In Delhi Development Authority v. Jaksons Developers (P) Ltd. (FAO(OS) (COMM) 192/2026, pronounced 6 November 2026), a Division Bench of the High Court of Delhi dismissed DDA’s appeal under Section 37 of the Arbitration and Conciliation Act and upheld a Single Judge’s ruling that the developer is entitled to the interest accrued on the fixed deposit into which its encashed Rs 9.30 crore performance bank guarantee had been parked. Having been held not entitled to invoke the guarantee at all, DDA could not keep the fruits of the encashment — and severing the offending direction from the award, post Gayatri Balasamy, was permissible.
The case in one view
| Case | DDA v. Jaksons Developers (P) Ltd., FAO(OS) (COMM) 192/2026 |
|---|---|
| Bench | Dinesh Mehta and Dr. Aditi Choudhary, JJ., High Court of Delhi |
| Pronounced | 6 November 2026 (reserved 13 October 2026) |
| Provisions | Sections 17, 31(7), 33, 34 and 37, Arbitration and Conciliation Act, 1996 |
| Outcome | Appeal dismissed; developer entitled to the FDR interest |
The background
DDA allotted the developer a hotel plot in Rohini in January 2008 for the 2010 Commonwealth Games, secured by a Rs 9.30 crore performance bank guarantee. Alleging delay, DDA moved to invoke the guarantee in May 2010; stays under Sections 9 and 17 intervened; the hotel became operational in September 2010 and was used for the Games. In October 2013 the arbitrator permitted DDA to encash the guarantee, but on terms: the proceeds would sit in a fixed deposit, and the interest would abide the outcome of the arbitration.
The 2023 award went against DDA on the central question — it was never entitled to invoke the guarantee — and ordered the Rs 9.30 crore released to the developer. But by an addendum under Section 33, the arbitrator withheld the FDR interest, reasoning that the developer’s separate interest claim had been rejected. The developer’s limited Section 34 challenge to that withholding succeeded before a Single Judge in May 2026. DDA appealed.
Internal inconsistency as patent illegality
The Division Bench’s reasoning runs in a straight line. The FDR was a creature of the Section 17 interim order — a holding arrangement whose whole point was that the money’s ultimate owner would take it with its earnings. Once the award held DDA’s invocation wrongful, allowing DDA to keep the interest inverted that arrangement and contradicted the award’s own logic, the more so as DDA’s counter-claim for interest on the guarantee had itself been rejected.
From the judgment: “There is no reasoned finding recorded in the award for denying interest accrued on the FDR to JDPL.” And the principle, in a phrase: “the interest of the FDR is nothing but the fruit of the principal amount of the FDR.”
Section 31(7) did not assist DDA, because the encashed guarantee was not “the sum for which the award is made”; the FDR interest was not award interest at all, but an accretion to secured money.
The Gayatri Balasamy objection
DDA’s structural argument was that the Section 34 court had modified the award, which courts cannot do. The Bench disagreed on severability: the developer’s rejected interest claim (Claim 8) never encompassed the FDR interest, so the withholding direction stood apart from the merits and could be severed without rewriting the award. The distinction matters after Gayatri Balasamy: setting aside a severable, inconsistent direction is within Section 34; substituting the court’s view on a decided claim is not.
What the decision means in practice
The wider frame
The judgment sits at the intersection of two live themes in Indian arbitration law: the limits on judicial interference with awards after Gayatri Balasamy, and the restitutionary logic governing security furnished under interim orders. The Division Bench’s resolution — interference confined to a severable inconsistency, restitution extended to the fruits of the secured sum — offers a tidy template for both. For infrastructure and real-estate disputes in Delhi, where performance guarantees are invoked early and litigated for a decade, the practical rule is now crisply stated at Division Bench level.
Frequently Asked Questions
What was the dispute about?
A Rohini hotel plot allotted by DDA in 2008 for the 2010 Commonwealth Games, backed by a Rs 9.30 crore performance bank guarantee. DDA moved to invoke the guarantee for delay in 2010; interim orders followed; in 2013 the arbitrator allowed encashment but directed the proceeds into an FDR whose interest would abide the outcome. The 2023 award held DDA was never entitled to invoke the guarantee and ordered the Rs 9.30 crore returned — but an addendum withheld the FDR interest.
Why was withholding the FDR interest patently illegal?
Because it made the award internally inconsistent. Once the arbitrator held DDA could not invoke the guarantee, letting DDA retain the interest earned on the encashed money defeated the very purpose of the Section 17 interim arrangement — and DDA's own counter-claim for interest on the guarantee had been rejected. As the courts put it, the interest of the FDR is nothing but the fruit of the principal amount of the FDR.
Did the Section 34 court impermissibly modify the award?
No. DDA argued, on Gayatri Balasamy, that courts cannot modify awards. The Bench held the FDR-interest direction was severable: the developer's rejected interest claim never covered the FDR interest, so striking the withholding direction did not rewrite the merits — it removed an inconsistent, unreasoned direction, which remains within the Section 34 court's powers.
What is the scope of a Section 37 appeal?
Narrow. Within the limits set by MMTC v. Vedanta, the appellate court examines whether the Section 34 court stayed within its statutory bounds; it does not re-hear the award. Finding the Single Judge's reasoning sound, the Division Bench dismissed the appeal.