders v. Upendra Kantilal Thanawala?

On October 29, 2026, it upheld the Bombay High Court's March 5, 2024 decision setting aside a 2011 arbitral award, holding the arbitrators had rewritten the 2003 development agreement, but used Article 142 to direct the landowners to refund the amounts paid with simple interest at 9 percent a year.

Why was the arbitral award set aside?

The court held the award ignored the agreement's payment sequence, fixed a price at six times the agreed Rs 915 per square foot without any computation, included excluded property and credited a payment under a superseded memorandum. It said the arbitrators supplanted the contract with new terms, contrary to Section 28(3) of the Arbitration Act.

Why did the landowners have to pay interest when the contract said no interest?

Clause 54 required refund without interest if the agreement ended for default and no construction had been done. The court said that condition would have applied had the landowners refunded in April 2008, but they kept the money, so it directed refund with 9 percent simple interest from each payment.

Does stamp duty show whether a document is a development agreement or an agreement to sell?

In this case, the High Court relied partly on the 1 percent stamp duty paid on the document, treating that rate as applicable to development agreements and 5 percent to agreements to sell. The Supreme Court found it unnecessary to decide the label because the award failed for rewriting the contract.

Last updated 2026-11-01. PropNewz Team.