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Larsen and Toubro Ltd. v. Puri Construction Pvt. Ltd.

Civil Appeal · 2025 INSC 523Decided 21 Apr 2025
C.A. No. 2575-2578 of 2016 (with connected Civil Appeal Nos. 2579-2581 of 2016)
Justice Abhay S. Oka · Justice Pankaj Mithal

Background

Puri Construction Ltd. (PCL), which owned land in Gurgaon under development licenses, brought in Larsen & Toubro Ltd. (L&T) via a Development Agreement to complete a housing project after an earlier joint-venture partner exited. When L&T allegedly abandoned its obligations (failing to pay statutory development charges, jeopardizing PCL's commitments to the exiting partner, and trying to make sales without proper sanction) PCL terminated the agreement and won a large arbitral award (roughly Rs. 35 crore in damages plus other sums) against L&T. A single judge of the Delhi High Court set aside that award entirely, but the Division Bench partly restored it, upholding the finding that L&T breached the contract while setting aside the specific damages figures, prompting cross-appeals to the Supreme Court by both L&T and PCL.

Decision Breakdown

The Supreme Court dismissed both sets of appeals, affirming that L&T had indeed breached the Development Agreement (including abandoning the project, defaulting on payments to the bank and statutory authorities, and undermining PCL's obligations to its former partner) and that a later "Supplementary Agreement" L&T relied on was tainted by economic duress and never validly took effect. The Court held that under Section 37 of the Arbitration Act, an appellate court's powers are no broader than a court's powers under Section 34, meaning an arbitral award can be set aside for patent illegality but not modified or partly rewritten by the courts; since the Division Bench had not attempted to modify the award itself but simply left the quantification question open for the parties to pursue through appropriate proceedings, its approach was correct. The Court used the occasion to criticize the increasingly common practice of turning limited-scope arbitration appeals into full-blown factual re-arguments with excessive written submissions and case citations, calling for judicial and professional discipline to keep such proceedings within their proper limits.

Lesson Learnt

Courts reviewing arbitration awards cannot rewrite or "fix" the numbers in an award, they can only uphold or strike it down for legal defects, so businesses entering arbitration should recognize that a flawed damages calculation, even in an otherwise sound award, may mean starting over rather than getting a court to simply correct the figure.

Official source (sci.gov.in)View Judgment (PDF)

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