M/S. LARSEN & TOUBRO LTD.versusM/S. MOHAN LAL HARBANS LAL BHAYANA

                        [2014] 3 S.C.R. 162


A               MIS. LARSEN & TOUBRO LTD.
                               v.
          M/S. MOHAN LAL HARBANS LAL BHAYANA
                (Civil Appeal No. 7586 of 2009)
                       FEBRUARY 25, 2014
B
       [SURINDER SINGH NIJJAR AND A.K. SIKRI, JJ.]

         ARBITRATION AND CONG/LIA T/ON ACT, 1996:

c       s. 11 (6) - Application before High Court for appointment
  of arbitrator - Agreement between employer SCOPE and
  appellant contractor - Clause 25 of agreement bearing
  arbitration clause - Appellant engaging respondent sub-
  contractor - Application by respondent for appointment of
0 arbitrator - Allowed by High Court - Held: SCOPE being
  Principal/Employer of appellant, the liability for honouring the
  claim of respondent was that of SCOPE and appellant was
  not supposed to make any payment from its coffers - Further,
  by virtue of first supplementary agreement, the modalities of
E settling the dispute between parties underwent a significant
  change - It was unambiguously provided that in view of
  arbitration between appellant and SCOPE, pertaining to
  claims of respondent as well, even if the disputes between the
  appellant and the respondent were deemed to have been
  settled and were not referable to arbitration again between
F these two parties Order of High Court is set aside - In view of
  subsequent developments after the decision of the High
  Court, when the final bill is almost at the stage of finalization,
  the only aspect that can be taken care of at this stage is to
  hasten the process of arbitration, in case after the passing of
G the final bill by SCOPE, some claims of respondent still
  survive -- Directions issued accordingly to balance the
  equities.

        In the instant appeal, the appellant challenged the
H                                 162
M/S. LARSEN & TOUBRO LTD. v. M/S. MOHAN LAL 163
           HARBANS LAL BHAYANA
order of the High Court passed on an application A
preferred by the respondent u/s 11 (6) of the Arbitration
and Conciliation Act, 1996 appointing an arbitrator on
behalf of the appellant on the ground that in spite of
notice by the respondent in this behalf, the appellant had
failed to nominate its arbitrator in terms of Clause 25 of B
the agreement entered into between the parties. Since the
respondent had already nominated its arbitrator, further
direction was given that the two arbitrators (one
nominated by the respondent and one appointed by the
High Court for the appellant), would appoint an Umpire c
in consonance with the said Clause 25. The stand of the
appellant was that Clause 25 was modified by three ,
supplementary agreements and resultantly there was no
question of arbitration between the appellant and the
respondent in view of the modifications. The appellant 0
claimed that by agreement dated 29.2.1988 entered into
between the Standing Conference of Public Enterprises
(SCOPE) and the appellant, SCOPE awarded certain
construction works to the appellant. This agreement also
permitted the appellant to sub-contract. Accordingly, the E
appellant entered into an agreement dated 3.3.1988 with
the respondent. Clause 2 of this agreement dated
3.3.1988 pertained to the payments which were to be
made by the appellant to the respondent and the amount
under this sub contract was payable to the respondent
by the appellant only on receipt of corresponding F
receipts from SCOPE. Further, as per Clause 6, the
respondent was to perform the work awarded to it to the .
satisfaction of SCOPE. It was further the case of the
appellant that the appellant and the respondent entered
into a supplementary agreement dated 31.1.1990 and the G
modalities of settling the disputes between the parties
through arbitrator also underwent a significant change,
as was clear from Clause (viii) of the first supplementary
agreement.
                                                           H
    164       SUPREME COURT REPORTS          [2014] 3 S.C.R.


