# Larsen and Toubro Limited v. Puri Construction Pvt. Ltd. and Others

- **Citation:** 2025 INSC 523
- **Court:** Supreme Court of India
- **Decided:** 2025-04-21
- **Bench:** Abhay S. Oka, Pankaj Mithal
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/larsen-and-toubro-limited-v-puri-construction-pvt-ltd-and-others-38546
- **Pages:** 40

## Headnote

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
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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

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[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
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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.
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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 counterclaim, 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
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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.
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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. Roohe-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
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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.
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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;
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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.
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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.
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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
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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
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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.
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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
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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.
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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
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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.
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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
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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.