Supreme Court of India
LARSEN AND TOUBRO LIMITEDversusPURI CONSTRUCTION PVT. LTD. AND OTHERS
- Citation
- 2025 INSC 523
- Decided
- 21 April 2025
- Disposal
- Dismissed
- Bench
- ABHAY S OKA
Holding
A court cannot modify an arbitral award; it may only set aside or confirm it under Sections 34 and 37 of the Arbitration Act, and thus the Division Bench did not modify the award.
Summary
Larsen & Toubro (L&T) and Puri Construction Ltd (PCL) entered into a Development Agreement for land development, later supplemented by a Supplementary Agreement and a Tripartite Agreement involving a bank. Disputes arose over alleged economic duress, non‑fulfilment of conditions precedent, and L&T's abandonment of the project, leading to an arbitral award that imposed monetary liability on L&T. A Single Judge set aside the award under s.34 of the Arbitration Act, but the Delhi High Court Division Bench partially restored findings, upheld the award’s cost order, and left the quantification of damages open. L&T and PCL appealed, raising the question whether the court could modify an award by partially setting it aside. The Supreme Court held that under s.34 and s.37 the court's power is limited to setting aside or confirming an award, not modifying it, and therefore the Division Bench did not modify the award. Consequently, the appeals were dismissed, the award’s monetary liability remains set aside, costs to PCL are upheld, and the parties must pursue appropriate legal remedies.
Issues considered
- The scope of power of a court under Section 34 of the Arbitration and Conciliation Act, 1996 to partly set aside an arbitral award
- Whether the appellate court under Section 37 can modify an award in a manner not permitted under Section 34
- Whether the Supplementary Agreement is a non‑starter and vitiated by economic duress
- Whether L&T committed a fundamental breach of the Development Agreement
- Whether the quantification of damages (Rs.35 crores) and other monetary awards can be set aside
- Whether the court can remand the matter to the arbitral tribunal for quantification of the monetary claim
- Whether the award’s cost order can be confirmed
Legislation cited
- Arbitration and Conciliation Act, 1996s. 34, s. 37
- Code of Civil Procedure, 1908s. 96
- Contract Act, 1872s. 16(3), s. 73
- Income Tax Act, 1961s. 37-I
Headnote
Issue for Consideration In petition u/s.34, Arbitration and Conciliation Act, 1996, Single Judge had set aside the Arbitral Award. Division Bench in appeal thereagainst u/s.37, Arbitration Act by way of the impugned judgment, inter alia upheld the dismissal of L&T’s counter-claim findings of the Arbitral Tribunal that the Supplementary Agreement was a non-starter as it was vitiated by economic duress; that the Development Agreement was not novated by the Supplementary Agreement; that L&T committed fundamental breach of the Development Agreement. The operative part of
Subjects
Power of court under s.34 Arbitration ActPower of appellate court under s.37 Arbitration ActArbitral award modificationEconomic duressSupplementary Agreement non‑starterFundamental breachSection 73 Contract Act damagesCost of arbitrationLimited jurisdiction of courts in arbitration
Judgment
[2025] 4 S.C.R. 2811 : 2025 INSC 523
Larsen and Toubro Limited
v.
Puri Construction Pvt. Ltd. and Others
(Civil Appeal No(s). 2575-2578 of 2016)
21 April 2025
[Abhay S. Oka* and Pankaj Mithal, JJ.]
Issue for Consideration
In petition u/s.34, Arbitration and Conciliation Act, 1996, Single
Judge had set aside the Arbitral Award. Division Bench in appeal
thereagainst u/s.37, Arbitration Act by way of the impugned
judgment, inter alia upheld the dismissal of L&T’s counter-claim
and agreed with the findings of the Arbitral Tribunal that the
Supplementary Agreement was a non-starter as it was vitiated
by economic duress; that the Development Agreement was not
novated by the Supplementary Agreement; that L&T committed
fundamental breach of the Development Agreement. The operative
part of the award fixing the monetary liability of L&T was set aside
while leaving open the remedy of PCL for the quantification of
the monetary claim. The award regarding costs was confirmed
however, the Division Bench did not restore any part of the arbitral
award and the parties were left to pursue the appropriate course of
action. Issue as regards the correctness of the impugned judgment,
challenged by both, L&T and PCL; power of the court u/s.34,
Arbitration Act of partly setting aside the award; whether in the
facts and circumstances of the present case, the Division Bench
modified the Award by partly setting aside the judgment u/s.34.
Headnotes†
Arbitration and Conciliation Act, 1996 – ss.34, 37 – Puri
Construction Limited and its sister concerns (‘PCL’) were in
possession of certain lands as the owner – PCL had entered
into a joint venture with ITC Classic Real Estate Finance Limited
(ITCREF) for the development of lands, however, ultimately,
ITCREF exited from the business – L&T and PCL entered into an
agreement for land development (Development Agreement) –
Later, a supplementary agreement was entered into between
them on the basis of which a Tripartite Agreement was entered
* Author
2812 [2025] 4 S.C.R.
Supreme Court Reports
into between PCL, L&T and the Bank – Disputes arose – Arbitral
Award was passed holding inter alia that L&T jeopardised
PCL’s obligations towards ITCREF; it resiled from and went
back upon its original contractual obligations and tried to
effect sales without sanction under the revised development
plan and without making any provision for the responsibility
towards ITCREF; L&T abandoned the Development Agreement;
Supplementary Agreement was tainted by economic coercion
and the signatures of PCL were obtained by fraud – In petition
u/s.34, Single Judge set aside the award – By the impugned
judgment, Division Bench disagreed with certain findings of
the Single Judge, allowing the appeals preferred by PCL to that
extent and the appeal by L&T was dismissed – However, the
parties were left to pursue the appropriate course of actions
under law – Challenge to, by both PCL and L&T:
Held: 1.1 Powers of the Appellate Court u/s.37 of the Arbitration
Act are not broader than those of the Court u/s.34 of the Arbitration
Act – Therefore, what cannot be done in the exercise of the powers
u/s.34 cannot be done in an Appeal u/s.37 – An Arbitral Award
cannot be modified – In the present case, the Division Bench
has not modified the award by partly setting aside the Judgment
u/s.34 – The remedy of PCL was kept open to pursue appropriate
course of action under law as there cannot be a remand to the
Arbitral Tribunal for quantification of monetary claim – As the
finding of the Arbitral Tribunal regarding breaches committed by
L&T was affirmed, the Division Bench rightly segregated that part
of the award by which, cost of arbitration was ordered to be paid
to PCL by L&T – As documents of title were deposited with the
Registrar, the direction to hand over the same to PCL cannot be
faulted with. [Para 56]
1.2 In view of the clauses in the Supplementary Agreement, the
finding recorded by the Tribunal that, as the conditions precedent
in the relevant clauses were not complied with by L&T, the
Supplementary Agreement was a non-starter is a possible finding
which could not have been interfered with u/s.34 of the Arbitration
Act – Moreover, it is a finding of fact. [Para 46]
1.3 Further, after examining the evidence, the Division Bench
held that there was no patent illegality in the findings recorded by
the Arbitral Tribunal that the Supplementary Agreement and the
Tripartite Agreement were tainted by coercion – On facts, such a
[2025] 4 S.C.R. 2813
Larsen and Toubro Limited v. Puri Construction Pvt. Ltd. and Others
view by the Arbitral Tribunal is not contrary to justice and morality –
View taken by the Division Bench, agreed with. [Para 48]
1.4 The finding recorded by the Tribunal that L&T committed
fundamental breaches of the agreement cannot be interfered
within the limited jurisdiction u/s.34 of the Arbitration Act. [Para 49]
1.5 Division Bench accepted the correctness of the finding recorded
by the Tribunal that there was an abandonment of the project on
the part of L&T – It rightly declined to find fault with the findings
recorded by the Tribunal on this aspect based on evidence – Such
conduct on the part of L&T caused loss to PCL, which ultimately
resulted in the termination of the Development Agreement – The
issues based on the rejection of the counter-claim of L&T were rightly
addressed by the Division Bench on the ground that there were no
submissions made on the rejection of the counter claim before the
Single Judge in a petition u/s.34 of the Arbitration Act. [Para 50]
1.6 Division Bench dealt with the Tribunal’s direction to L&T to pay
Rs. 50 crores to PCL on crystallization of ITCREF’s claims – It
held that the type and kind of losses incurred by ITCREF would
not be reasonably foreseeable for PCL to be indemnified against –
Therefore, the Division Bench rightly observed that while granting
a sum of Rs. 50 crores to PCL, the Tribunal went overboard – Said
finding of the Division Bench cannot be faulted with. [Para 51]
1.7 As regards the damages of the sum of Rs. 35 crores to be
paid by L&T to PCL on account of breach of the Development
Agreement, the basis taken by the Tribunal was the figures given
by L&T in its counter-claim – Division Bench held that instead of
basing the findings on the figures set out by L&T in its counter-
claim, the correct approach would have been to determine the
prevailing market rate for sale of built-up area at the time of the
breach and thereupon determine the proceeds that PCL would
have received from the sale of its 25 per cent share under the
Development Agreement – Therefore, the award of Rs.35 crores
as damages was fundamentally contrary to s.73 of the Contract
Act – Such an approach was completely contrary to substantive
law in the form of s.73 – This finding cannot be disturbed – As the
termination of the Development Agreement is upheld, L&T cannot
deal with the property in any manner and PCL can always deal
with the same. [Paras 52, 54]
Practice and Procedure – Arbitration and Conciliation Act,
1996 – ss.34, 37 – Limited jurisdiction of Courts in proceedings
2814 [2025] 4 S.C.R.
Supreme Court Reports
under – Unnecessary long oral submissions or bulky written
submission in arbitration matters, matter of concern –
Observation as regards the need for imposing time limit on
oral submissions. [Para 58]
Case Law Cited
Project Director, National Highways No. 45 E and 220, National
Highways Authority of India v. M. Hakeem and Another [2021] 5
SCR 368 : (2021) 9 SCC 1 – relied on.
Dyna Technologies Private Limited v. Crompton Greaves Limited
[2019] 15 SCR 295 : (2019) 20 SCC 1; Associate Builders v. Delhi
Development Authority [2014] 13 SCR 895 : (2015) 3 SCC 49;
S.V. Samudram v. State of Karnataka and Another [2024] 1 SCR
281 : (2024) 3 SCC 623; McDermott International Inc. v. Burn
Standard Co. Ltd. & Ors. [2006] Supp. 2 SCR 409 : (2006) 11
SCC 181 – referred to.
List of Acts
Arbitration and Conciliation Act, 1996; Code of Civil Procedure,
1908; Contract Act, 1872; Income Tax Act, 1961.