A         Allowing the appeal, the Court

       HELD: 1.1 In essence, the parties understood that as
  the Principal/Employer was SCOPE, for whom the work
  was to be performed by virtue of main agreement dated
  29.2.1988 entered into between the parties, and the sub
8
  contract between the appellant and respondent was on
  back to back basis, any work done by the respondent
  was for the benefit of SCOPE and, ultimately, liability for
  honoring the claims of the respondents was that of
  SCOPE and the appellant was not supposed to make any
C payment from its coffers. The parties even acted on the
  basis of said understanding initially. [para 5-6] [169-F-G]

        1.2 Clause (viii) of the first supplementary agreement
  acknowledges the fact that for the work done by the
D respondent under the sub-contract, there could be two
  kinds of situations. There could be a situation where
  there would be disputes and differences between the
  appellant and the respondent for the works done by the
  respondent. This could be regarding the workmanship or
E the amounts payable for the work done etc. There could
  also be a situation where SCOPE is not satisfied with the
  workmanship or may raise dispute about the quantum of
  bills etc. resulting into denial of payment or short
  payment to the appellant for the work undertaken by the
F respondent under the sub-contract, and in terms of
  Clause (viii) in the first supplementary agreement, such
  disputes will be deemed to have been raised jointly
  between the respondent and appellant on the one side
  and SCOPE on the other side. For this reason, this
G Clause further provided that the appellant was to refer
  such disputes to SCOPE for settlement by negotiation
  failing which the appellant would refer the disputes for
  arbitration (as per mechanism provided in the Clause
  between the appellant and SCOPE). In order to lodge
  these claims suitably and properly, the respondent was
H
M/S. LARSEN & TOUBRO LTD. v. M/S. MOHAN LAL 165
           HARBANS LAL BHAYANA
supposed to assist and cooperate the appellan~. Such           A
assistance was expected in successfully pursuing
arbitration as well. It is for this reason that this Clause
unambiguously further provided that in view of the
arbitration between the appellant and SCOPE, pertaining
to the claims of the respondent as well, even if the           B
disputes between the appellant and the respondent were
deemed to have been settled and were not referable to
arbitration again between these two parties. [para 6-7]
[171-B-H; 172-A-C]
      1.3 On reading Clause 25 in the original agreement C
pertaining to the process of arbitration along with the
modified mechanism agreed to between the parties in the
first supplementary agreement, the parties for making the
change is clearly discernable. Further, by yet another
supplementary agreement dated 8.12.1993, between the D
appellant and the respondent, it was further agreed
whatever claims are received by the appellant from the
SCOPE, they shall be shared between the appellant and
respondent in the ratio of 67:33. The understanding
between the parties that for any claims of the respondent, E
both the parties were to join together and raise claims
against SCOPE was reinforced by Clause 6 in the said
agreement which again provided an underlined message
that in so far as the appellant and the respondent are '
concerned, they shall not resort to any arbitration F
between themselves on this account. [para 8-10) [172-C-
D; 173-A-B and D-E]
    1.4 The High Court is not correct in holding that
Clause 25 of the original agreement in unamended form
holds the field. In fact, even the respondent knew fully       G
well that the said clause had been drastically altered by
supplementary agreements. It is for this reason that in the
prayer (a) of the application u/s 11 of the Act filed by the
respondent, it has itself acknowledged this change by
mentioning that arbitrator be appointed in terms of Clause     H
    166       SUPREME COURT REPORTS              (2014) 3 S.C.R.


A 25 of the contract agreement dated 3.3. 1988 "as modified
  by supplementary agreements dated 31st January 1990
  and 6th February 1995". What, however, is lost sight of
  by the respondent in the process, is that the modification
  in Clause 25 did not permit the respondent to move this
B kind of application for appointment of arbitrator between
  the parties, at that stage. The order of the High Court is
  set aside. [para 16] [177-D-F]

       1.5 When the High Court had passed the impugned
C orders, the claim had not been made with SCOPE. However,
  the said position has undergone substantial change
  thereafter. In view of the subsequent developments, when
  the final bill is almost at the stage of finalization the only
  aspect that can be taken care of at this stage is to hasten
  the process of arbitration, in case after the passing of the
D final bill by SCOPE, some claims of the respondent still
  survive. Directions issued accordingly to balance the
  equities. [para 18-21] [178-D-G]

