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 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 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 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]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Divya Pandey. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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