Arbitration Awards: Limits of Judicial Intervention – Section 34 of the Arbitration Act is a “limited remedy” – These appeals arose from a complex dispute concerning a land development project for residential group housing schemes in Gurgaon, Haryana, involving Larsen and Toubro Limited (L&T) and Puri Construction Pvt. Ltd. (PCL). PCL had obtained licenses to develop the lands and had initially entered into a joint venture with ITCREF2. L&T and PCL subsequently entered into a Development Agreement in January 1998, followed by a Supplementary Agreement in December 1999, and a Tripartite Agreement in January 2000.
The dispute escalated when PCL terminated the Development Agreement in December 2000, alleging L&T’s failure to allocate land to ITCREF, non-sanctioning of funds, non-payment of External Development Charges (EDC), and non-commencement of work4. L&T filed a counter-claim5. An Arbitral Tribunal issued its award on 28th December 2002, finding that L&T had jeopardised PCL’s obligations, abandoned the project, and was in default of EDC payments6. The Tribunal also determined that the Supplementary Agreement was unlawful and tainted by economic coercion67. The Tribunal awarded PCL Rs. 35 crores in damages, directed L&T to settle a bank loan, release title deeds, and prevented L&T from interfering with PCL’s development, among other directives.
L&T challenged this award under Section 34 of the Arbitration and Conciliation Act, 1996, before a Single Judge of the Delhi High Court. The Single Judge largely upheld the Arbitral Tribunal’s findings regarding the Supplementary Agreement being vitiated by economic duress and its non-binding nature, and upheld the Rs. 35 crores in damages. However, some other parts of the award, including specific compensation amounts, were set aside. Both parties then appealed to a Division Bench of the Delhi High Court under Section 37 of the Arbitration Act. The Division Bench partly allowed PCL’s appeal and dismissed L&T’s appeal, observing that the parties were “left to pursue the appropriate course of actions under law”.
Law Involved
Arbitration and Conciliation Act, 1996:
Section 34: Pertains to applications for setting aside an arbitral award.
Section 37: Deals with appeals from orders made under Section 34.
Indian Contract Act, 1872: Sections 73 and 75 were referenced in relation to claims for damages.
Judicial Precedent: The Supreme Court extensively referred to its previous judgments, particularly Project Director, National Highways Authority of India v. M. Hakeem and Another, which discusses the limited scope of judicial intervention under Section 34 of the Arbitration Act.
Other cited cases included McDermott International Inc. v Burn Standard Co. Ltd. &Ors. and Kinnari Mullick v. Ghanshyam Das Damani, reinforcing the principle that a court acting under Section 34 cannot modify an award.
ReasoningThe Supreme Court scrutinised the Delhi High Court Division Bench’s judgment, particularly its conclusion that the parties were “left to pursue the appropriate course of actions under law”. The Court highlighted that the power of a court under Section 34 of the Arbitration Act is a “limited remedy”. Citing its established jurisprudence, the Supreme Court reiterated that a court has no power to modify an arbitral award; its only options are to set aside the award, in whole or in part, or to uphold it. It also affirmed that a remand to the Arbitral Tribunal is permissible only under specific, limited circumstances as outlined in Section 34.
The Supreme Court found that the Division Bench, by stating that parties could pursue further action, effectively tried to re-open the arbitration or allow fresh adjudication, which goes beyond the statutory powers granted under Sections 34 and 37 of the Arbitration Act. The Court emphasised that the jurisdiction in arbitration appeals is limited, requiring judicial restraint and deference to the Arbitral Tribunal’s findings if they are intelligible and adequately reasoned. The High Court’s tendency to entertain “long oral submissions or bulky written submissions” in arbitration matters was criticised, as it often leads to exceeding the permissible scope of intervention. The Division Bench’s observations effectively amounted to a “remand” which is not allowed under Section 34.
HoldingThe Supreme Court’s judgment will address the specific civil appeals (CIVIL APPEAL NOS. 2575-2578 OF 2016, 2580-2581 OF 2016, and CIVIL APPEAL NO. 2579 OF 2016)1. While the ultimate formal holding is not fully detailed in the provided excerpts, the reasoning strongly indicates that the Supreme Court would set aside the impugned judgment of the Delhi High Court Division Bench dated 30th April 2015, insofar as it exceeded the permissible scope of judicial intervention under Section 34 and 37 of the Arbitration and Conciliation Act, 1996. This implies that the High Court’s decision to “leave parties to pursue appropriate course of actions under law” and its implicit modification or remand of the award would be overturned, re-establishing the principle that courts cannot re-arbitrate or modify an award. The Supreme Court’s ruling will reinforce the limited nature of court intervention in arbitration proceedings, allowing only for the setting aside of an award or part thereof, not its modification or general remand for fresh adjudication.
Larsen And Toubro Limited V. Puri Construction Pvt. Ltd. And Others
Supreme Court: 2025 INSC 523: (DoJ 21-04-2025)