      CIVIL APPELLATE JURISDICTION : Civil Appeal No.
E 7586 of 2009.
        From the Judgment and Order dated 27.04.2007 of the
    High Court of Delhi at New Delhi in A.A. No. 264 of 2004.
        Ashok H. Desai, S. Guru Krishna Kumar, S. Guru Krishna
F Kumar, Parthiv K. Goswami, Diksha Rai, Yashvardhan Singh
  for the Appellant.
         Priya Kumar, Sangita Bhayana, Amlan Kumar Ghosh for
    the Respondent.
          The Judgment of the Court was delivered by
G
       A.K. SIKRI, J. 1. On an application preferred by the
  respondent herein under Section 11 (6) of the Arbitration and
  Conciliation Act, 1996 (hereinafter referred to as the Act), the
  High Court has appointed/nominated an Arbitrator on behalf of
H the appellant herein on the ground that in spite of notice by the
 M/S. LARSEN & TOUBRO LTD. v. M/S. MOHAN LAL 167
      HARBANS LAL BHAYANA [A.K. SIKRI, J.]
  respondent in this behalf, the appellant had failed to nominate     A
· its Arbitrator in terms of Clause 25 of the Agreement entered
  into between the parties. Since the respondent had already
  nominated its Arbitrator, further direction is given that the two
 Arbitrators (one nominated by respondent and one appointed
  by the Court for the appellant), shall appoint an Umpire in         B
  consonance with the said Clause 25. This order is impugned
  by the appellant primarily on the ground that Clause 25 was
  modified by three supplementary agreements whereby the
  entire edifice of the said arbitration clause stood adhered and
  on a conjoint reading of original Clause 25 with modification       c
  effected by the supplementary agreements, there was no
  question of arbitration between the appellant and the respondent
  at this stage. To appreciate this contention, one will have to
  traverse through the relevant clauses of the main contract as
 well as supplementary agreements. Thus, we would like to state       D
  along with the events, as they occurred, in chorology. In fact,
  as we proceed to unfurl the events with our comments thereon,
  there and then we shall be getting answer as well to the issue
  involved.

     2. An agreement dated 29.2.1988 was entered into                 E
between the Standing Conference of Public Enterprises
(SCOPE) and the appellant namely Larsen & Toubro (L&T ltd.).
This agreement was for construction of Twin Tower Office
Complex at Laxmi Nagar District Centre, Delhi which was
awarded by the SCOPE to the appellant. Original contract value        F
for this work was stipulated at Rs.27.48 Crores. Works
comprised of the Civil Works and also subsidiary works, that
could be ordered from time to time by SCOPE/Architect. This
agreement also permitted the appellant to sub-contract.
Accordingly, the appellant entered into an agreement dated            G
3.3.1988 with the respondent. While retaining the civil works
with itself, the appellant awarded finishing works including
brickworks, wood works, flooring, furnishing, aluminum works
and other miscellaneous works including waterproofing etc. to
the respondent. It was a pass through contract on a back to           H
     168        SUPREME COURT REPORTS                 [2014] 3 S.C.R.


 A back basis. The value of sub contract was stated as Rs.12.08
   crores. Clause 2 of this agreement dated 3.3.1988 pertains to
   the payments which were to be made by the appellant to the
   respondent. As can be seen from the reading of this Clause,
   as reproduced below, amount under this sub contract was
 B payable to the respondent by the appellant only on receipt of
   corresponding receipts from SCOPE:

           "Clause 2 - L&T shall pay "MHB" the said contract amount
           or such other sum as shall become payable only a~ and
           when the said payments are received by "L&T" from
 c         SCOPE at the time and in the manner hereinafter
           specified in the terms and conditions of this Contract."

        3. Another important stipulation in this sub contract was
   Clause 6, as per which the respondent was to perform the work
 D awarded to it to the satisfaction of SCOPE, namely the
   Principal. It reads as under:

           "Clause 6 - All obligations in respect of ancillary works·
           undertaken by MHB shall be performed by MHB itself and
           will not jeopardize the interest and contract of L&T with
,E
           SCOPE. Satisfaction of SCOPE, their representatives and
           Architects shall form the basis of this agreement."

