Supreme Court Holds Arbitral Tribunal Cannot Rewrite Contract or Grant Relief Beyond Its Terms

The Supreme Court has held that the powers of arbitral tribunal do not extend to rewriting the parties' contract or granting relief that contradicts its terms. The ruling in a property development dispute came from a bench of Justices Sanjay Kumar and Sanjeev Sachdeva. It was reported on October 29, 2026. A majority award that had granted specific performance beyond the agreement did not survive.

That reference came out of a property development transaction. The available account of the order does not set out the shares, payment terms or development milestones. Differences arose over performance and over what claims the contract allowed. Those claims went to arbitration for decision under the agreement.

By a majority, the tribunal granted relief that went past the contract. It included specific performance, an order that compels performance in kind rather than payment of damages. The award was challenged on the ground that this relief contradicted the terms the parties had accepted. The Court's account centres on that majority award.

Party autonomy anchored the Court's answer. Arbitration draws its life from consent and from the written agreement. The bench held that a tribunal has no power to recast the bargain to reach what it sees as a fair result. It must apply the contract, not replace it.

Majority award went beyond agreement

Specific performance formed the centre of the challenge. Under Indian law the remedy stays within the conditions set by the contract and the statute on relief. A direction to perform cannot create a fresh obligation or stretch an existing one past its agreed limits. The Court took the view that the majority award had crossed that line by directing performance the contract did not permit.

Court ties authority to contract

Arbitration is a creature of agreement. Parties choose the forum, fix its remit through the arbitration clause and the claims referred, and define rights and duties through the underlying contract. From that premise, the bench restated the rule that a tribunal decides according to the terms of the contract. It cannot add, subtract or alter those terms on its own sense of equity, even if the result is harsh for one side.

Limits on powers of arbitral tribunal

Practitioners will read the discussion of the powers of arbitral tribunal as a link between procedure and substance. Textbooks describe the powers duties and jurisdiction of an arbitral tribunal in a familiar order. Jurisdiction comes from the arbitration agreement and the reference. Duties include fairness, equal treatment and fidelity to the applicable law. Powers cover conduct of proceedings, assessment of evidence and grant of relief. Each power, the Court indicated, remains bounded by the contract. A tribunal can interpret ambiguous language. It cannot write a fresh bargain.

Under Indian law, the reading fits the structure powers and functions of arbitral tribunal. The statute requires the tribunal to decide in accordance with the terms of the contract and to take trade usages into account where relevant. Courts have set aside or refused to enforce awards where the tribunal travelled outside that mandate. The present order follows that line. It restates that the contract supplies both the claim and the limit of relief.

Property development contracts show why the point matters. Such agreements link payment, title, approvals, construction stages and timelines for handing over built-up areas or plots. A change in one element can affect timing of performance and the remedy for breach. A direction to convey or build beyond the agreed share, area or schedule shifts the economic balance. The party ordered to do more bears a burden never accepted. The other party gains an advantage never bargained for.

The same logic governed specific performance. The remedy forces performance in its agreed form. It does not enlarge what must be performed. Where the contract provides for damages, refund, adjustment of price or termination on defined events, those stipulations guide relief. A tribunal that orders a different thing, or performance on different terms, departs from its mandate. The bench held that departure cannot stand because the tribunal thought it just.