List of Keywords
Power of the court u/s.34, Arbitration and Conciliation Act, 1996
of partly setting aside the award; Power of court to modify award
u/s.34, Arbitration and Conciliation Act, 1996; Powers of the
Appellate Court u/s.37, Arbitration and Conciliation Act, 1996;
Arbitral Award cannot be modified; Supplementary Agreement;
Tripartite Agreement; Development Agreement; Supplementary
Agreement was a non-starter; Supplementary Agreement and
Tripartite Agreement tainted by coercion; Coercion; Economic
duress; Abandonment of the project; Termination of Development
Agreement upheld; Rejection of counter claim; Fundamental breach
of Development Agreement; Puri Construction Limited (‘PCL’);
Larsen and Toubro Limited (‘L&T’); Limited jurisdiction under Section
34, Arbitration and Conciliation Act, 1996; Limited jurisdiction of
Courts under Sections 34 and 37, Arbitration and Conciliation Act,
1996; Bulky written submissions; Long oral arguments; Lengthy
judgments; Time limit on oral submissions; External Development
Charges; Non-payment of External Development Charges;
Unilaterally abandoning the project; Development of lands; Novated;
Agreement of indemnity; Rejection of counter-claim.
[2025] 4 S.C.R. 2815
Larsen and Toubro Limited v. Puri Construction Pvt. Ltd. and Others
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No(s). 2575-2578
of 2016
From the Judgment and Order dated 30.04.2015 of the High Court
of Delhi at New Delhi in FAO No. 194, 21, 22, and 23 of 2009
With
Civil Appeal No(s). 2580-2581 and 2579 of 2016
Appearances for Parties
Advs. for the Appellant:
Akhil Sibal, C. A. Sundaram, Krishnan Venugopal, Sr. Advs., Saheer
Parekh, Sumit Goel, Ms. Sreeparna Basak, Ms. Abhishek Thakral,
Jayant Bajaj, Ishaan Nagar, Ms. Deboshree Mukherjee, Ms. Aditi
Phatak, M/s. Parekh & Co., M. R. Shamshad, Aditya Samaddar,
Arijit Sarkar, Ms. Nabeela Jamil, Abhimanyu Bhandari, Ms. Rooh-
e-hina Dua, Zafar Inayat, Ms. Shreya Arora, J. Rajesh, Krishnan
Agarwal, Avinash Mathur.
Advs. for the Respondents:
C. A. Sundaram, Akhil Sibal, Sr. Advs., M. R. Shamshad, Aditya
Samaddar, Arijit Sarkar, Ms. Nabeela Jamil, Ms. Rohini Musa,
Zaffar Inayat, Mohd. Ajmal, Shashank Singh, Saheer Parekh,
Sumit Goel, Ms. Sreeparna Basak, Ms. Abhishek Thakral, Jayant
Bajaj, Ishaan Nagar, Ms. Deboshree Mukherjee, Ms. Aditi Phatak,
M/s. Parekh & Co.
Judgment / Order of the Supreme Court
Judgment
Abhay S. Oka, J.
FACTUAL ASPECTS
1. These appeals arise out of the judgment and order dated 30th April,
2015, passed by the Division Bench of Delhi High Court on the appeals
preferred under Section 37 of the Arbitration and Conciliation Act,
1996 (for short, ‘the Arbitration Act’). The appeals before the Division
Bench were preferred against the judgment dated 26th November,
2008 of the learned Single Judge in a petition under Section 34 of
2816 [2025] 4 S.C.R.
Supreme Court Reports
the Arbitration Act by which the award of the Arbitral Tribunal was
set aside. The Division Bench, by the impugned judgment, has
disagreed with some of the findings recorded by the learned Single
Judge. To that extent, the appeals preferred by Puri Construction
Private Limited and Mohinder Puri have been allowed. The appeal
by Larsen and Toubro Limited was dismissed. However, the Division
Bench observed that the parties are left to pursue the appropriate
course of actions under law.
2. In these appeals, we are concerned with a company, Puri Construction
Limited and its sister concerns (collectively referred to as ‘PCL’).
We are also concerned with another company, Larsen and Toubro
Limited (hereafter referred to as ‘L&T’). PCL was in possession
of lands in the Gurgaon District, Haryana, as the owner thereof.
PCL had obtained licenses from the Director Town and Country
Planning, Haryana (for short, ‘the DTCP’) to develop the lands for
residential group housing schemes. Earlier, PCL had entered into
a joint venture with ITC Classic Real Estate Finance Limited (for
short, ‘ITCREF’) under the name Florentine Estates of India Limited
for the development of the lands. Ultimately, ITCREF exited from
the business. An Exit Agreement dated 30th July, 1997 was made,
which, inter alia, stipulated that PCL would transfer to ITCREF the
built-up space of 1,95,000 sq. ft. in the project. Thereafter, L&T was
introduced to complete the project.
3. L&T and PCL entered into an agreement for land development (for
short ‘the Development Agreement’) on 19th January, 1998, but the
date mentioned therein was 10th March, 1998. Subsequently, since
L&T was of the opinion that there was a recessionary trend in the real
estate market due to which the project was required to be down-sized,
a supplementary agreement was entered into between L&T and PCL
on 30th December, 1999 (for short ‘the Supplementary Agreement’).
Based on the Supplementary Agreement, a Tripartite Agreement
dated 10th January, 2000 (for short, ‘the Tripartite Agreement’) was
entered into between PCL, L&T and Lord Krishna Bank (for short
‘the Bank’).
4. Broadly, in the Development Agreement, it was provided as under:
(a) L&T will develop the entire property mentioned in Schedule
‘A’ of the Agreement, including the part allocated to PCL, at
its own cost;
[2025] 4 S.C.R. 2817
Larsen and Toubro Limited v. Puri Construction Pvt. Ltd. and Others
(b) In phase-I of development, L&T will develop a portion of
Schedule ‘A’ property as described in Schedule ‘B’. An area
of 18.025 acres will be developed by L&T within 60 months in
phase-I. In phase-II of the development, L&T was to develop
the remaining portion as mutually acceptable to the parties in
view of the prevailing market conditions;
(c) The ratio of division in the developed property between PCL
and L&T was agreed to be 25% and 75% respectively;
(d) ITCREF was to get an area of 2,20,416 sq. ft. from the property
allocated to PCL;
(e) PCL agreed to pay all External Development Charges (for
short, ‘EDC’) up to the date of the development agreement.
The liability to pay EDC was to be of L&T after receiving No
Objection Certificate (for short ‘NOC’);
(f) L&T was to complete the construction of Phase-I in 60 months,
which was subject to extension in view of prevailing market
conditions; and
(g) L&T will not be deemed to be in default if performance of its
obligations under the development agreement is delayed, inter
alia, due to the prevailing market conditions.
5. The Supplementary Agreement incorporated the following clauses:
(a) The terms of the Development Agreement will continue to bind
the parties unless otherwise agreed in the in the Supplementary
Agreement, which shall come into effect after happening of the
following events:
i. L&T taking over or replacing bank guarantees furnished
by PCL to DTCP;
ii. The bank paying EDC amounting to Rs. 6 crores to DTCP;
iii. Reimbursement of expenses incurred by PCL by L&T; and
iv. Compliance with the terms and conditions of the Tripartite
Agreement made by L&T by paying Rs.5.14 crores to the
Lord Krishna Bank (“the Bank”).
(b) L&T will furnish bank guarantees to DTCP after approval of the
term loan by the bank to PCL;
2818 [2025] 4 S.C.R.
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(c) L&T will pay the EDC of Rs. 6 crores paid by PCL through the
bank and the remaining EDC Charges within 18 months;
(d) L&T agreed to commence construction work for 3.84 lac sq.ft.
of the development, subject to achieving a confirmed booking/
selling target of 75% in phase-I area; and
(e) The Agreement would not be construed as a waiver of any
right that has accrued for the extension or termination under
the Development Agreement.
6. In the Tripartite Agreement, it was provided as under:
(a) The Bank will pay a sum of Rs. 6 crores towards EDC to DTCP
on behalf of PCL, which will constitute a term loan to PCL. The
loan will be secured by 15 acres of land already mortgaged by
PCL to the Bank;
(b) The Bank will issue a bank guarantee of Rs. 4.66 crores to
DTCP on behalf of L&T; and
(c) L&T will pay the Bank a sum of Rs. 5.19 crores on behalf of
PCL to discharge the loan availed for payment of EDC on or
before 19th January, 2000.
7. We may note here that there was an arbitration to which ITCREF and
PCL were parties. A consent award was passed on 13th May, 2000,
in favour of ITCREF requiring PCL to allot 1,06,200 sq. ft. to ITCREF.
8. PCL by letter dated 18th December, 2000, terminated the Development
Agreement with L&T inter alia, on the grounds of:
(a) Failure to allocate area to ITCREF;
(b) Non-sanctioning of funds towards the development; and
(c) Non-payment of EDC; and
(d) Other breaches in relation of non-commencement of work.
9. Delhi High Court referred the dispute between PCL and L&T to a
Sole Arbitrator. Broadly, the following were the prayers made by PCL
before the Arbitral Tribunal:
(a) Direct L&T to satisfy the loan availed from the Bank and to
obtain the release of the title-deeds in respect of 15 acres of
land placed by PCL with the Bank as security;
[2025] 4 S.C.R. 2819
Larsen and Toubro Limited v. Puri Construction Pvt. Ltd. and Others
(b) Direct L&T to return the title-deeds of the rest of the lands to
PCL;
(c) Direct L&T to return the sanctioned development plans and
other documents, including licences, permits, permissions etc;
(d) Issue a permanent injunction against L&T restraining it from
interfering with any of PCL’s rights to develop the property; and
(e) For grant of compensation and damages to the tune of Rs. 300
crores and Rs. 100 crores respectively.
10. L&T filed a counter-claim before the Arbitral Tribunal, making the
following prayers:
(a) Declare that PCL has no authority to rescind the contract;
(b) Grant compensation and damages to L&T to the tune of
Rs. 280 crores due to the wrongful rescission of the agreement
by PCL. Rs. 280 crores were claimed as the reimbursement
amount of profit which L&T would have received by developing
75% of the area; and
(c) Grant reimbursement to L&T of Rs. 8,31,53,968/- as the
amount spent by it towards fulfilling the obligations under the
Development Agreement.