       4. Clause 25 of the agreement between the appellant and
   the respondent provides for arbitration for settlement of
 F disputes. Relevant part of this Clause reads as under:
           "Clause 25 - Except where otherwise provided in the
           contract, all questions, disputes, certificates excluding
           "excepted matters" relating to this contract shall be referred
 G         to a Sole Arbitrator in case claims are upto and including
           Rs.10 lakhs to be appointed by the General Manager
           (Civil), L&T and for claiming over Rs.10 lakhs by panel of
           3 Arbitrators of who one will be appointed by General
           Manager (Civil), L&T the other by BHR and an umpire
           appointed in advance jointly by the two Arbitrators .... "
 H
 MIS. LARSEN & TOUBRO LTD. v. M/S. MOHAN:' LAL 169
      HARBANS LAL BHAYANA [A.K ..SIKRI, J.]

           ...... No award of the arbitration/umpire shall be         A
     binding on L&T unless MHB had furnished complete
     opportunity to L&T to file a similar claim on SCOPE and
     only upon L&T receiving any payment fr9m SCOPE under
     the award which L&T may get in its favour on the subject
     matter of work."                                                 B

      5. The position which prevailed up to this stage was that
for the works undertaken by the respondent, it could receive the
payments only when such payments were made by SCOPE to
the appellant. Further, all questions and disputes between the        C
appellant and the respondent were to be referred to a sole
arbitrator where the claim was up to Rs.10 lakhs and three
arbitrators for claims beyond 10 lakhs. The arbitrator(s) was not
supposed to deal with "excepted matters", so stated in the
certificates. However, even if the award of the arbitrator/umpire
was in favour of the respondent, respondent could not receive         D
payment under tbe said award unless such a payment was
received by the appellant from SCOPE under the award. In that
event, the respondent was to provide an opportunity to the
appellant to raise those claims with SCOPE. On receiving the
payments from SCOPE either under the arbitration award                E
between SCOPE and the appellant or otherwise, the appellant
was supposed to honour the award passed in favour of the
respondent. In essence, the parties understood that as the
Principal/Employer was SCOPE, for whom the work was to be
performed by virtue of main agreement dated 29.2.1988                 F
entered into between parties and the sub contract between the
appellant and respondent was on back to back basis, any work
done by the respondent was for the benefit of SCOPE and
ultimately liability for honoring the claims of the respondents was
that of SCOPE and the appellant was not supposed to make              G
any payment from its coffers.

    6. The parties even acted on the basis of aforesaid
understanding initially. There were certain claims of the
respondent and the appellant in turn raised those claims with
                                                                      H
    170       SUPREME COURT REPORTS                 [2014) 3 S.C.R.


A SCOPE. A settlement was reached between the appellant and
  SCOPE with respect to those claims whereby the appellant
  was given a sum of Rs.2.15 crores by SCOPE. The appellant
  and the respondent entered into an agreement dated 31.1.1990
  for apportioning the aforesaid amount, whereby a sum of
B RS.77.40 lacs was paid to the respondent'towards full and final
  settlement of claims/ price escalation on works due to
  hindrance caused in execution of work and to complete the
  balance work. At the same time, another important
  understanding was also reached between the parties. While
c making this apportionment, the modalities of settling the
  disputes between the parties through arbitrator also underwent
  a significant cbange. This is clear from Clause (viii) of the first
  supplementary agreement which reads as under:

                 "The Agreement provides that all disputes between
D         the parties shall be settled through arbitration. It is now
          expressly agreed that any dispute or difference which MHB
          might have with L& T under the agreement or SCOPE
          might have with L&T under the main contract between then
          relating to the part of work that is to be executed by MHB,
E         shall be deemed disputes jointly between MHB and L&T
          and SCOPE under the main contract and L&T will refer all
          such disputes to SCOPE for settlement by negotiation. If
          SCOPE does not settle the same by negotiation, then L&T
          will refer the said disputes for arbitration with SCOPE al
F         on with any other disputes which L&T might have with
          SCOPE in terms of the arbitration clause provided in the
          main contract. MHB shall in such an event, help prepare
          claims and statement of case relating to their scope of
          work and render all assistance and cooperation as may
G         be required in successfully pursuing arbitration. MHB shall
          bear proportionately cost of arbitration relating to their
          scope of work. The award of the arbitration on all such
           matters in dispute claims and counter claims relating to the
           MHB's scope of works shall be binding on both MHB and
H          L&T and all such disputes between MHB and L&T shall
M/S. LARSEN & TOUBRO LTD. v. MIS. MOHAN LAL 171
     HARBANS LAL BHAYANA [A.K. SIKRI, J.]
     be deemed to have been settled accordingly and shall not           A
     be referable to arbitration again between MHB and L&T
     under the agreement."

