Supreme Court criticises senior lawyers for lengthy arguments in arbitration appeals; suggests time limit

The Supreme Court on Monday criticised lengthy arguments and excessive citations made by lawyers in arbitration appeals and suggested setting time limits for oral arguments in such matters. .A Bench of Justices Abhay Shreenivas Oka and Pankaj Mithal endorsed the Delhi High Court's concerns about how arbitration appeals are conducted and highlighted serious systemic issues affecting India's legal system."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. The observations were made while dismissing a decade-old dispute between Larsen & Toubro Limited (L&T) and Puri Construction Private Limited (PCL)..The Court expressed concern that senior lawyers often present minutely detailed factual arguments and cite numerous cases on the same legal points during arbitration appeals despite the limited jurisdiction of courts in such proceedings. This approach unnecessarily extends hearings and results in overly lengthy judgments, the Bench opined."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 noted that such practices in effect lead to criticism of arbitration. Hence, it emphasised on the need for time limit on oral submissions in arbitration cases. “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 judgment was passed in a dispute between PCL and L&T. They had entered into a development agreement in 1998 for a group housing project in Haryana. A supplementary agreement and a tripartite agreement with Lord Krishna Bank followed in 1999-2000, primarily to manage funding shortfalls and regulatory compliance relating to External Development Charges (EDC). PCL terminated the development agreement in December 2000 alleging L&T had failed to meet key obligations including EDC payments and construction timelines.The matter was referred to arbitration. The arbitral tribunal held L&T liable for fundamental breaches including:Abandoning the project;Failing to pay EDC;Jeopardising PCL’s obligations to ITCREF (a prior joint venture partner); andEngaging in economic coercion during the signing of the supplementary agreement.It awarded over ₹115 crore in compensation and damages to PCL and injunctive relief restraining L&T from interfering with PCL’s rights over the property..In 2015, the Delhi High Court Division Bench upheld the breach findings and the injunction but set aside monetary compensation. It found that while L&T had indeed defaulted, the tribunal had relied on unproven figures—particularly L&T’s own profit projections—to compute damages. The matter ultimately reached the Supreme Court. The Supreme Court held the following:.Breach of Contract by L&TThe Court affirmed that L&T failed to fulfill its obligations under the development agreement of 1998 including non-payment of External Development Charges (EDC) and abandonment of the project. The supplementary agreement of 1999 was held to be a "non-starter" as L&T did not comply with essential conditions such as replacing bank guarantees and paying 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. Economic Duress & CoercionThe Tribunal and the High Court had found that PCL was forced into the supplementary agreement and tripartite agreement due to financial distress caused by L&T’s defaults. The Supreme Court upheld this finding, citing Section 16(3) of the Indian Contract Act on undue influence."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. .Damages and compensation set asideWhile the breach of contract was confirmed, the Supreme Court agreed with the High Court that the arbitral tribunal’s quantification of damages at ₹35 crores lacked proper evidence.The alternative award of ₹75 crores for failing to secure title deeds and ₹5 crores for non-return of licenses was also struck down for lack of substantiation.“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. No Remand for Fresh ArbitrationThe Court clarified that under Section 34 of the Arbitration Act, an award cannot be modified - only set aside or upheld. However, PCL retains the right to pursue fresh legal remedies 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. .It thus dismissed the appeal filed by L&T. .L&T was represented by Senior Advocate Akhil Sibal with Advocates Saheer Parekh, Sumit Goel, . Sreeparna Basak, Abhishek Thakral, Jayant Bajaj, Ishaan Nagar, Deboshree Mukherjee, Aditi Phatak from Parekh & Co..Mohinder Puri was represented by Senior Advocates Krishnan Venugopal and Abhimanyu Bhandari, with Advocates Rooh-e-hina Dua, Zafar Inayat, Shreya Arora, J. Rajesh, Krishnan Agarwal and Avinash Mathur..Puri constructions was represented by Senior Advocates C. A. Sundaram and M. R. Shamshad with Advocates Aditya Samaddar, .Arijit Sarkar and Nabeela Jamil, Adv..[Read Judgment].Follow Bar and Bench channel on WhatsAppDownload the Bar and Bench Mobile app for instant access to the latest legal news.