11. The Arbitral Award was made on 28th December, 2002. The Arbitral
Tribunal held that:
(a) L&T jeopardised PCL’s obligations towards ITCREF;
(b) L&T resiled from and went back upon its original contractual
obligations and tried to effect sales without sanction under the
revised development plan and without making any provision
for the responsibility towards ITCREF;
(c) L&T had consciously decided to abandon the Development
Agreement and omitted to pay EDC and also defaulted in the
fulfilment of its obligation to the statutory authorities, ITCREF,
as well as the Bank;
(d) The object of the Supplementary Agreement was unlawful as it
sought to defeat the beneficial interest of ITCREF, which was
a signing party to the Development Agreement; and
(e) The Supplementary Agreement was tainted by economic
coercion, and the signatures of PCL were obtained by fraud.
2820 [2025] 4 S.C.R.
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12. The operative award is as follows:
“ I. An Award in favour of the Claimants directing the
Respondent to pay Rs. 35 Crores to the Claimants on
account of damages suffered by the Claimants within four
weeks from the date of the award;
II. An Award in favour of the Claimants, directing the
Respondent to settle the claim of Lord Krishna Bank
within 4 weeks of the Award by repayment of loan of
Rs. 6 Crores with such interest that may be due and payable
to Lord Krishna Bank and further directing the Respondent
to secure the release of title deeds from the said bank
and to reimburse the claimant’s interest charges paid by
Puri Construction Ltd. to Lord Krishna Bank in interregnum;
within a period of four weeks from the date of this award.
In default thereof, the Respondent will pay to the Claimants
a sum of Rs. 75 Crores for loss of saleable area in respect
of 15 acres of land placed in mortgage with the said bank
within a period of four weeks from the date of this Award.;
III. An Award in favour of the claimants directing the
Respondent to return licences permits and permissions
obtained by the Claimants from the statutory authorities
in respect of the lands covered by the Development
Agreement dated 10.3.1998 within 4 weeks of this Award to
the Managing Director of Puri Construction Ltd. and obtain
a certificate of discharge to that effect granted by the said
Puri Construction Ltd. or in lieu thereof the Respondent
will pay to the Claimants a sum of Rs. 5 Crores by way
of damages within a period of four weeks from the date
of this Award;
IV. An Award in favour of the Claimants directing that the
Respondent or anybody claiming under the Respondent is
permanently injuncted by restraining them from interfering
in any way or manner with the rights of the claimants to
develop the property covered under the said Agreement
dated 10.3.1998;
V. An Award in favour of the Claimants, directing the
Respondent to indemnify the Claimants in terms of
[2025] 4 S.C.R. 2821
Larsen and Toubro Limited v. Puri Construction Pvt. Ltd. and Others
Clauses 4(b) and 25 of the Development Agreement
dated 10.3.1998 for any action or decree or settlement to
be enforced by ITCREF against the Claimants or in lieu
thereof shall pay to the Claimants a sum of Rs. 50 Crores
on such date as such action or decree or settlement to
be enforced by ITCREF against the Claimants becomes
crystallized;
VI. An Award in favour of the Claimants, directing the
Respondent to pay cost of the Arbitration proceedings
quantified at Rs. 30 lakhs within a period of four weeks
from the date of the Award;
VII. An Award in favour of the Claimants, directing the
Respondent to pay interest to the Claimants @ 12% p.a.
on the sums awarded hereinabove commencing on four
weeks from the date of this Award till actual payment made
by the Respondent.”
13. The learned Single Judge in a petition under Section 34 of the
Arbitration Act had set aside the Arbitral Award. The Division Bench by
the impugned judgment upheld the dismissal of L&T’s counter-claim.
The Division Bench upheld the findings of the Arbitral Tribunal that
the Supplementary Agreement was a non-starter as it was vitiated
by economic duress. The Division Bench also upheld the Arbitral
Tribunal’s finding that the Development Agreement was not novated
by the Supplementary Agreement. Division Bench also upheld the
Tribunal’s finding that conditions to be fulfilled by L&T, subject to
which the Supplementary Agreement was to come into force, were not
fulfilled. However, the Tribunal’s quantification of damages for breach
of contract, amounting to a sum of Rs. 35 crores, and compensation
in lieu of securing title deeds with respect to 15 acres of land,
amounting to Rs. 75 crores, as well as compensation for default in
returning licences and permits, amounting to Rs. 5 crores, was set
aside. The permanent injunction granted in favour of PCL, restraining
L&T from interfering with PCL’s development of the Schedule ‘A’
property under the Development Agreement, was upheld. Even the
relief granted of indemnification in favour of PCL for ITCREF’s claim
was set aside without prejudice to the indemnification for ITCREF’s
claim relating to the transfer of 2,20,416 sq. ft of land to the extent
envisaged under the Development Agreement. The Division Bench
2822 [2025] 4 S.C.R.
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upheld the Arbitral Tribunal’s order to the extent that it awarded
the cost of arbitration to PCL. The title deeds deposited with the
Registrar of the High Court were ordered to be released to PCL. In
the light of the above directions and conclusions, the parties were
allowed to pursue their appropriate course of action. The Division
Bench allowed three appeals preferred by PCL in part and dismissed
the appeal preferred by L&T. Both PCL and L&T, aggrieved by the
Division Bench’s decision, preferred the present Civil Appeals.
SUBMISSIONS
14. Very detailed submissions have been made on behalf of both parties.
We are reproducing the gist of the submissions made by the counsel
appearing for the parties.
15. Learned senior counsel appearing on behalf of L&T has made detailed
submissions after inviting our attention to the findings recorded by
the Arbitral Tribunal and by the courts under Sections 34 and 37 of
the Arbitration Act. The learned senior counsel submitted that though
Division Bench of the High Court has referred to the decision of this
court in the case of Project Director, National Highways No. 45 E
and 220, National Highways Authority of India v. M. Hakeem and
Another1, which holds that the court dealing with a petition under
Section 34 cannot modify the award, the Division Bench purported
to modify the award. He submitted that it is not permissible for the
court to uphold a part of the award and remand the remaining part
back to the Tribunal. He submitted that the decision of the Division
Bench is akin to setting aside the decree for upholding judgment.
He submitted that the reasoning in the award and its operative part
are intrinsically linked and the same cannot be severed. Moreover,
this is not a case where there are distinct and severable claims. He
submitted that the effect of the impugned judgment of the Division
Bench is that PCL would get a chance to improve upon the pleadings
by initiating fresh arbitration before the Tribunal. But, L&T’s doors
would be closed for a fresh adjudication in view of the findings
rendered in the award.
16. According to the learned senior counsel, the Division Bench has set
aside the award directing payment of Rs. 35 crores as damages
1 (2021) 9 SCC 1
[2025] 4 S.C.R. 2823
Larsen and Toubro Limited v. Puri Construction Pvt. Ltd. and Others
to PCL. He pointed out that the award contains a direction to L&T
to settle the claim of the Bank by repayment of the loan of Rs. 6
crores and to secure release of the title deeds from the Bank; in
default, L&T was directed to pay PCL a sum of Rs. 75 crores. The
first part of the relief for payment of Rs. 6 crores has been upheld
by the Division Bench, but the portion of the award in respect of
Rs. 75 crores has been set aside. The award contains a direction
against L&T to return licences, permits and permissions obtained by
PCL from statutory authorities in respect of the lands. On failure to
return the documents, L&T was directed to pay Rs. 5 crores to PCL.
However, the Division Bench has upheld the award directing return of
the documents, but has rejected the award to the extent of payment
of Rs. 5 crores. Moreover, an award-granting injunction against L&T
from interfering in any manner with the rights of PCL to develop the
property has been upheld. The award directed L&T to indemnify PCL
for any action, decree, or settlement to be enforced by ITCREF or,
in lieu thereof, to pay to PCL Rs. 50 crores. The Division Bench has
set aside this part of the award in its entirety. There was an order
of costs of arbitration to the tune of Rs. 30 lakhs in favour of PCL,
which has been confirmed. He submitted that, in fact, no licences,
permits, or permissions obtained from statutory authorities were in
possession of L&T. Moreover, the award in favour of the Bank is
perverse as L&T has sought specific performance of the contract;
there was no need to grant an injunction.
17. Now, coming to the interplay between the Development Agreement,
Supplementary Agreement and the Tripartite Agreement, he submitted
that the rights and obligations of the parties under the said agreements
have been decided by the Arbitral Tribunal without recording reasons.
He submitted that even PCL admitted that the conditions contained in
Sub-clauses (a) to (d) of Clause I of the Supplementary Agreement
were conditions precedent. However, the Tribunal misread the plain
terms of the Supplementary Agreement contrary to the pleadings and
without assigning any reason, has held that conditions precedent in
Clauses (I), (II) and (III) of the Supplementary Agreement have not
been fulfilled and therefore, the Supplementary Agreement was a
non-starter. He relied upon the decision of this Court in the case of
Dyna Technologies Private Limited v. Crompton Greaves Limited2.
2 (2019) 20 SCC 1
2824 [2025] 4 S.C.R.
Supreme Court Reports
18. The learned senior counsel further submitted that in Section 34
proceedings, reasons cannot be supplanted to the reasons recorded
in the award. He invited our attention to sub-clauses (a) to (d) of
Clause I of the Supplementary Agreement. His submission is that
the terms of the Supplementary Agreement were totally disregarded
by the Tribunal and relied on the original terms of the Development
Agreement. He submitted that the award is vitiated due to lack of
reasons. He submitted that the award made was contrary to the
pleadings. The learned senior counsel invited our attention to the
findings of the learned Single Judge in a petition under Section 34.
He submitted that the Division Bench supplanted its own reasons
to uphold the award. Further, the Division Bench tried to rewrite the
contract by including other clauses as conditions precedent. His
submission is that the Tribunal mixed up various unrelated issues with
issue no. 2 which pertains to economic coercion. He submitted that
the entire focus was on the alleged breach committed by L&T of the
Development Agreement and abandonment of the site. Unreasoned
finding has been given that the Supplementary Agreement and the
Tripartite Agreement were entered under compulsion. The Tribunal
failed to note that in the Statement of Claim as well as in the rejoinder
filed by PCL, there was assertion regarding the binding nature of
the Supplementary Agreement. One Mr. Mohinder Puri on behalf of
PCL filed an affidavit which was not only beyond the pleadings, but
also contrary to the same as he, for the first time, alleges exercise
of coercion to enter into Supplementary Agreement. Learned counsel
relied upon several documents to show that there was no coercion
and submitted that the Tribunal ignored the documents. He would,
therefore, submit that the award was vitiated in view of Section 28(1)
(a) of the Arbitration Act. He relied upon a decision of this Court in
the case of Associate Builders v. Delhi Development Authority3.
Learned counsel submitted that the view taken by the Tribunal is
not even a plausible view.