      7. This clause acknowledges the fact that for the work
done by the respondent under the sub contract, there could be
                                                                        B
two kinds of situations. There could be a situation where there
would be disputes and differences between the appellant and
the respondent for the works done by the respondent. This could
be regarding the workmanship or the amounts payable for the
work done etc. There could also be a situation where SCOPE
is not satisfied with the workmanship or may raise dispute              C
about the quantum of bills etc. resulting into denial of payment
or short payment to the appellant for the work undertaken by
the respondent under the sub contract. The Clause (viii) in the
first supplementary agreement provided that such disputes will
be deemed to have been raised jointly between the respondent            D
and appellant on the one side and SCOPE on the other side.
For this reason, this Clause further provided that appellant was
to refer such disputes to SCOPE for settlement by negotiation
failing which arbitration (as per mechanism provided in the
Clause between the appellant and SCOPE). In order to lodge              E
these claims suitably and properly, the respondent was
supposed to assist and cooperate the appellant. Such an
assistance was expected in successfully pursuing arbitration as
well. Reason for such a collaborative effort, with synergy
between the two parties synergize, was too obvious. Since the           F
respondent has undertaken the work, its inputs could immensely
help the appellant in prosecuting the claims efficaciously and
potently. Further, by participating the respondent would have
satisfaction that its interest is appropriately taken care of. It was
even supposed to bear proportionate cost of arbitration. It was,        G
thus, clear intention that the claims of the respondent were to
be taken up by the appellant and raise with SCOPE and in the
event SCOPE disputing those claims, get those claims
 adjudicated through arbitration. In that sense, both the appellant
and respondent were on one side as co-claimants. However,               H
    172       SUPREME COURT REPORTS                   [2014] 3 S.C.R.


A since the respondent is not a party to the main agreement
  dated 29.9.1988 which is entered into between the appellant
  and SCOPE, the respondent was supposed to give the
  assistance and cooperate in the manner provided in this
  Clause. It is for this reason that this Clause unambiguously
B further provided that in view of the arbitration between the
  appellant and SCOPE, pertaining to the claims of the
  respondent as well, even if the disputes between the appellant
  and the respondent were deemed to have been settled and
  were not referable to arbitration again between these two
c parties.

          8. On reading Clause 25 in the original agreement
    pertaining to the process of arbitration along with the modified
    mechanism agreed to between the parties in the aforesaid first
    supplementary agreement, the parties for making the change
D   is clearly discernable. As per the original clause, the disputes
    between the appellant and the respondent were to be referred
    to the arbitral tribunal. After the rendition of award by the arbitral
    tribunal, money was still not payable under the award to the
    respondent. Instead, in order to recover those moneys from
E   SCOPE, it was for the appellant to file a similar claim on
    SCOPE and on receiving the payment from SCOPE under the
    award, the appellant was to give the money to the respondent
    as per the award between the appellant and the respondent. It
    amounted to indulging in double exercise, viz. (1) an arbitration
F   between the parties herein and thereafter another arbitration
    relating to subject matter between the appellant and SCOPE.
    (2) In order to rationalize and eliminate the dual exercise, the
    parties agreed that instead of resorting to arbitration between
    themselves, both would join together and prefer those claims
G   with SCOPE. This modified process of arbitration, as
    envisaged in the first supplementary agreement, was much
    more rationale which appealed to reason.

     9. The next event which took place cemented the aforesaid
H mechanism between the parties. It appears ~hat there were
 MIS. LARSEN & TOUBRO LTD. v. MIS. MOHAN LAL 173
      HARBANS LAL BHAYANA [A.K. SIKRI, J.]
 further claims of the respondent which were raised by the          A
 appellant with SCOPE. SCOPE agreed to make payments
 and to apportion those payments between the appellant and
 the respondent, these two parties entered into another
 supplementary agreement dated 8.12.1993. The recital to this
 agreement is of paramount importance for our purposes. It          B
 records:

     "L&T has, therefore, invoked the arbitration clause under
     L&T's contract with SCOPE and referred all the claims
     including those relating to MHB on 29.5.1992 to                C
     arbitration, which is now pending."

