The case, which revolved around a development agreement from 1998 concerning a residential project in Gurgaon, saw L&T accused of failing to honour financial commitments and construction obligations. PCL terminated the contract in 2000, triggering arbitration.
The Arbitral Tribunal, in its 2002 award, found that L&T had committed a fundamental breach of contract and observed:
“L&T had consciously decided to abandon the Development Agreement… and defaulted in the fulfilment of its obligations.”
The tribunal further noted that the Supplementary Agreement was signed under economic coercion, declaring it a non-starter.
While the Delhi High Court’s Division Bench upheld several key findings—including L&T’s liability and the permanent injunction restraining it from interfering with the project—the court trimmed down the monetary reliefs, citing lack of precise evidence on damages.
However, what caught the Supreme Court’s attention during the hearing of civil appeals was the open-ended nature of arbitration proceedings in India. Justice Abhay S. Oka, writing for the bench, remarked:
“This is a matter of serious concern and calls for introspection. There must be a framework imposing reasonable time limits for oral arguments and submission of written notes in arbitration proceedings.”
The Court endorsed the High Court’s prior observation that:
“There should be some clarity in the arbitration process, particularly with respect to timelines for oral hearings and submissions.”
The real estate dispute, which has lingered for over two decades, became a vehicle for the top court to reiterate its concerns about arbitration inefficiencies—a key deterrent in making India a global arbitration hub. In particular, the Court took note of how prolonged hearings, repetitive submissions, and unregulated extensions delay justice and erode confidence in the arbitration process.
While the ruling affirms that courts should respect the sanctity of arbitral awards unless there’s a clear violation, it also stresses the need for procedural discipline in arbitration itself. The bench emphasized that arbitrators must set strict timelines and avoid open-ended hearings that compromise efficiency and inflate costs.
The case also underscored the risks of coercion in contract law, with the Supreme Court agreeing that PCL’s consent to supplementary terms was secured under financial pressure, making those terms unenforceable.
Ultimately, the Supreme Court upheld the key findings of breach and coercion but left the door open for PCL to pursue fresh claims on quantification of damages, reinforcing the broader message that while arbitration is a preferred mode of dispute resolution, it must evolve to match the standards of speed and clarity expected from modern commercial adjudication.
Read The Judgment Here
keywords: Arbitration award, Supreme Court judgment, Puri Construction, Larsen & Toubro, Real estate dispute, Arbitration delay