19. Learned senior counsel submitted that a finding was recorded by
the learned Single Judge in the Section 34 petition that the Arbitral
Tribunal could not have ignored all the correspondence and evidence
showing why the Supplementary Agreement was signed. The learned
Single Judge held that the award was self-contradictory and the
3 (2015) 3 SCC 49
[2025] 4 S.C.R. 2825
Larsen and Toubro Limited v. Puri Construction Pvt. Ltd. and Others
findings were mutually destructive inasmuch as while holding that
the Supplementary Agreement was entered into by compulsion, the
Tribunal, thereafter, purported to enforce the Tripartite Agreement.
Learned senior counsel pointed out that the Division Bench rejected
the objection of L&T that the plea of coercion was not taken by
holding that the Statement of Claim is not specific on the point of
coercion, but the plea taken in paragraph 136(5)(a) of the Statement
of Claim can be deemed sufficient. In fact, what is quoted was part
of PCL’s letter dated 18th December, 2000, in response to L&T’s
letter dated 10th July, 2000. It was urged that the above allegation
has nothing to do with economic coercion to compel PCL to enter
into Supplementary Agreement. It is submitted that Division Bench
has supplied reasons to justify the award which reasons were not
there in the award itself. In fact, the Division Bench went to the extent
of converting the plea of coercion into undue influence even when
there was no pleading to that effect.
20. The Arbitral Tribunal has rendered a contradictory finding that the
Supplementary Agreement was not operative, but, L&T cannot
be relieved of its obligations under the Tripartite Agreement and
thus, is bound to pay the Bank. Learned counsel reiterated that
the Tripartite Agreement flows from the Supplementary Agreement.
He pointed out that the Arbitral Tribunal held that L&T was bound
by the Tripartite Agreement and at the same time observed that
the Supplementary Agreement and the Tripartite Agreement were
signed by PCL under compulsion and in dire need of funding of EDC
payment. He submitted that the learned Single Judge has rightly held
that when the Supplementary Agreement was a non-starter, as per
the Tribunal, no relief could have been granted under the Tripartite
Agreement. Unfortunately, this argument has not been dealt with by
the Division Bench.
21. He invited our attention to Clause 26 of the Development Agreement
which provided that L&T was entitled to extension of time for
completing the construction in case of adverse market conditions. As
per Clause 34, L&T could not be treated in default of performance
of its obligation if it is delayed or prevented due to adverse market
conditions. He submitted that there were enough documents on
record to show that land prices were falling and prevailing market
conditions did not encourage development of land. He submitted
that though there was a specific pleading to that effect, the Arbitral
2826 [2025] 4 S.C.R.
Supreme Court Reports
Tribunal did not record any finding in the award with regard to the
market conditions and in fact, Clauses 26 and 34 of the Development
Agreement have been completely ignored. However, the learned
Single Judge noticed that there was material on record with respect
to the fall in real estate market and held that Arbitrator could not
have ignored all those correspondences and evidence showing why
the Supplementary Agreement was signed. The Division Bench
recorded the submission that the Tribunal has ignored Clauses 26
and 34 of the Development Agreement, but, has not dealt with the
submission and tried to supply its own reasons which were not found
in the award. Thus, the Division Bench acted beyond the scope of
Section 37 of the Arbitration Act.
22. The Arbitral Tribunal committed an error by directing L&T to make
payment to the Bank on the ground that L&T cannot be relieved of its
obligation to the Bank under the Tripartite Agreement. It is submitted
that the Bank was not a party to the proceedings and therefore, the
claim by the Bank was not before the Arbitral Tribunal. In fact, in the
affidavit in lieu of evidence filed by PCL, it was contended that the
Bank is a third party and any action by the Bank can be tried only
by the Debt Recovery Tribunal. Therefore, the submission is that the
award in favour of the Bank is vitiated under Section 28(1)(a)(iv).
He submitted that the said argument of L&T was accepted by the
learned Single Judge on the ground that the Bank was not a party
before the Tribunal and the Tripartite Agreement did not have an
arbitration clause. On this aspect, he pointed out the finding of the
Division Bench that the principal amount of Rs. 6 crores with interest
was an amount payable by L&T to the bank under the Development
Agreement. He submitted that, in fact, the said obligation can be
read only in the Tripartite Agreement.
23. Learned senior counsel submitted that L&T has suffered a loss of
Rs. 5.44 crores towards EDC. Though, the Tribunal had noted that
the EDC payment would normally be reimbursed, but it failed to offset
the same. Learned counsel pointed out that the sum of Rs. 8.10
crores was deposited under an interim order dated 24th January, 2003
passed by the learned Single Judge in Section 34 petition subject to
the outcome of the proceedings. An application for restitution was filed
by L&T in Section 34 proceedings. By order dated 8th January, 2011,
it was directed to be listed along with the appeal before the Division
Bench. However, the Division Bench has not dealt with the same. A
[2025] 4 S.C.R. 2827
Larsen and Toubro Limited v. Puri Construction Pvt. Ltd. and Others
prayer was made that L&T may be permitted to file an appropriate
application for restitution before the High Court.
24. The submission of the learned senior counsel is that the order of the
learned Single Judge in the Section 34 petition deserves to be upheld.
25. The learned senior counsel appearing for PCL pointed out that
basically two issues arise for consideration. The first is whether there
was a breach committed by L&T as held by the Arbitral Tribunal, and
the second question is whether, if the finding of breach committed by
L&T is upheld, the finding of the Arbitral Tribunal regarding damages
can be revived.
26. The learned senior counsel submitted that the scope of interference
in a petition under Section 34 of the Arbitration Act is now well
settled. He relied upon a decision of this Court in the case of
S.V. Samudram v. State of Karnataka and Another4. If the Arbitral
Tribunal’s view is a plausible view, it ought not be interfered with. To
arrive at a decision as to whether a plausible view has been taken,
the court would consider whether the Arbitrator has considered the
material forming part of the record and arrived at a plausible view in
an overall sense and not expect the Arbitrator to deal with the matter
and render a judgment with the detailed reasoning as is normally
found in decisions of the civil courts.
27. Learned senior counsel submitted that to examine the award in
supervisory jurisdiction under Section 34 of the Arbitration Act, the
court must be cautious and should defer to the view taken by the
Arbitral Tribunal even if the reasoning provided in the award is
implied. If the reasons recorded by the Arbitral Tribunal are intelligible,
the award cannot be set aside just because there were gaps in
the reasoning of conclusions reached by the Arbitral Tribunal. The
submission is that the award of the Arbitral Tribunal in the present
case is intelligible and contains adequate reasons. He pointed out
several findings recorded by the Arbitral Tribunal with reasons.
28. He submitted that L&T’s submission that Clause 26 read with Clause
34 of the Development Agreement permitted it to seek extension of
time is wholly misplaced considering the fact that L&T abandoned
the project because a decision was taken by L&T to do so. Only in
4 (2024) 3 SCC 623
2828 [2025] 4 S.C.R.
Supreme Court Reports
case L&T had paid EDC and there was no risk of losing the licences,
L&T could have invoked Clauses 26 and 34 of the Development
Agreement for delayed completion of construction. Admittedly, no
request was made by L&T for the grant of extension of time for
completing the construction with the undertaking of making payment of
EDC in terms of Clauses 19 and 25 of the Development Agreement,
which were never modified. Learned senior counsel submitted that
L&T was holding title deeds in relation to 25 acres of land and did
not return the title deeds. The title deeds in respect of the remaining
15 acres of land were with the Bank for securing the loan availed
for payment of EDC. The payment of EDC was the liability of L&T
as per the Development Agreement. He also pointed out that L&T
did not lead any of the evidence. The stand of L&T in considerations
of the overall findings of the learned Tribunal on breach of contract,
abandonment etc. is completely out of place and without any basis.
In fact, no issues were framed on the basis of Clauses 26 and 34
of the Development Agreement.
29. The conditions precedent in the Supplementary Agreement may be
read with their true intent and purport. Condition precedent no.1
also contains the binding nature of the Development Agreement,
except as agreed otherwise. Under the Supplementary Agreement,
payment of EDC, as per Clause 19 read with Clause 27 of the
Development Agreement, was continued. The developer was liable
to pay EDC over a period of 18 months in terms of the licence.
Condition precedent no. 1(a) expressly requisited the ‘replacing or
taking over’ of the bank guarantee furnished by PCL. He pointed out
the letter dated 15th March, 2000, addressed by PCL to the Bank,
where the request was made to continue with the bank guarantee
of PCL. However, at the same time, the request was made to
the bank to forthwith release the margin money of PCL. Learned
counsel submitted that L&T has made a false statement on oath
that the bank guarantee of PCL, with margin money and interest,
was released. Altogether, a new case was made out by L&T before
this court, as it was not pleaded before the Tribunal that the margin
money had been refunded and bank guarantees had been released.
In fact, PCL by letter dated 12th April, 2000 reminded L&T that fresh
bank guarantees were to be served as PCL’s guarantee was not
released. According to the specific pleading of PCL in the Statement
of Claims, a condition precedent for the coming into effect of the said
[2025] 4 S.C.R. 2829
Larsen and Toubro Limited v. Puri Construction Pvt. Ltd. and Others
agreement was replacing and taking over the bank guarantee. In the
Statement of defence-cum-counterclaim of L&T, it was claimed that
L&T had executed a counter bank guarantee. It was submitted that
attributing insufficient reasons in relation to non-satisfaction of the
condition precedent of the Supplementary Agreement is incorrect.
On 07th October, 1999, L&T had taken a clear stand that the report
submitted by the consultant was not favourable to pursue the project
and hence, they shall not pay EDC. Reliance was placed by learned
counsel on the Statement of Claims of L&T. He invited our attention
to the fact that on 26th October, 1999, PCL was again constrained
to put L&T on notice that there were serious defaults of the terms of
licences and the Development Agreement. It was submitted that L&T
was in possession of title deeds of area of 25 acres from 15th and
16th October, 1998. A submission was made that there were sufficient
facts pleaded in the pleadings to show coercion. He submitted
that non-payment of EDC as per Clause 19(b) of the Development
Agreement led to issuance of notice for cancellation of licences of
PCL. In the letter dated 07th October, 1999, L&T had taken a clear
stand that they will not pay EDC. Initially, on 8th December, 1998,
L&T’s stand was that it was their responsibility to pay EDC from
01st July, 1998. Thereafter, a stand was taken on 02nd April, 1999
that they will pay EDC only after launch of the project. L&T did not
pay Rs. 5 crores refundable advance to PCL. L&T instructed PCL
not to collect any cheque and on 08th April, 1999, L&T internally
instructed to demobilize resources from the site. The title deeds were
in possession of L&T and the same was pleaded in the Statement
of Claims. Learned counsel submitted that these all facts constituted
coercion. He also pointed out that with the consent of the parties,
the issue was framed on the plea of coercion being an issue no. 2,
and in fact, L&T accepted that there could be no grievance with the
procedure followed by the Arbitral Tribunal in framing issues. In fact,
in the final submission before the Arbitral Tribunal, L&T admitted
that the plea of economic duress was pleaded by PCL by pointing
out that the Supplementary Agreement was signed out of economic
duress and coercion.