        10. The parties acted as per modified understanding. It
  was further agreed whatever claims are received by the
· appellant from the SCOPE, they shall be shared between the
   appellant and respondent in the ratio of 67:33. The              D
   understanding between the parties that for any claims of the
   respondent, both the parties were to join together and raise
  claims against SCOPE was reinforced by Clause 6 in the said
 · agreement which again provided an underlined message that
   in so far as the appellant and the respondent are concerned,     E
   they shall not resort to any arbitration between themselves on
   this account. For better appreciation, we reproduce Clause 6
   herein below, of the second supplementary agreement, dated
  8.12.1993:

           "That L&T and MHB shall not undertake any other          F
     arbitration as between them in respect of the claims
     referred to pending arbitration, except to share the
     proceeds or liabilities as stated above by way of accord
     and satisfaction."
                                                                    G
      11. In the aforesaid arbitration, two Member Arbitral
 Tribunal awarded a sum of Rs.15.02 crores approximately
 (which was subsequently reduced to Rs.13.23 crores by mutual
 negotiation) and as per the second supplementary agreement,
 that amount was shared between the appellant and the               H
                                                     J
    174        SUPREME COURT REPORTS                  [2014) 3 S.C.R.


A respondent whereby appellant paid a sum of Rs.4.58 crores
  to the respondent. So much so, when the amount of Rs.15.02
  crores, as awarded by the Arbitral Tribunal against SCOPE and
  in favour of the appellant was reduced to 13.23 crores, this
  arrangement was endoresed by the respondent as well by
B entering into third supplementary agreement dated 6.2.1995.
  The significance of this agreement, for the purpose of present
  case, is Clauses 5 and 16 thereof. Therefore, we reproduce
  hereinunder both these Clauses:

          "Clause 5 - Any claim arising after the date covered by the
c         said award, shall as far as possible settled mutually by
          negotiation. It is mutually agreed by the parties that any
          such disputes, shall be identified but shall not be referred
          to arbitration on the owner (SCOPE herein) until the
          completion of the project. This would facilitate
D         concentration of the concerted efforts of the parties for
          timely completion of the project. The reference of disputes,
          if any, to arbitration after completion of the project shall be
          in accordance with the terms of first supplementary
          agreement dated 31.01.1990. Any further arbitration if
E         referred to the owner after completion of the work, the
          Award arising out of this arbitration shall be share in
          promotion of the claims referred to the works of each of
          the parties herein.

F         Clause 16 - The parties further agrees amend and modify
          clause 25 of the General Conditions of Contract dated
          3.3.1988 which deals with settlement of Disputes by
          Arbitration to the limited extent that in the event of any fresh
          reference of disputes to arbitration, the Arbitrator or
          arbitrators as the case may be shall be bound to give
G
          speaking award. This Clause 25 is subject to the terms of
          the first supplementary agreement dated 31.01.1990 which
          modified the agreement dated 03.03.1988."

      12. Following aspects emerge from the reading of these
H two Clauses:
 M/S. LARSEN & TOUBRO LTD. v. M/S. MOHAN LAL 175
      HARBANS LAL BHAYANA [A.K. SIKRI, J.]

           (a) The parties herein agreed to settle the claims           A
     between themselves through negotiations, in the first
     instance.

           (b) Even if there were disputes between the appellant
     and the respondent they were only to be identified but could       8
     not be referred to arbitration with SCOPE until completion
     of the project.

           (c) Even on the completion of the project, the
     mechanism of raising the disputes had to remain the same
     as was agreed to earlier in the first supplementary                C
     agreement dated 31.1.1990 viz. appellant had to raise the
     claims with SCOPE in cooperation with the respondent
     and there was not to be any inter-se arbitration between
     these parties.
                                                                        D
           (d) Clause 25 as contained in the original agreement
     dated 3.3.1988 between the appellant and the respondent
     pertaining to the arbitration was specifically made subject
     to the logistic provided in the first supplementary
     agreement dated 31.1.1990 making it abundantly clear               E
     that Clause 25 stood modified by the supplementary
     agreement.

