Larsen & Toubro Ltd. v. Mohan Lal Harbans Lal Bhayana
Background
Larsen & Toubro subcontracted finishing work on an office complex and later agreed that the subcontractor's claims would first be pursued jointly against the project owner. The subcontractor nevertheless obtained a High Court appointment of an arbitrator for a direct dispute with Larsen & Toubro. The contractor argued that the later agreements had changed when such an arbitration could begin.
Decision Breakdown
The Supreme Court allowed the appeal and set aside the appointment. The original arbitration clause had to be read with the supplementary agreements, which required the parties first to pursue their joint claims against the owner. To prevent indefinite delay, the Court imposed time limits for settling the final bill, constituting any necessary tribunal and completing the award. It also provided for direct arbitration if the contractor declined to pursue claims the subcontractor still considered legitimate, rather than treating the original clause as immediately available in its unchanged form.
Lesson Learnt
Later written agreements can change the sequence for invoking arbitration. A party should read the full contractual arrangement before seeking an arbitrator, while using available remedies to prevent an agreed preliminary stage from becoming endless.