30. He submitted that on the question whether the condition precedent
for the Supplementary Agreement was satisfied, L&T did not lead
evidence and evidence of PCL remained uncontroverted.
2830 [2025] 4 S.C.R.
Supreme Court Reports
31. As regards the contention that the relief granted in the award was
beyond the jurisdiction, learned counsel submitted that the arbitration
clause in the Development Agreement even covered disputes in
connection with the agreement. In fact, the Supplementary Agreement
refers to the fact that parties to the Development Agreement have
agreed to enter into a tripartite agreement with the Bank. In turn,
the tripartite agreement records that L&T and PCL had entered into
Development Agreement on 10th March 1998. The notice invoking
the arbitration clause refers to the three agreements, and even in
the petition filed under Section 11 of the Arbitration Act, the disputes
were set out in relation to the three agreements. By consent of the
parties, vide order dated 14th February, 2001, the disputes in relation
to all three agreements, including the determination of the liability of
ITCREF and the Bank, were referred to the Arbitral Tribunal. Before
the Arbitral Tribunal, L&T took the stand that it was its liability to ensure
payment to the Bank. Also, L&T took a stand through its counsel
that the obligation was cast upon L&T with respect to the liability of
ITCREF. Moreover, L&T did not take recourse to Section 16 of the
Arbitration Act for challenging the jurisdiction of the Arbitral Tribunal.
32. Learned senior counsel pointed out the issues framed by the Tribunal
concerning damages and compensation. He submitted that perusal
of L&T’s Statement of Defence shows that the parties were ad
idem on the question of valuation at which sales could be made
as L&T had itself based the claim for damages on such valuation.
As regards valuation, the Tribunal considered the evidence of Shri
Mohinder Puri adduced on behalf of PCL. Therefore, the Tribunal
relied upon agreed valuation based on L&T’s demands in its counter-
claim as a reasonable estimate of the loss suffered by PCL. L&T
had pleaded that they were entitled to 75% of the total constructed
area while PCL was entitled to 25%. In fact, the Arbitral Tribunal
used L&T’s computation of loss of profit made by L&T at Rs. 280
crores as the basis to arrive at PCL’s loss of profit as Rs. 93 crores.
In fact, the estimate of loss caused to PCL was taken at Rs. 93
crores, which is on the lower side. After considering the fact that
ITCREF had initiated action to forfeit licenses, the Tribunal reduced
the amount awarded as damages to Rs. 35 crores. Therefore, the
findings recorded by the Tribunal on this behalf are reasonable.
Learned counsel submitted that the Division Bench ought not to
have set aside the Tribunal’s findings on damages awarded to
[2025] 4 S.C.R. 2831
Larsen and Toubro Limited v. Puri Construction Pvt. Ltd. and Others
PCL. This was not a case of no evidence before the Tribunal. The
basis of damages was L&T’s own valuation of the built-up space.
Evidence of Shri Mahendra Puri had gone unchallenged. As the
damages granted to PCL were based on evidence on record, the
said finding should not have been interfered with in a petition under
Section 34 or in an appeal under Section 37 of the Arbitration Act.
He submitted that in view of the decision of this Court in the case
of Associate Builders v. Delhi Development Authority3, incorrect
quantification of damages by the Arbitral Tribunal will not be covered
by either “patent illegality” or “violation of public policy”. Even as
regards the indemnity in favour of ITCREF, the concerned issue
was issue no. 10 before the Tribunal on which detailed statements
were made and findings were recorded by the Arbitral Tribunal
based on the appreciation of the evidence on record. The finding
of the Division Bench that L&T’s obligation to indemnify was only
in terms of the built-up space is wholly incorrect. Learned senior
counsel pointed out that on one hand, there was non-payment
of EDC by L&T, on the other hand, there were repeated notices
sent by DTCP for cancellation of licences. Moreover, ITCREF had
filed a civil suit in the District Court seeking recovery of rupees
73 crores plus interest against PCL and also against L&T. In addition
to all this, L&T was holding title deeds of 25 acres of licensed land
of PCL and 15 acres of PCL’s licensed land with the Bank for which
the Bank had invoked securitization laws and also filed proceedings
before the Debt Recovery Tribunal. During the Arbitral proceedings,
L&T always resisted returning the title deeds in respect of 25 acres
of land. Therefore, the argument that the land remained with PCL
has no relevance at all.
33. Lastly, it was submitted that the dispute between the parties was of the
year 2000. The award was made on 28th December, 2002, after a very
detailed hearing before the Tribunal. Thereafter, the dispute remained
sub-judice continuously before the courts. Therefore, considering
the findings of the Tribunal, as upheld by the Division Bench, this
court will consider exercising extraordinary powers to do complete
justice. Therefore, appeals preferred by L&T may be dismissed, and
PCL may be compensated for the huge legal expenditure incurred
during the last 21 years. It was submitted that the appeal preferred
by PCL be allowed while upholding the damages and compensation
awarded by the Arbitral Tribunal in terms of the award.
2832 [2025] 4 S.C.R.
Supreme Court Reports
ISSUES FRAMED BY THE ARBITRAL TRIBUNAL
34. The Arbitral Tribunal framed 14 issues which read thus:
Issue No. 1: Whether the Development Agreement dated 10.03.1998
entered into between the Respondent and the Claimants is binding
on the parties or the same stand novated by the Supplementary
Agreement dated 30.12.1999?
Issue No. 2: Whether the Supplementary Agreement dated 30.12.1999
and the Tripartite Agreement dated 10.01.2000 were tainted by
coercion and economic duress on the claimants? If not, whether
the claimants and the Respondent performed respective obligations
according to tenor and terms of the Supplementary Agreement dated
30.12.1999 and the Tripartite Agreement dated 10.01.2000?
Issue No. 3: Whether the Claimants committed breaches of
the fundamental terms of the Development Agreement dated
10.03.1998 to enable the Respondent to resile from the agreement
of development?
Issue No. 4: Whether the respondent’s Board of directors in
pursuance of reports of Boston Consulting Group (for short ‘BCG’).
Richard Ellis and Jones Lang La Salle decide to down-size/exit
the business of real estate development and not to pay EDC or
commence development work?
Issue No. 5: Whether there had been non provisions of security of
the development site and unprovoked unilateral abandonment of the
site by L&T. If so whether such actions had resulted in encroachments
causing monetary loss to the Claimants and in the event of such
monetary loss caused to the Claimants what is the extent of such loss?
Issue No. 6: Whether the Claimants entitled to terminate the
development agreement for the reasons stated in the letter of
termination dated 16.12.2000 or even otherwise?
Issue No. 7: Was the Respondent under any obligation to commence
construction in phase I for development of 3.84 Lac sq. ft. before
the Claimants had confirmed booking/selling targets as per the
Supplementary Agreement dated 30.12.1999?
Issue No. 8: Whether termination of the contract by the Claimants
amounts to wrongful repudiation and entitles Respondent to rescind
[2025] 4 S.C.R. 2833
Larsen and Toubro Limited v. Puri Construction Pvt. Ltd. and Others
the contract and claim damages under Section 73 and 75 of the
Indian Contracts Act?
Issue No. 9: Whether the Respondent is entitled to be relieved
of its obligations under the Tripartite Agreement dated 10.01.2000
and be put in the same position as if such agreement had not been
entered into?
Issue No. 10: Is the Respondent liable to compensate the Claimants
under the agreement of indemnity and if so what effect?
Issue No. 11: Is the Respondent liable to be compensated
by Claimants by a sum of Rs.8,31,53,968/- including a sum of
Rs.5.19 Crores paid by the LKB as claimed by the respondent?
Issue No. 12: Is the Respondent entitled to be compensated by the
Claimants a sum of Rs.280 Crores as net profit being difference in
the cost of construction estimated at Rs.800/- per sq. ft. with the total
cost being Rs. 320 Crores as claimed by the respondent?
Issue No. 13: Are the Claimants entitled to compensation from the
Respondent and damages of a total values of Rs. 300 crores and
are the Claimants entitled to a further sum of Rs. 100 crores as
punitive damages?
Issue No. 14: Whether Mr. Mohinder Puri has the authority to
institute the instant claim petition and to carry out acts necessary
to prosecute the instant claim petition on behalf of Claimants other
than Puri Construction Limited? If not whether the claim petition for
other Claimants is maintainable?
ARBITRAL TRIBUNAL’S AWARD
35. The Arbitral Tribunal recorded detailed findings. The findings recorded
by the Arbitral Tribunal can be summarised as under:
Issue No. 1: The conditions precedent in Clauses (I), (II), and
(III) of the Supplementary Agreement were not fulfilled. Therefore,
the Supplementary Agreement was a non-starter, hence, only the
Development Agreement was binding on the parties which was not
novated by the Supplementary Agreement.
Issue No. 2: The Supplementary Agreement and the Tripartite
Agreement were tainted by coercion. These agreements were
2834 [2025] 4 S.C.R.
Supreme Court Reports
executed as PCL was in dire need of money for making EDC
payments. It was the obligation of L&T to provide funds for payment
of EDC and the Tripartite Agreement was signed since L&T failed
to provide the requisite funds.
Issue No. 3: PCL substantially discharged its obligation under the
Development Agreement. However, by unilaterally abandoning the
project, L&T committed fundamental breach in its obligation under
the Development Agreement.
Issue No. 4: The site inspection conducted by the Arbitral Tribunal
revealed that L&T had not commenced the development work. L&T
did not lead any oral evidence and failed to produce the relevant
documents that were called upon to be produced by the Tribunal.
Thus, L&T took a conscious decision to abandon the development,
not to pay EDC or fulfil its obligations towards statutory authorities,
ITCREF and the Bank. Therefore, monetary loss was caused to PCL.
Issue No. 5: L&T did not fulfil its obligations under the development
agreement. L&T failed to fund the project. It also failed to provide
sufficient security arrangements at the site, resulting in encroachment
of some sites.
Issue No. 6: PCL was entitled to terminate the Development
Agreement in view of the breaches committed by L&T as recorded
in issue No. 5.
