The Supreme Court criticized lawyers for dragging arbitration appeals with long arguments and too many case citations. It stressed the need for time limits to ensure courts can also focus on common people’s cases.
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NEW DELHI: The Supreme Court of India strongly expressed concern about how lawyers argue in arbitration-related appeals. The Court felt that lawyers often take too much time and bring too many case references, which makes the hearings unnecessarily long. The Court said it may be time to fix a limit on how long lawyers can speak in such cases.
The Bench was headed by Justices Abhay Shreenivas Oka and Pankaj Mithal. They supported similar concerns earlier raised by the Delhi High Court regarding the functioning of arbitration appeals. The Supreme Court pointed out that this issue is not small and affects the overall legal system in India.
“In several appeals arising out of Sections 34 and 37 proceedings, we have noticed that there is a tendency on the part of the senior members of the Bar to argue as if these proceedings were regular appeals under Section 96 of the Code of Civil Procedure,”
-the Court said.
This comment came while the Court was deciding on an old dispute that had started almost 10 years ago between Larsen & Toubro Limited (L&T) and Puri Construction Private Limited (PCL).
The Supreme Court said it has noticed that senior lawyers argue too many minor facts and quote many legal cases, even when such detailed arguments are not necessary in arbitration matters. This ends up making the hearings longer than needed and results in long written judgments.
“The high monetary stakes involved in the proceedings should not result in unnecessarily long oral submissions or bulky written submissions,”
-the Court observed.
The Court said that because of these practices, arbitration in India is getting a bad name.
“All this results in the criticism about arbitration in India. Therefore, there is a need to impose time limit on oral submissions in such cases. We cannot forget that this Court and the High Courts have the appellate jurisdiction in civil and criminal cases. These Courts should be in a position to also devote sufficient time to the cases of the common man. What we have expressed is a matter of serious concern and introspection for everyone,”
-the Court stated.
The case was between PCL and L&T. In 1998, they signed a development agreement to build a housing project in Haryana. Later, they made another agreement and also signed a tripartite agreement with Lord Krishna Bank between 1999 and 2000. These were done mainly to manage financial shortfalls and government rules related to External Development Charges (EDC).
In December 2000, PCL cancelled the agreement, saying L&T did not fulfill its important responsibilities like paying the EDC and completing construction on time.
The issue was taken to arbitration.
The arbitral tribunal found L&T guilty of serious mistakes such as:
- Leaving the project unfinished;
- Not paying EDC charges;
- Putting PCL’s commitments to its former partner ITCREF at risk; and
- Forcing PCL to sign agreements through economic pressure.
The tribunal gave a decision in favour of PCL. It awarded compensation of over Rs 115 crore and also said that L&T should not interfere with PCL’s property rights.
In 2015, the Delhi High Court looked at the matter. It agreed with the tribunal that L&T was at fault and kept the injunction in place. However, the Court removed the money compensation part, saying the tribunal had used wrong calculations, including L&T’s own profit estimates, to decide the amount. This case then reached the Supreme Court.
The Supreme Court clearly stated that L&T broke the agreement terms from 1998. It failed to pay the EDC and also walked away from the project. The Court said that the additional agreement made in 1999 was never properly started as L&T did not meet the key conditions such as replacing bank guarantees or clearing dues to Lord Krishna Bank.
“Looking to 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 undoubtedly a possible finding which could not have been interfered with under Section 34 of the Arbitration Act. Moreover, it is a finding of fact,”
-the judgment said.
The Court also agreed with the findings of economic pressure and undue influence.
PCL was financially stressed because of L&T’s failures and was forced to sign the supplementary and tripartite agreements.
“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 consideration of the facts discussed before, such a view by the Arbitral Tribunal cannot be said to be contrary to justice and morality. We agree with the view taken by the Division Bench,”
-the Court ruled.
However, while the Court confirmed that L&T broke the agreement, it did not accept the way damages were calculated by the arbitral tribunal. The tribunal had awarded Rs 35 crore as damages, Rs 75 crore for title deed issues, and Rs 5 crore for not returning licenses. The Court said there was no proper proof behind these figures.
“PCL did not prove the said loss, and the Tribunal did not rely upon any evidence to arrive at a fair assessment of the loss actually incurred by PCL…..Therefore, the award of Rs. 35 crores as damages was fundamentally contrary to Section 73 of the Contract Act. Such an approach was completely contrary to substantive law in the form of Section 73. This finding cannot be disturbed,”
-the Court stated.
The Court also made it clear that as per the Arbitration Act, the Court cannot modify an award. It can only approve it or cancel it. But PCL still has the option to take legal action again for damages.
“On a conjoint reading of Paragraph 119 and 121, we find that the remedy of PCL has been 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,”
-the judgment said.
Finally, the Supreme Court dismissed L&T’s appeal.
L&T was represented by Senior Advocates Krishnan Venugopal and Abhimanyu Bhandari, along with advocates Rooh-e-hina Dua and Shreya Arora. Other lawyers in their team included Sameer Parekh, Sumit Goel, Sreeparna Basak, Abhishek Thakral, Jayant Bajaj, and Ishan Nagar.
On the other side, Puri Constructions was represented by Senior Advocate MR Shamshad, supported by Shashank Singh, Aditya Samaddar, Arijit Sarkar, Zeb Hasan, and Prapti Shrivastava.
CASE TITLE:
L&T Vs Puri Construction
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