     13. Some further claims, out of the aforesaid contract arose
and the appellant submitted those claims to SCOPE in
October, 2000 which were up to date in November 2000. These             F
were made jointly by these parties on SCOPE in August 2001.
They were up dated again in December 2002 and January
2003 in concert with each other.
     14. Now the stage came which led to present proceedings.           G
While the things stood at the aforesaid level, the respondent
decided to close the contract sometime in the year 2002. We
are not required to go into the nitty gritty of this event viz. as to
whether the respondent abandoned the site or it had
completed the project. Suffice it is to note that the respondent        H
    176       SUPREME COURT REPORTS               [2014] 3 S.C.R.


A raised many claims with the appellant and also served legal
  notice dated 31.1.2004 in this behalf. It nominated its arbitrator
  and called upon the respondent to appoint its arbitrator for
  settling the disputes between them. The appellant replied by
  denying the contents of the legal notice. This denial of the
B appellant prompted the respondent to file the application under
  Section 11 of the Act seeking a direction to the appellant to
  appoint its arbitrator. The exact prayer made in this application
  was as under:

          "(a) Appoint an Arbitrator on behalf of the Respondent in
c         terms of Clause 25 of the Contract Agreement dated 3rd
          of March 1988 between the parties as modified by
          Supplementary Agreement dated 31st January 1990 and
          6th February 1995.

D         (b) Direct the Arbitrators appointed by the applicant and
          that appoint on behalf of the respondent to appoint an
          umpire in terms of Clause 25 of the Contract Agreement
          dated 3rd March, 1988."

E       15. It is in this application, as mentioned above, impugned
  orders are passed by the High Court holding that Clause 25
  still survived and the arbitral tribunal can be constituted for
  adjudication of the disputes between the appellant and the
  respondent. The High Court has further held that though the
  respondent had nominated its arbitrator, since the appellant had
F failed to do so in spite of notice, the appellant lost its right to
  nominate its own arbitrator. For this reason, it is the High Court
  which has appointed/nominated an arbitrator for the appellant
  with direction that two arbitrators may appoint presiding
  arbitrator.
G
      16. While narrating the aforesaid events, we have also
  commented on the effects of the three supplementary
  agreements and impact thereof on Clause 25. It is too obvious,
  from the reading of the relevant clause in the supplementary
H agreements, that there could not have been any arbitration
 MIS. LARSEN & TOUBRO LTD. v. M/S. MOHAN LAL 177
      HARBANS LAL BHAYANA [A.K. SIKRI, J.]

between the appellant and respondent, at this stage. Clause            A
25 of the original agreement has undergone material change.
The modalities of raising arbitration are completely novated. As
per the modified understanding between the parties, which is
so eloquently recorded in writing, in the first instance, the claims
of the respondent are to be taken up by the appellant with             B
SCOPE. For pressing those claims and in order to ensure their
proper adjudication, the respondent is supposed to assist and
cooperate with the appellant in pursuing the arbitration. In that
sense, at this stage, the appellant and respondent are on one
side who have to put up a joint fight with SCOPE. It is only after     c
the award is rendered in the arbitration between the appellant
and SCOPE and something remains, which may qualify as a
dispute between the appellant and the respondent, that there
can be an arbitration in respect of those disputes between
these two parties. We are, therefore, of the opinion that the
                                                                       0
High Court is not correct in holding that Clause 25 of the original
agreement in unamended form holds the field. In fact, even the
respondent knew fully well that said clause had been drastically
altered by supplementary agreements. It is for this reason that
in the prayer (a) of the application under Section 11 of the Act       E
filed by the respondent, it has itself acknowledged this change
by mentioning that arbitrator be appointed in terms of Clause
25 of the contract agreement dated 3rd March 1988 "as
modified by supplementary agreements dated 31st January
1990 and 6th February 1995". What, however, is lost sight of
by the respondent in the process, is that the modification in          F
Clause 25 did not permit the respondent to move this kind of
application for appointment of arbitrator between the parties,
at that stage.

     17. Fully realizing the sequittor of the modified clause, Ms.     G
Priya Kumar, learned Advocate appearing for the respondent
tried to paint a different story alleging non-cooperation of the
appellant. She was vociferous in her submission in depicting
blameworthy conduct of the appellant in not raising the claims
preferred by the respondent, with SCOPE and submitted that             H
    178       SUPREME COURT REPORTS                 (2014] 3 S.C.R.