Issue No. 7: Before PCL had confirmed bookings/selling targets as
per the Supplementary Agreement, L&T was not under an obligation
to commence construction in phase 1. The reason was that the
Supplementary Agreement was not operative and binding, and no
responsibility contrary to the Development Agreement could be
fastened on L&T.
Issue No. 8: The termination of the contract by PCL does not amount to
wrongful repudiation, and it does not entitle L&T to rescind the contract
and claim damages under Sections 73 and 75 of the Contract Act.
Issue No. 9: As the Tripartite Agreement was negated due to L&T’s
default, and since it imposes liability on L&T, it cannot be relieved
of its obligation under the Tripartite Agreement.
Issue No. 10: L&T had complete knowledge of PCL’s obligation to
ITCREF. Under Clause 25 of the Development Agreement, L&T was
[2025] 4 S.C.R. 2835
Larsen and Toubro Limited v. Puri Construction Pvt. Ltd. and Others
responsible for indemnifying PCL against any loss, liability, cost, or
claim that may arise against PCL due to L&T’s failure to discharge
its obligations. The obligations under Clause 25 shall subsist even
after the termination of the Development Agreement.
Issue No. 11: As L&T had abandoned the project, it cannot take
advantage of its own wrong. Therefore, L&T is not entitled to
compensation from PCL.
Issue No. 12: The claim of Rs. 240 crores made by L&T was
negatived on the ground that L&T itself had abandoned the project
and therefore, it cannot take advantage of its own wrong.
Issue No. 13: PCL was entitled to compensation from L&T amounting
to Rs. 93 crores in relation to its 25 percent share. It was based
on L&T’s calculation of profit for its 75 percent share. The Tribunal
observed that PCL was entitled to damages of Rs. 35 crores in lieu
of L&T’s failure to pay EDC in a timely manner. However, it was held
that PCL was not entitled to any punitive damages.
Issue No. 14: The authority of Mr. Mohinder Puri to institute a claim
on behalf of PCL was acquiesced by L&T, as it did not object to the
affidavit filed by Mr. Puri. Moreover, Mr. Puri supplied copies of the
board resolutions of the respective companies granting him power
of attorney.
36. We have already reproduced the operative part of the Award in
paragraph 12 above.
FINDINGS RECORDED BY LEARNED SINGLE JUDGE IN
SECTION 34 PETITION
37. Now, coming to the findings recorded in a petition under Section 34,
the findings can be summarised as under:
Issue No. 1: The conditions precedent for the Supplementary
Agreement were satisfied substantially. Clause (I) was the only
condition required to be fulfilled, and Clauses (II) and (III) were not
required to be fulfilled by L&T. It was held that the Arbitral Tribunal gave
inconsistent findings by holding that the Supplementary Agreement
was a non-starter and void. However, the Tripartite Agreement was
not found to be void, though it was entered into as a result of the
Supplementary Agreement.
2836 [2025] 4 S.C.R.
Supreme Court Reports
Issue No. 2: Both the Supplementary Agreement and the Tripartite
Agreement were not tainted by coercion as parties to it recognized
that the market prices had gone down and it was not advisable to
launch the project. In fact, Clause 26 of the Development Agreement
stipulated that construction was contingent upon prevailing market
conditions, and parties were permitted to rescind the contract in the
event of adverse market conditions.
Issue No. 3: It seems that no submissions were canvassed in the
petition under Section 34.
Issue No. 4: The Tribunal’s conclusion could not be based solely
on the reports of BCG; instead, the inference was to be drawn by
the Tribunal based on the actions.
Issue No. 5: The learned Single Judge did not record a finding on
this issue.
Issue No. 6: PCL was not entitled to terminate the Development
Agreement. Although PCL made a commitment to ITCREF to provide
an area of 153,500 sq. ft., it allocated only 88,320 sq. ft. itself.
Issue Nos. 7 and 8: It appears that no submissions were made
before the learned Single Judge on these issues.
Issue No. 9: The Tribunal exceeded its jurisdiction by directing L&T
to fulfil its obligations towards the Bank. It was held that the Bank
was not a party to the proceedings and the Tripartite Agreement did
not contain any arbitration clause.
Issue Nos. 10, 11 and 12: There were no specific findings recorded
by the learned Single Judge.
Issue No. 13: PCL was not entitled to any compensation from L&T
as it had already paid the price of the land to ITCREF. Moreover,
PCL committed an area to ITCREF, which was more than its share.
PCL’s losses would arise only when ITCREF files a suit for recovering
damages for non-fulfilment of the commitment and failing to hand
over the land in due time.
FINDINGS RECORDED BY DIVISION BENCH IN SECTION 37
APPEALS
38. Now, we must consider the findings recorded by the Division Bench
in appeals under Section 37 of the Arbitration Act.
[2025] 4 S.C.R. 2837
Larsen and Toubro Limited v. Puri Construction Pvt. Ltd. and Others
Issue No. 1: The Division Bench relied upon the conditions included
in Clause II of the Supplementary Agreement. The Division Bench
observed that PCL had spent 17.28 crores towards EDC out of which
payment of Rs. 6 crores was made by PCL by mortgaging 15 acres of
its land. Under Clause II, L&T was required to make good a plurality
of bank guarantees and assume responsibility for payment of EDC.
However, there was complete failure on the part of L&T to do so.
Issue No. 2: The Division Bench found that the finding of the Tribunal
that the Supplementary Agreement and the Tripartite Agreement
were tainted by coercion was correct. It was observed that the
Arbitral Tribunal rightly found that economic duress has vitiated the
Development Agreement.
Issue No. 3: The Division Bench observed that L&T has not urged
any ground with respect to rejection of its counter-claim before the
learned Single Judge.
Issue No. 4: The Division Bench agreed with the finding of the Tribunal
that L&T decided to abandon the project on the basis of the BCG
Report. The Division Bench held that the award was well supported
by evidence. Inspection conducted by the Arbitral Tribunal showed
that L&T had not even commenced the development work. Though,
PCL handed over the title deeds to L&T on 16th October, 1998, no
progress was made in construction by L&T. Moreover, L&T delayed
the project and was planning it till 18th December, 1999. L&T was
fully aware about PCL’s obligation to ITCREF which was expressly
set out in the Development Agreement.
Issue No. 6: There may not be separate findings recorded by the
Division Bench, but the Division Bench, as stated earlier, agreed that
the Tribunal accepted the breaches committed by L&T.
Issue No. 7: There is no specific finding recorded by the Division
Bench.
Issue No. 8 and 9: The Division Bench held that L&T did not urge
any ground with respect to the rejection of its counter-claim before
the learned Single Judge.
Issue No. 10: The Division Bench held that the Tribunal’s direction
to L&T to pay Rs. 50 crores to PCL on crystallization of ITCREF’s
claim deserves to be set aside. The loss suffered by ITCREF would
2838 [2025] 4 S.C.R.
Supreme Court Reports
not be reasonably foreseeable for PCL to be indemnified against. It
was held that L&T’s failure to transfer the built-up area would have
to be accounted for under the heading damages for the breach of
the Development Agreement by L&T.
Issue Nos. 11 and 12: The Division Bench held that L&T did not
raise any ground with respect to the rejection of its counter-claim
before the learned Single Judge.
Issue No. 13: The Division Bench held that actual loss was not
established by PCL. It was observed that after the rejection of L&T’s
counterclaim, it would be an illegality to rely on L&T’s calculation of
profit. However, the Tribunal’s finding regarding L&T’s failure to pay
EDC timely was affirmed.
Issue No. 14: It is evident that the Tribunal’s findings were not
seriously challenged.
39. We now turn to the conclusions recorded in paragraph 119 of the
impugned judgment. In substance, the Division Bench agreed with
the findings recorded by the Arbitral Tribunal that the Supplementary
Agreement was a non-starter, it was vitiated by economic duress,
and that the Development Agreement was not novated by the
Supplementary Agreement. The Division Bench also approved the
finding of the Arbitral Tribunal that L&T committed a fundamental
breach of the Development Agreement. The Division Bench also
upheld the dismissal of L&T’s counterclaim. Furthermore, the Division
Bench concluded that the permanent injunction granted in favour of
PCL was also justified. However, the quantification of damages and
compensation, as well as indemnification for ITCREF’s claim, was
found to be contrary to the record. The net effect was that the operative
part of the award fixing the monetary liability of L&T was set aside
while leaving open the remedy of PCL for the quantification of the
monetary claim. In view of the confirmation of findings on merits, the
award regarding costs was confirmed. But, in view of the legal position
that the award cannot be varied or modified, the Division Bench did
not restore any part of the arbitral award and held in paragraph no.
120 that the parties are left to pursue the appropriate course of action.
CONSIDERATION
40. Firstly, we will deal with the issue of the power of the Court under
Section 34 of partly setting aside the award. This issue was dealt with
[2025] 4 S.C.R. 2839
Larsen and Toubro Limited v. Puri Construction Pvt. Ltd. and Others
by this Court in the case of Project Director, National Highways
No. 45 E and 220, National Highways Authority of India v. M.
Hakeem and Another1. This Court, in the said decision, considered
its earlier decision in the case of McDermott International Inc. v
Burn Standard Co. Ltd. & Ors.5 Ultimately, in paragraph 42, this
Court held thus:
“42. It can therefore be said that this question has now
been settled finally by at least 3 decisions [McDermott
International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC
181] , [Kinnari Mullick v. Ghanshyam Das Damani, (2018)
11 SCC 328 : (2018) 5 SCC (Civ) 106] , [Dakshin Haryana
Bijli Vitran Nigam Ltd. v. Navigant Technologies (P) Ltd.,
(2021) 7 SCC 657] of this Court. Even otherwise, to state
that the judicial trend appears to favour an interpretation
that would read into Section 34 a power to modify, revise
or vary the award would be to ignore the previous law
contained in the 1940 Act; as also to ignore the fact that
the 1996 Act was enacted based on the Uncitral Model Law
on International Commercial Arbitration, 1985 which, as has
been pointed out in Redfern and Hunter on International
Arbitration, makes it clear that, given the limited judicial
interference on extremely limited grounds not dealing with
the merits of an award, the “limited remedy” under Section
34 is coterminous with the “limited right”, namely, either
to set aside an award or remand the matter under the
circumstances mentioned in Section 34 of the Arbitration
Act, 1996.”
41. We are conscious of the fact that a larger bench is seized with the
issue of the power of the Court to modify the award under Section
34. However, we are respectfully bound by the decision in the case
of Project Director, National Highways No. 45 E and 220, National
Highway Authority of India v. M. Hakeem and Another1. As we
have noted, after recording its conclusions in paragraph 119, the
Division bench, in the last paragraph of the impugned Judgment,
has not modified the award.
5 (2006) 11 SCC 181
2840 [2025] 4 S.C.R.
