Arbitrator cannot award on withdrawn claims; Dressing AMR as compensation does not revive jurisdiction, holds Delhi high court

Delhi High Court Rules Arbitrator Lacks Authority on Withdrawn Claims; AMR Labeling Ineffective for Jurisdiction Restoration.

Parveen Kapoor and Ors. v. Omaxe Ltd. | FAO (OS) (COMM) 50/2024 | Delhi High Court | May 4, 2026

The Delhi High Court has held that once a claim is withdrawn from arbitral proceedings, the arbitrator loses all jurisdiction over that claim. A withdrawn claim cannot be reintroduced into the arbitration, directly or indirectly, and an award granting reliefs flowing from such a claim amounts to patent illegality. The Division Bench of Justice V. Kameswar Rao and Justice Vinod Kumar dismissed an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, upholding a Single Judge order that had partly set aside an arbitral award.

Background

The dispute arose from the purchase of a commercial unit in 'Omaxe Novelty Mall' at Amritsar. The appellants had paid 95% of the total sale consideration of approximately Rs. 87.84 lakh for a shop on the Atrium Floor. On the same date as the allotment letter of August 23, 2007, the respondent Omaxe Ltd. executed an Addendum promising to pay an Assured Monthly Return (AMR) of Rs. 1,05,788.80 per month to the appellants until the date of offer of possession.

The Addendum did not contain an arbitration clause. Omaxe paid the AMR until January 2010 and then stopped. The ASI had raised objections during construction as the project site abutted a protected monument, leading to a halt in construction that lasted until 2012. Possession was eventually offered in July 2015. The appellants invoked arbitration and a retired District Judge was appointed as Sole Arbitrator.

The Withdrawal

In the original statement of claims filed before the arbitrator, the appellants raised Claim No. 1 seeking recovery of AMR from June 2010 to July 2015 amounting to Rs. 65.58 lakh with 18% interest per annum. The respondent objected that the AMR claim arose from the Addendum, which had no arbitration clause and was therefore not arbitrable. In response, the appellants themselves filed an application in August 2018 seeking permission to withdraw Claim No. 1 with liberty to pursue it before another appropriate forum. The Arbitrator allowed the application.

After withdrawing the AMR claim from arbitration, the appellants filed a petition before the National Company Law Tribunal, Chandigarh, claiming the same AMR amounts.

The Award and Subsequent Challenge

Despite the withdrawal, the Arbitrator passed an award that, while declining the compensation claims at the claimed rate of 18% interest per annum on the ground that AMR already constituted an inbuilt compensatory mechanism, went on to award 10% per annum interest on the unpaid AMR from the date each payment fell due till delivery of possession, stating that this was necessary to meet the ends of justice.

Omaxe challenged the award under Section 34. The Single Judge partly set aside the award, holding that once the AMR claim was withdrawn, the Arbitrator had no jurisdiction to award anything flowing from it. The Single Judge further found that the Arbitrator had on one hand held that AMR was adequate compensation and on the other hand awarded additional interest on those very AMRs, which was internally contradictory. The direction to hand over possession and execute the sale deed was upheld.

Division Bench Analysis

Before the Division Bench, the appellants argued that the AMR claim had been reintroduced in the final amended statement of claims and that the respondent had not objected to this, and that evidence was led on the point. The respondent countered that the appellants had not only withdrawn the claim from arbitration but had also taken the further affirmative step of filing before the NCLT, which placed a conclusive bar on the claim being revived before the Arbitrator.

The Bench agreed with the Single Judge. It held that once a claim is withdrawn, it goes entirely out of the hands of the Arbitrator. The Court found that a reading of the final amended statement of claims did not support the appellants' contention that the AMR claim had been formally reintroduced. More importantly, the appellants had moved the NCLT claiming the same AMR amounts, which the Bench viewed as a deliberate and unambiguous election to pursue that claim in a separate forum. The argument that the Arbitrator had awarded compensation and not AMR was rejected, as the award itself used the AMR figure as the standard for measuring that compensation.

On the question of interference under Section 37, the Bench reiterated that the scope of appellate review is very limited and that the impugned Single Judge order did not suffer from any infirmity. The appeal was accordingly dismissed.

The Court also noted that neither the judgments on scope of Sections 34 and 37 nor those on an arbitrator's power to award interest had any application to the facts of this case, since the fundamental defect was one of jurisdiction arising from withdrawal of the claim.