Back
2025 Supreme(SC) 668
SUPREME COURT OF INDIA
ABHAY S. OKA, PANKAJ MITHAL, JJ.
Larsen and Toubro Limited – Appellant
versus
Puri Construction Pvt. Ltd. and Others – Respondents
Civil Appeal Nos. 2575-2578 of 2016 with Civil Appeal Nos. 2580-2581 of 2016 and Civil Appeal No. 2579 of 2016
Decided on : 21-04-2025
For the Appellant(s) : Mr. Krishnan Venugopal, Sr. Adv. Mr. Abhimanyu Bhandari, Sr. Adv. Ms. Rooh-e-hina Dua, AOR Ms. Shreya Arora, Adv. Mr. Sameer Parekh, Adv. Mr. Sumit Goel, Adv. Ms. Sreeparna Basak, Adv. Mr. Abhishek Thakral, Adv. Mr. Jayant Bajaj, Adv. Mr. Ishan Nagar, Adv.
For the Respondent(s): Mr. Sameer Parekh, Adv. Mr. Sumit Goel, Adv. Ms. Sreeparna Basak, Adv. Mr. Abhishek Thakral, Adv. Mr. Jayant Bajaj, Adv. Mr. Ishan Nagar, Adv. For M/S. Parekh & Co., AOR Mr. M. R. Shamshad, Sr. Adv. Mr. Shashank Singh, AOR Mr. Aditya Samaddar,Adv. Mr. Arijit Sarkar, Adv. Ms. Zeb Hasan, Adv. Ms. Prapti Shrivastava, Adv.
The court upheld the findings of economic duress and fundamental breach of contract, while emphasizing the need for proper evidence in quantifying damages.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 34 and Section 37 - Appeals against the judgment of the Division Bench of Delhi High Court - The Division Bench upheld the findings of the Arbitral Tribunal that the Supplementary Agreement was vitiated by economic duress and that L&T committed a fundamental breach of the Development Agreement. The Tribunal's quantification of damages was set aside, allowing parties to pursue appropriate legal remedies. (Paras 1, 12, 119, 121)
(B) Economic Duress - The court affirmed that the execution of the Supplementary Agreement was under economic duress, impacting its validity. (Paras 11, 119)
(C) Breach of Contract - The Tribunal found L&T's abandonment of the project constituted a fundamental breach of the Development Agreement, justifying PCL's termination of the contract. (Paras 11, 119)
(D) Damages - The Division Bench set aside the Tribunal's award of damages due to lack of evidence supporting the quantification, emphasizing the need for proper valuation of losses. (Paras 12, 119) (E) Permanent Injunction - The court upheld the permanent injunction against L&T from interfering with PCL's development rights. (Paras 12, 119) (F) Costs of Arbitration - The award of costs in favor of PCL was confirmed. (Paras 12, 119)
Based on the provided legal document, here are the key points:
- Case Details: The case involves Larsen and Toubro Limited (Appellant) versus Puri Construction Pvt. Ltd. and Others (Respondents), decided by the Supreme Court of India on 21-04-2025 regarding Civil Appeals Nos. 2575-2578 of 2016, etc. (!)
- Core Findings: The Court upheld the findings of economic duress and fundamental breach of contract, while setting aside the arbitral tribunal's quantification of damages due to lack of proper evidence. (!)
- Legal Acts Referred: The judgment refers to the Arbitration and Conciliation Act (Sections 16, 11, 28(1)(a), 34, 37), Civil Procedure Code (Section 96), Contract Act (Sections 16(3), 73), and Income Tax Act (Section 37(i)). (!)
- Validity of Supplementary Agreement: The Court affirmed that the Supplementary Agreement was vitiated by economic duress and remained a "non-starter" because the conditions precedent (such as replacing bank guarantees and payment of EDC) were not fulfilled by L&T. (!) (!)
- Fundamental Breach: The Court upheld the finding that L&T committed a fundamental breach of the Development Agreement by abandoning the project and failing to commence construction or pay EDC, justifying PCL's termination of the contract. (!) (!)
- Damages and Compensation: The Court set aside the award of damages (Rs. 35 crores), compensation for title deeds (Rs. 75 crores), and compensation for non-return of licenses (Rs. 5 crores) because they were based on L&T's own valuation without independent evidence of actual loss. (!) (!) (!)
- Indemnity Relief: The Court set aside the award directing L&T to indemnify PCL for ITCREF's claims (Rs. 50 crores), ruling that such losses were not reasonably foreseeable and thus not recoverable under the agreement. (!) (!)
- Permanent Injunction: The Court upheld the permanent injunction against L&T, restraining them from interfering with PCL's development rights over the property. (!)
- Costs: The award of arbitration costs in favor of PCL (Rs. 30 lakhs) was confirmed by the Court. (!)
- Title Deeds: The Court directed that the title deeds deposited with the Registrar of the High Court be released to PCL. (!)
- Judicial Restraint: The Court emphasized that courts cannot modify arbitral awards under Section 34 or Section 37 and criticized the tendency of counsel to treat these proceedings as regular appeals under Section 96 of the CPC, urging restraint in arguments. (!) (!)
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 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;
(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 part