Supreme Court Reports
42. We have perused the three agreements subject matter of controversy.
The Development Agreement is a contract between PCL and L&T.
Clause 4 of the Development Agreement refers to the obligations
of PCL under the agreement entered into by it on 30th July, 1997
with ITCREF. It refers to the fact that PCL had agreed to hand over
1,95,000 sq. ft. of built-up area in the Schedule ‘A’ property, after its
development, comprising high-rise and low-rise buildings, inclusive
of a car park, to ITCREF. It also refers to the fact that the extent of
the built-up area to be allocated to ITCREF was 2,20,416 sq. ft.,
which formed part of the allocation made under the Development
Agreement to PCL. The Development Agreement also provides
that PCL had agreed that 15 acres of land mortgaged to the Bank
would be in the remaining portion of Schedule ‘A’ property and
that PCL would get the mortgage discharged on this 15 acres of
land comprised in Schedule ‘A’ property before commencement
of development work in the remaining portion of Schedule ‘A’
property. The Agreement also provides for the deposit of original
documents in relation to Schedule ‘A’ property (except to the
extent of 15 acres of land mortgaged with the Bank). Paragraph 19
records L&T’s obligation to pay the EDC after receiving the NOC
from the appropriate authority. The Agreement provides that L&T
shall complete the construction of the building on the Schedule ‘B’
property within 60 months or such mutually extended period from
the date of obtaining sanction for the building plan, or tax clearance
under Section 37-I of the Income Tax Act, and making the said
property available for development, whichever is later. It has also
stipulated that construction shall be carried out in phases. After
completion of phase of 3,00,000 sq. ft. on Schedule ‘B’ property,
L&T, in consultation with PCL, by mutual consent, shall have the
option and liberty to renew and revise the specifications/amenities
and built-up area of the balance development and extend the period
of completion by a further period of 12 months, depending upon
the prevalent market conditions.
43. Now, we refer to the Supplementary Agreement. In the recital of
the Supplementary Agreement, it is mentioned that L&T has made
only partial compliance with the requirement under the Development
Agreement to pay EDC to DTCP. Moreover, L&T has failed to
furnish a bank guarantee for the balance payment of EDC. In fact,
it records that L&T had taken a stand that in view of the adverse
[2025] 4 S.C.R. 2841
Larsen and Toubro Limited v. Puri Construction Pvt. Ltd. and Others
market conditions, the project had become unviable and sought
further time from PCL to allow the prevailing real estate market
conditions to improve. Clauses I, II and III of the Supplementary
Agreement read thus:
I. “That the terms of the Development Agreement will
continue to bind the parties hereto, unless otherwise
agreed to in these presents, which shall come into
effect on happening of the following events :
(a) DEVELOPER replacing or taking over the Bank
Guarantees furnished by the OWNERS through their
Banker to DTCP, Haryana;
(b) Payment of EDC amounting to Rs. 6 Crore by Lord
Krishna Bank to DTCP Haryana, in terms of the
Tripartite Agreement between the parties hereto with
Lord Krishna Bank;
(c) Reimbursement of expenses incurred by the OWNER
as detailed in Annexure I, on production of proof of
payment thereof;
(d) Compliance of the terms and conditions of the
tripartite agreement between the parties hereto
with Lord Krishna Bank, inter-alia the DEVELOPER
paying Rs. 5.19 Crore to Lord Krishna Bank, on
behalf of OWNERS towards discharge of the loan
availed by the OWNERS for payment of EDC. The
said sum of Rs. 5.19 Crore shall be a secured
interest free loan by the DEVELOPER to the
OWNERS.
II. The Bank Guarantees would be furnished by the
DEVELOPER to the DTCP after final approval of term loan
by Lord Krishna Bank to the OWNER and escrow account
arrangement finalisation, either through the Bankers of
the OWNERS or any other Bank acceptable to DTCP.
The said bank guarantees shall remain valid and in force
upto the date of receipt of completion Certificate of the I
phase of the project.
III. The parties hereto agree that the Clause 19 of the
Development Agreement shall stand modified as under:
2842 [2025] 4 S.C.R.
Supreme Court Reports
(a) The EDC Charges of Rs. 1013.14 Lacs paid so far
by the OWNERS shall be reimbursable only after
receipt of the same from the prospective purchasers
of the apartments in the Project.
(b) The Developer agrees to pay the balance EDC as
under:
i. Rs. 6 Crore through M/s. Lord Krishna Bank as
provided in Clause I(b) supra;
ii. Pay the remaining EDC charges over a period
of 18 months in terms of licenses.
(c) The EDC paid by the parties shall be reimbursable
to each of the parties from out of the sale proceeds,
as agreed in the Agreement for Development.”
(emphasis added)
44. We may note here that, as stated in Clause (I) of the Supplementary
Agreement, the terms of the Supplementary Agreement were to come
into effect upon the occurrence of the events mentioned therein,
which included the condition that L&T would replace or take over the
bank guarantees furnished by PCL through their banker to DTCP.
Other condition was of compliance of the terms and conditions of
the Tripartite Agreement which provided for L&T paying sum of Rs.
5.19 crores to the Bank on behalf of PCL. The Arbitral Tribunal
found that Clauses (I) and (II) were not fully complied with by L&T.
The Tribunal also found that Clause (III) was not complied with by
L&T due to non-payment of EDC charges as provided therein. On
a plain reading of these three clauses, the learned Single Judge’s
finding that Clauses (II) and (III) were not required to be fulfilled
is based on a complete misreading of Clauses (II) and (III). The
Division Bench rightly agreed with the Tribunal that conditions
included in the said clauses were required to be complied with, but
were not complied with. The Division Bench noted that even the
Supplementary Agreement revealed that the DTCP had issued a
show-cause notice for non-payment of EDC, threatening cancellation
of licenses. Clause (I) of the Supplementary Agreement makes it
very clear that the Supplementary Agreement shall come into effect
only upon the occurrence of the four events specified therein. That
is how the Supplementary Agreement remained a non-starter.
[2025] 4 S.C.R. 2843
Larsen and Toubro Limited v. Puri Construction Pvt. Ltd. and Others
45. We now turn to the Tripartite Agreement, which in turn refers to
the Supplementary Agreement. It is recorded that PCL and L&T
had approached the Bank to avail a term loan of Rs. 6 crores for
payment of EDC charges. Under the said agreement, the Bank
agreed to pay Rs. 6 crores EDC to DTCP on behalf of PCL. It was
agreed that the 15 acres of land already mortgaged by PCL with the
Bank will continue to serve as a guarantee for the said term loan of
Rs. 6 crores. The Tripartite Agreement provides that the Bank shall
forthwith release, in favour of the PCL, the counter-guarantees
outstanding for the bank guarantees given by the Bank for a sum
of Rs. 466.175 lakhs in favour of DTCP, Haryana. It was provided in
the Tripartite Agreement that L&T will open an Escrow account with
the Bank in New Delhi, wherein all sale proceeds of the proposed
flats will be deposited. Out of the funds in the escrow account, the
Bank will first appropriate the interest part for the respective period
and out of the balance portion, appropriate 50 per cent towards
repayment of the term loan and release the remaining 50 per cent
balance to L&T, subject to review on a later date. It was provided
that PCL and L&T have undertaken to launch the sale of apartments
in the Schedule ‘A’ property, covering an area of 3.84 lakhs sq.
ft., by 15th February, 2000. L&T had also undertaken to complete
the said development within 30 months of the commencement of
construction. Even all sale proceeds were to be collected by L&T
and deposited with the Bank in an escrow account. The Tripartite
Agreement provided that L&T shall pay to the Bank a sum of Rs.
5.19 crores on behalf of PCL towards discharge of the loan availed
by PCL for payment of EDC on or before 19th January, 2000. Lastly,
it was provided that upon full set-off and/or repayment of the term
loan of Rs. 6 crores, including interest thereon, PCL shall be relieved
of its obligation under this Agreement.
46. Looking to the clauses in the Supplementary Agreement, the finding
recorded by the Tribunal that, as the conditions precedent in the
relevant clauses were not complied with by L&T, the Supplementary
Agreement was a non-starter is undoubtedly a possible finding
which could not have been interfered with under Section 34 of the
Arbitration Act. Moreover, it is a finding of fact.
47. Coming to the issue no. 2, it is apparent from the recitals in the
Supplementary Agreement as well as Tripartite Agreement that
as L&T did not discharge its obligation under the Development
2844 [2025] 4 S.C.R.
Supreme Court Reports
Agreement to pay EDC, the Bank was required to be brought
into the picture so that it could advance a sum of Rs. 6 crores by
way of loan for making payment of the said amount to DTCP. We
must mention here that Clause 19 of the Development Agreement
provided that L&T shall reimburse PCL the EDC amount already
paid up to the date of the Development Agreement by mutually
agreed instalments. The amounts paid by PCL towards EDC up
to the date of execution of the Development Agreement were also
mentioned, as L&T did not pay the amount already paid by PCL
towards EDC. By Clause (III) of the Supplementary Agreement,
Clause 19 was modified. The main reason for the execution of the
Supplementary Agreement and the Tripartite Agreement was the
default on the part of L&T. The Tribunal looked into various terms
and conditions of the Development Agreement and the obligation of
L&T to carry out its activities in a time-bound manner. The Tribunal
considered the pleadings of PCL and the failure of L&T to deny
material paragraphs. The tribunal also referred to a letter dated 7th
October, 1999, addressed by L&T that its consultant had reported
that it would not be favourable to pursue the project and therefore
requirement of payment of EDC by L&T does not arise. In fact, L&T
relied upon the report of BCG. However, in respect of order dated
08th November, 2001, L&T did not produce the relevant documents.
The Tribunal has noted that L&T was aware about PCL’s financial
conditions and its obligations towards ITCREF. The Tribunal also
referred to the fact that on 02nd November, 1999, DTCP issued a
show cause notice proposing cancellation of licenses due to non-
payment of EDC. These facts and the default by L&T left no choice
to PCL but to execute the Supplementary Agreement as well as the
Tripartite Agreement.
48. The Division Bench referred to Section 16(3) of the Contract Act which
provides that where a person who is in a position to dominate the
will of another, enters into a contract with him, and the transaction
appears, on the face of it or on the evidence adduced, to be
unconscionable, the burden of proving that there was no undue
influence is on the person in a position to dominate the will of the
other. Illustrations (c) and (d) of Section 16(3) of the Contract Act
were also relied upon, which deal with cases of economic duress
and undue influence. After examining the evidence, the Division
Bench held that there was no patent illegality in the findings recorded
[2025] 4 S.C.R. 2845
Larsen and Toubro Limited v. Puri Construction Pvt. Ltd. and Others
by the Arbitral Tribunal that the Supplementary Agreement and the
Tripartite Agreement were tainted by coercion. On consideration
of the facts discussed before, such a view by the Arbitral Tribunal
cannot be said to be contrary to justice and morality. We agree with
the view taken by the Division Bench.
