Supreme Court of India· 21 April 2025

Under Section 34 of the Arbitration and Conciliation Act, 1996, can a court set aside an Arbitral Tribunal's conclusion that conditions precedent to an agreement were not complied with?

Larsen and Toubro Limited v. Puri Construction Pvt. Ltd.

2025 INSC 523 · CIVIL APPEAL NO. 2579 OF 2016
Coram: Abhay S. Oka

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Answer

Not where that conclusion is a possible one on the clauses. The finding that the conditions precedent were not complied with, leaving the Supplementary Agreement a non-starter, is a finding of fact and undoubtedly a possible finding, and could not have been interfered with under Section 34.

Headnote

Arbitration and Conciliation Act, 1996 — ss.34 and 37 — Indian Contract Act, 1872 — ss.16(3) and 73 — Award cannot be modified — Scope of interference — Conditions precedent — Economic duress — Damages — Arbitration and Conciliation Act, 1996 — ss.34 and 37 — No power to modify an award — Held: A court under Section 34 may only set aside an arbitral award, not modify or vary it. Section 37 powers are no broader, so what cannot be done under Section 34 cannot be done on appeal. (¶40, 56) Arbitration and Conciliation Act, 1996 — s.34 — Conditions precedent — Possible view not interferable — Held further: A Tribunal's conclusion that unfulfilled conditions precedent left a supplementary agreement a non-starter is a finding of fact and a possible finding. Such a finding cannot be interfered with under Section 34. (¶46, 49) Indian Contract Act, 1872 — s.73 — Damages assessed without proof of loss — Held further: Damages fixed from the opposite party's own counter-claim figures, with no evidence of the loss actually incurred, are fundamentally contrary to Section 73. Being contrary to substantive law, that part of the award was rightly set aside. (¶52) Indian Contract Act, 1872 — s.16(3) — Economic duress — Burden on the dominant party — Held further: Where a party in a position to dominate the will of another obtains an unconscionable transaction, the burden of proving absence of undue influence lies on it; a coercion finding so reached discloses no patent illegality. Appeals dismissed. (¶48, 59)

In the Court's own words

Paragraph 46Looking 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.

Paragraph 49Dealing with issue no. 3, the Division Bench referred to Clause 26 of the Development Agreement and Clause 5 of the Supplementary Agreement. The Tribunal found that L&T committed a breach of Clause 19 of the Development Agreement by not making payment of a single instalment of EDC. Moreover, interest free deposit of Rs. 5 crores in terms of Clause 12 of the Development Agreement was not paid by L&T to PCL. The Tribunal found that there was no Development work carried out and not a single floor of any residential building was constructed for which development plans were sanctioned. Therefore, the finding recorded by the Tribunal that L&T committed fundamental breaches of the agreement cannot be interfered within the limited jurisdiction under Section 34 of the Arbitration Act.

Acts & Sections

s.34 Arbitration and Conciliation Act, 1996s.37 Arbitration and Conciliation Act, 1996s.73 Indian Contract Act, 1872s.16(3) Indian Contract Act, 1872s.28(1)(a) Arbitration and Conciliation Act, 1996s.75 Indian Contract Act, 1872s.96 Code of Civil Procedure, 1908

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Also decided in this judgment

Under the Arbitration and Conciliation Act, 1996, may a court under Section 34, or an appellate court under Section 37, modify an arbitral award instead of setting it aside?Can an award of damages stand under Section 73 of the Indian Contract Act, 1872 where it is quantified from the opposing party's counter-claim figures rather than from proof of the loss suffered?

Plain-language answer prepared by the LexStreak Editorial Desk — verify against the judgment. Source: Supreme Court of India. Corrections