Synopsis

A leave and license agreement was executed for commercial premises at a licence fee of Rs.6,73,500 per month, renewed twice by the licensee. The licensee later raised a grievance about the absence of MCD permission for commercial use, alleging misrepresentation. It withheld payment and the licensor terminated the agreement. The arbitrator held that the licensor had misrepresented the commercial usability, and instead of the agreed licence fee, awarded only Rs.20 per sq. ft. (industrial rate) from September 2006 to April 2011 and Rs.60 per sq. ft. thereafter. The Single Bench under Section 34 set aside this modification and restored the contractual rates, holding that the licensee, after discovering the alleged misrepresentation, continued in possession, executed an addendum, and did not rescind the contract – thereby affirming it under Section 19 of the Contract Act. The Division Bench in appeal under Section 37 dismissed the appeal, affirming that the arbitrator’s award was patently illegal and perverse, and the Single Bench’s interference was justified.

Court: High Court of Delhi

Coram: Hon’ble Mr. Justice Anil Kshetarpal and Hon’ble Mr. Justice Amit Mahajan (Division Bench)

Date of Judgment: Not explicitly mentioned in provided extract (the PDF shows 2026:DHC:4139-DB, likely May 2026)

Citation: FAO(OS)(COMM) 23/2021 and connected matter (2026:DHC:4139-DB)

Core Law: Arbitration and Conciliation Act, 1996 – Sections 34, 37, 28(3); Indian Contract Act, 1872 – Section 19 (voidability of contract for misrepresentation, affirmation)

1. Heading of the judgment

High court of delhi

Fao(os)(comm) 23/2021 and connected matter

Goyal mg gases pvt ltd (appellant) vs. Classic motors pvt ltd (respondent)

Coram: hon’ble mr. justice anil kshetarpal and hon’ble mr. justice amit mahajan

Date of judgment: may, 2026 (as per citation 2026:dhc:4139-db)

2. Legal framework

Major laws and provisions involved:

Arbitration and conciliation act, 1996 – section 34 (petition to set aside arbitral award), section 37 (appeal against order under section 34), section 28(3) (arbitral tribunal to decide in accordance with terms of contract and trade usages)

Indian contract act, 1872 – section 19 (voidability of contract for misrepresentation; proviso – if party after discovering misrepresentation affirms contract, it is not voidable)

Indian evidence act, 1872 – principles of conduct/affirmation

Subject matter of the judgment:

Whether a Single Bench under Section 34 of the Arbitration Act was justified in setting aside the arbitral tribunal’s modification of the contractual licence fee on the ground of alleged misrepresentation, and restoring the contract rate, given that the licensee continued occupation and executed an addendum after discovering the alleged misrepresentation. Whether such interference amounts to substituting the court’s view or is a legitimate exercise of jurisdiction to correct patent illegality/perversity.

Key legal principles applied:

Arbitrator must decide in accordance with contract – Section 28(3): An arbitral tribunal cannot rewrite the contract on abstract noti

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