49. Dealing with issue no. 3, the Division Bench referred to Clause 26
of the Development Agreement and Clause 5 of the Supplementary
Agreement. The Tribunal found that L&T committed a breach of Clause
19 of the Development Agreement by not making payment of a single
instalment of EDC. Moreover, interest free deposit of Rs. 5 crores
in terms of Clause 12 of the Development Agreement was not paid
by L&T to PCL. The Tribunal found that there was no Development
work carried out and not a single floor of any residential building was
constructed for which development plans were sanctioned. Therefore,
the finding recorded by the Tribunal that L&T committed fundamental
breaches of the agreement cannot be interfered within the limited
jurisdiction under Section 34 of the Arbitration Act.
50. As regards issue no. 4 and 5, the Division Bench has considered
material on record. The Division Bench recorded that approval of
the competent authority under the Income Tax Act, 1961 was given
on 30th June, 1998 and the building plans were sanctioned on
30th September, 1998. The title deeds were handed over by PCL to
L&T on 16th October, 1998. There are letters on record addressed
by PCL complaining to L&T about failure to make any progress on
the site. No EDC payments were made by L&T. Even planning of
the project was not completed by L&T till December, 1999. That is
how the inspection of the Arbitral Tribunal revealed that L&T did
not commence the development work. From the recital of clauses
in the Development Agreement, it is apparent that L&T was aware
of the obligations of PCL towards ITCREF. Considering the material
on record, the Arbitral Tribunal recorded that there was a conscious
decision on the part of L&T to abandon the development and not to
fulfil its obligations under the contract. Therefore, the Division Bench
accepted the correctness of the finding recorded by the Tribunal that
there was an abandonment of the project on the part of L&T. The
Division Bench rightly declined to find fault with the findings recorded
by the Tribunal on this aspect based on evidence. Obviously, such
conduct on the part of L&T caused loss to PCL, which ultimately
resulted in the termination of the Development Agreement. The
2846 [2025] 4 S.C.R.
Supreme Court Reports
issues based on the rejection of the counter-claim of L&T have been
rightly addressed by the Division Bench on the ground that there
were no submissions made on the rejection of the counter-claim
before the learned Single Judge in a petition under Section 34 of
the Arbitration Act.
51. The Division Bench dealt with the Tribunal’s direction to L&T to
pay Rs. 50 crores to PCL on crystallization of ITCREF’s claims.
The Division Bench held that the type and kind of losses incurred
by ITCREF would not be reasonably foreseeable for PCL to be
indemnified against. Therefore, the Division Bench rightly observed
that while granting a sum of Rs. 50 crores to PCL, the Tribunal had
gone overbroad. The said finding of the Division Bench cannot be
faulted with.
52. As regards the damages of the sum of Rs. 35 crores to be paid by
L&T to PCL on account of breach of the Development Agreement,
the basis taken by the Tribunal was the figures given by L&T in
its counter-claim. Mr. Mohinder Puri estimated the loss of PCL at
Rs. 117 crores. However, PCL did not prove the said loss, and the
Tribunal did not rely upon any evidence to arrive at a fair assessment
of the loss actually incurred by PCL. The Division Bench held that
instead of basing the findings on the figures set out by L&T in its
counter-claim, the correct approach would have been to determine
the prevailing market rate for sale of built-up area at the time of the
breach and thereupon determine the proceeds that PCL would have
received from the sale of its 25 per cent share under the Development
Agreement. Therefore, the award of Rs. 35 crores as damages was
fundamentally contrary to Section 73 of the Contract Act. Such an
approach was completely contrary to substantive law in the form of
Section 73. This finding cannot be disturbed.
53. As regards the direction to pay the amount of Rs. 6 crores with
interest, we need not record any finding as the amount has been
paid by L&T. The award in the alternative of Rs. 75 crores, without
proof of the value of land, cannot be sustained at all. There was no
evidence on record to indicate that the value of the 15-acre area would
be Rs. 5 crores per acre. Similarly, there was no basis for granting
Rs. 5 crores to PCL due to L&T’s failure to return the licenses and
other statutory permits. In these circumstances, we find the view
taken by the Division Bench to be correct.
[2025] 4 S.C.R. 2847
Larsen and Toubro Limited v. Puri Construction Pvt. Ltd. and Others
54. As the termination of the Development Agreement is upheld, obviously,
L&T cannot deal with the property in any manner and PCL can
always deal with the same.
55. In para 119, the Division Bench held thus:
“119. In the circumstances, the Court concludes as follows:
a. The finding of the Tribunal that the Development
Agreement was not novated by the Supplementary
Agreement is upheld; similarly the Tribunal’s findings that
the conditions which were to be fulfilled by L&T subject to
which the said Supplementary Agreement was to come
into force (but were not fulfilled) are upheld;
b. The finding of the Tribunal that the Supplementary
Agreement was a non-starter as it was vitiated by economic
duress is upheld. The impugned judgment’s ruling to the
contrary is set aside.
c. The finding of the Tribunal that L&T committed
fundamental breach of the Development Agreement is
upheld. The impugned judgment’s ruling to the contrary
is set aside.
d. The Tribunal’s dismissal of L&T’s counterclaim is upheld.
e. The Tribunal’s quantification of damages for breach of
contract (35 crores), compensation in lieu of securing title
deeds with respect to 15 acres of land (75 crores) and
compensation for default in returning licences and other
permits is set aside (5 crores). The permanent injunction
granted in favour of PCL restraining L&T from interfering
with PCL’s development of Schedule A property of the
Development Agreement is upheld. The relief granting
indemnification in favour of PCL for ITCREF’s claims is
set aside. It is clarified that this is without prejudice to the
indemnification for ITCREF’s claims relating to the transfer
of 2,20,416 sq. ft. of land to the extent envisaged under
the Development Agreement, The Tribunal’s order to the
extent that it awards costs of arbitration to PCL is upheld.
f. Title deeds deposited with the Registrar of this Court
pursuant to the directions in FAO 319/2001 are directed
to be released to PCL.”
2848 [2025] 4 S.C.R.
Supreme Court Reports
56. The powers of the Appellate Court under Section 37 of the Arbitration
Act are not broader than those of the Court under Section 34 of the
Arbitration Act. Therefore, what cannot be done in the exercise of
the powers under Section 34 cannot be done in an Appeal under
Section 37. An Arbitral Award cannot be modified. Thus, even after
recording the conclusions in paragraph no. 119, the Division Bench
has not modified the Award by partly setting aside the Judgment
under Section 34. In paragraph 121 of the Judgment, the Division
Bench held thus:
“121. In light of the above conclusions, parties are left to
pursue the appropriate course of action under law. This
Court notices that since the dispute has been in subsistence
for a considerable period of time, an attempt may be
made at settling the claims through mediation. FAO (OS)
21/2009, 22/2009 and 23/2009 are partly allowed to the
above extent; FAO (OS) 194/2009 is dismissed, for the
same reason.”
On a conjoint reading of Paragraph 119 and 121, we find that the
remedy of PCL has been kept open to pursue appropriate course
of action under law as there cannot be a remand to the Arbitral
Tribunal for quantification of monetary claim. As the finding of the
Arbitral Tribunal regarding breaches committed by L&T was affirmed,
the Division Bench has rightly segregated that part of the Award by
which, cost of arbitration was ordered to be paid to PCL by L&T. This
part has been severed from rest of the Award. Therefore, this part
of the Award must be complied with by L&T, if not already done. As
documents of title were deposited with the Registrar, the direction
to hand over the same to PCL cannot be faulted with. We cannot
find any fault with the operative part in paragraph 120.
57. Before we part with Judgment, we must reproduce what is observed
by Division Bench in paragraph no. 120 with approval:
“120. Before concluding, the court would like to highlight -
more as a post script, the prolix and near interminable
arguments which were addressed by senior counsel on
either side, who were insistent that the arbitral records,
such as pleadings and documents, had to be examined,
and read out in court. The court unsuccessfully entreatied
them to limit oral arguments; equally unsuccessful were
[2025] 4 S.C.R. 2849
Larsen and Toubro Limited v. Puri Construction Pvt. Ltd. and Others
attempts at ensuring that written briefs were kept within
limits. The citation of numerous authorities on similar
propositions, and reference to factual material, reduced an
arbitration appeal (against the decision in Section 34) to
the Division Bench into an appeal on facts, which Section
37 was clearly not intended to be. One hopes that there
is some clarity within the legal system about the kind of
time limit to arguments in such cases, to ensure timely
disposal of appeals.”
58. We agree with the views expressed by the Division Bench which
we have quoted above. In several appeals arising out of Sections
34 and 37 proceedings, we have noticed that there is a tendency
on the part of the senior members of the Bar to argue as if these
proceedings were regular appeals under Section 96 of the Code of
Civil Procedure, 1908 (for short ‘CPC’). In this case, while making
submissions, the learned counsel appearing for both the parties have
gone into the minutest factual details. As the Members of the Bar are
aware of the limited jurisdiction of the Courts in proceedings under
Sections 34 and 37 of the Arbitration Act, they must show restraint.
Similarly, we observe a tendency on the part of the Members of the
Bar to rely upon a large number of decisions, whether relevant or
irrelevant, while arguing Section 34 petitions and Section 37 appeals
as well as appeals arising therefrom. Multiple decisions are cited on
the same proposition of law. This makes hearing time-consuming. As
there are long oral arguments, the Courts permit written submissions
to be filed. That is how very long written submissions come on
record. The Courts have to devote page after page for dealing with
many submissions which ought not be made considering the limited
jurisdiction under Section 34 of the Arbitration Act. This results in
very lengthy judgments. The high monetary stakes involved in the
proceedings should not result in unnecessarily long oral submissions
or bulky written submissions. All this results in the criticism about
the arbitrations in India. Therefore, there is a need to impose time
limit on oral submissions in such cases. We cannot forget that this
Court and the High Courts have the appellate jurisdiction in civil
and criminal cases. These Courts should be in a position to also
devote sufficient time to the cases of the common man. What we
have expressed is a matter of serious concern and introspection
for everyone.
2850 [2025] 4 S.C.R.
Supreme Court Reports
59. In view of what we have held earlier, there is no merit in the appeals
and the same are dismissed.
Result of the case: Appeals dismissed.
†
Headnotes prepared by: Divya Pandey
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