A such a conduct of the appellant was reprehensible which could
  not make the respondent wait for indefinite period. She
  highlighted the fact that though the works were completed in
  the year 2002, when even the constructed complex was
  inaugurated and the respondent had preferred the claims with
B the appellant with request to take up those claims with SCOPE
  way back in October, 2002. But nothing has moved forward.
  She further submitted that till date even the arbitral tribunal has
  not been constituted and the respondent can not be made to
  suffer by waiting endlessly.
c         18. This argument may be convincing in so far as equities
    are concerned. However, merely thereby the legal position
    which is contractually defined between the parties by way of
    written agreements does not alter. It would be necessary to
    record here that when the High Court had passed the impugned
D   orders, the claim had not been made with SCOPE. That may
    be one of the reasons for the High Court to pass the impugned
    order. However, the said position has undergone substantial
    change thereafter. Even after the filing of the Special Leave
    Petition against the impugned order and grant of leave in the
E   matter, in November 2009, there have been joint meetings of
    the appellant and the respondent with the officials of SCOPE.
    Few such meetings took place in April 2012. Pursuant to those
    meetings, SCOPE had called upon the appellant to complete
    the residual work rectification so that SCOPE was in a position
F   to settle the final bills, Thereafter in June 2012, after detailed
    discussion on various issues concerning the project, SCOPE
    asked the appellant to submit revised final bill. Accordingly, bill
    dated 16th June, 2012 was prepared by the appellant in
    consultation with the representatives of the respondent and
G   submitted to SCOPE.

       19. After the submission of the revised final bill, SCOPE
  has been in the process of scrutinizing the same including the
  claims. In this regard, several round of meetings held with
H SCOPE. Many of these meetings with SCOPE which were held
M/S. LARSEN & TOUBRO LTD. v. M/S. MOHAN LAL 179
     HARBANS LAL BHAYANA [A.K. SIKRI, J.]

after the submission of the revised final bill were attended by        A
the representative of the respondent along with the appellant.
In December 2013, again SCOPE called upon the appellant
to hold a meeting to discuss on the pending issues.

    Meanwhile the appellant L&T has been continuing to
                                                                       8
extend the Bank Guarantee which was submitted to SCOPE.

      20. In such a scenario, when the final bill is almost at the
stage of finalization the only aspect that can be taken care of
at this stage is to hasten the process of arbitration, in case after
the passing of the final bill by SCOPE, some claims of the             C
respondent still survive.

     21. Accordingly while allowing this appeal and setting
aside the order of the High Court, we would like to give the
following directions, in order to balance the equities:                D

            (1) It shall be ensured by the appellant that final bill
     is settled by SCOPE within two months from the date of
     receiving the copy of this order. For this purpose, this order
     shall be brought to the notice of SCOPE as well so that
     SCOPE acts swiftly for settling the bill.                         E

           (2) In case there are certain claims of the respondent .
     which are not agreed to while passing the final bill and
     disputes remain, those will be taken up by the appellant
     with SCOPE immediately thereafter by invoking arbitration F
     between the appellant and SCOPE as per the arbitration
     agreement between the appellant and SCOPE. In raising
     such disputes the appellant and the respondent shall act
     in unison as per the understanding arrived at between
     them vide supplementary agreements. In that event, arbitral G
     tribunal shall be constituted within 2 months thereof.

          (3) In case the appellant is satisfied with the final bill
     and chooses not to raise the claims with SCOPE but the
     respondent feels that their claims are legitimate then it
                                                                       H
    180        SUPREME COURT REPORTS                   [2014) 3 S.C.R


A          would be treated as dispute between the appellant and the
           respondent. In that event, arbitral tribunal shall be
           constituted as per Clause 25 of the agreement dated
           3.3.1998 between the parties within a period of two months
           of that event.
B
                 (4) In either of the aforesaid arbitrations, the arbitral
           tribunal shall endeavour to render its award within six
           months from the date of the constitution of the arbitral
           tribunal.
c       22. The appeal is allowed and disposed of in the aforesaid
    terms.

    R.P.                                               Appeal allowed.