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One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=769473 https://www.taxtmi.com/caselaws?id=769473 Setting aside of arbitral award - binding nature of Development Agreement dated 10.03.1998 entered into between the Respondent and the Claimants - coercion and economic duress on the claimants - breaches of the fundamental terms of the Development Agreement - downsizing/ exit of the business of real estate development and not to pay EDC or commence development work - non provisions of security of the development site and unprovoked unilateral abandonment of the site by L&T - termination of development agreement for the reasons stated in the letter of termination - obligation to commence construction in phase I - termination of the contract by the Claimants amounts to wrongful repudiation - Respondent is entitled to be relieved of its obligations under the Tripartite Agreement or not - liability to compensate the Claimants under the agreement of indemnity - authority to institute the instant claim petition and to carry out acts necessary to prosecute the instant claim petition on behalf of Claimants other than Puri Construction Limited. Power of the Court under Section 34 of partly setting aside the award - HELD THAT:- This issue was dealt with by this Court in the case of Project Director, National Highways No. 45 E and 220, National Highways Authority of India v. M. Hakeem and Another [2021 (7) TMI 1343 - SUPREME COURT]. This Court, in the said decision, considered its earlier decision in the case of McDermott International Inc. v Burn Standard Co. Ltd. & Ors. [2006 (5) TMI 442 - SUPREME COURT] - Ultimately, in paragraph 42, this Court held 'Even otherwise, to state that the judicial trend appears to favour an interpretation that would read into Section 34 a power to modify, revise or vary the award would be to ignore the previous law contained in the 1940 Act; as also to ignore the fact that the 1996 Act was enacted based on the Uncitral Model Law on International Commercial Arbitration, 1985 which, as has been pointed out in Redfern and Hunter on International Arbitration, makes it clear that, given the limited judicial interference on extremely limited grounds not dealing with the merits of an award, the "limited remedy" under Section 34 is coterminous with the "limited right", namely, either to set aside an award or remand the matter under the circumstances mentioned in Section 34 of the Arbitration Act, 1996.' The Development Agreement is a contract between PCL and L&T. Clause 4 of the Development Agreement refers to the obligations of PCL under the agreement entered into by it on 30th July, 1997 with ITCREF. It refers to the fact that PCL had agreed to hand over 1,95,000 sq. ft. of built-up area in the Schedule 'A' property, after its development, comprising high-rise and low-rise buildings, inclusive of a car park, to ITCREF - The Agreement provides that L&T shall complete the construction of the building on the Schedule 'B' property within 60 months or such mutually extended period from the date of obtaining sanction for the building plan, or tax clearance under Section 37-I of the Income Tax Act, and making the said property available for development, whichever is later. It has also stipulated that construction shall be carried out in phases. After completion of phase of 3,00,000 sq. ft. on Schedule 'B' property, L&T, in consultation with PCL, by mutual consent, shall have the option and liberty to renew and revise the specifications/amenities and built-up area of the balance development and extend the period of completion by a further period of 12 months, depending upon the prevalent market conditions. In the recital of the Supplementary Agreement, it is mentioned that L&T has made only partial compliance with the requirement under the Development Agreement to pay EDC to DTCP. Moreover, L&T has failed to furnish a bank guarantee for the balance payment of EDC. In fact, it records that L&T had taken a stand that in view of the adverse market conditions, the project had become unviable and sought further time from PCL to allow the prevailing real estate market conditions to improve - Clause (I) of the Supplementary Agreement makes it very clear that the Supplementary Agreement shall come into effect only upon the occurrence of the four events specified therein. That is how the Supplementary Agreement remained a non-starter. It is apparent from the recitals in the Supplementary Agreement as well as Tripartite Agreement that as L&T did not discharge its obligation under the Development Agreement to pay EDC, the Bank was required to be brought into the picture so that it could advance a sum of Rs. 6 crores by way of loan for making payment of the said amount to DTCP. The Division Bench referred to Section 16(3) of the Contract Act which provides that where a person who is in a position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the burden of proving that there was no undue influence is on the person in a position to dominate the will of the other - 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. Whether the Claimants committed breaches of the fundamental terms of the Development Agreement dated 10.03.1998 to enable the Respondent to resile from the agreement of development? - HELD THAT:- 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. Whether the respondent's Board of directors in pursuance of reports of Boston Consulting Group (for short 'BCG'). Richard Ellis and Jones Lang La Salle decide to downsize/ exit the business of real estate development and not to pay EDC or commence development work? - Whether there had been non provisions of security of the development site and unprovoked unilateral abandonment of the site by L&T. If so whether such actions had resulted in encroachments causing monetary loss to the Claimants and in the event of such monetary loss caused to the Claimants what is the extent of such loss? - HELD THAT:- The powers of the Appellate Court under Section 37 of the Arbitration Act are not broader than those of the Court under Section 34 of the Arbitration Act. Therefore, what cannot be done in the exercise of the powers under Section 34 cannot be done in an Appeal under Section 37. An Arbitral Award cannot be modified. Thus, even after recording the conclusions in paragraph no. 119, the Division Bench has not modified the Award by partly setting aside the Judgment under Section 34 - 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. As the finding of the Arbitral Tribunal regarding breaches committed by L&T was affirmed, the Division Bench has rightly segregated that part of the Award by which, cost of arbitration was ordered to be paid to PCL by L&T. This part has been severed from rest of the Award. Therefore, this part of the Award must be complied with by L&T, if not already done. As documents of title were deposited with the Registrar, the direction to hand over the same to PCL cannot be faulted with. Conclusion - i) The conditions precedent in Clauses (I), (II), and (III) of the Supplementary Agreement were not fulfilled. Therefore, the Supplementary Agreement was a non-starter, hence, only the Development Agreement was binding on the parties which was not novated by the Supplementary Agreement. ii) The Supplementary Agreement and the Tripartite Agreement were tainted by coercion. iii) L&T committed fundamental breach of the Development Agreement by unilaterally abandoning the project, failing to pay EDC, and not fulfilling its obligations towards statutory authorities, ITCREF, and the Bank. iv) The termination of the Development Agreement by PCL was justified and did not amount to wrongful repudiation entitling L&T to rescind or claim damages. v) The courts under Sections 34 and 37 of the Arbitration Act do not have the power to modify or partially set aside arbitral awards; they may only uphold or set aside in entirety or remand under limited circumstances. vi) The authority of the claimant's representative to institute arbitration was valid and unchallenged. Appeal dismissed. 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