Legal & Judicial Updates (April 2025)

From landmark court verdicts to key policy changes, this document provides a comprehensive summary of the most significant legal and regulatory developments from April 2025.

NOTABLE JUDGEMENTS MARCH 2025

ARBITRATION LAW

I. Case Title: Electro-steel Steel Ltd. (Now M/s ESL Steel Ltd.) vs ISPAT Carrier Pvt. Ltd.

Citation: 2025 SCC Online 829

Court: Supreme Court of India

Decided on: 21 April 2025

Brief Facts:

• ISPAT Carrier Pvt. Ltd. (Respondent), an MSME, filed two claims in 2014 before the West Bengal MSME Facilitation Council under the MSMED Act, 2006 for unpaid dues amounting to approx. ₹1.59 crores.
• Arbitration proceedings under Section 18(3) of the MSMED Act were initiated but paused due to the moratorium imposed by the NCLT under Section 14 of the IBC when CIRP was initiated against Electrosteel Steel Ltd. (Appellant).
• Vedanta Ltd.'s resolution plan for Electrosteel was approved by the NCLT in April 2018, declaring operational creditors' claims, including those of ISPAT, as "settled at nil".
• After the moratorium ended, the Facilitation Council resumed arbitration and passed an award in July 2018 in favour of ISPAT.
• Electrosteel did not challenge the award under Section 34 of the Arbitration Act but opposed its execution, contending the claim stood extinguished under the approved resolution plan.
• Both the Commercial Court and the Jharkhand High Court rejected Electrosteel's objection, leading to the present appeal before the Supreme Court.

Issues:

1. Whether an arbitral award passed post-IBC resolution approval is executable when the underlying claim was not part of the resolution plan.
2. Whether such an award, though unchallenged under Section 34 of the Arbitration Act, can be declared a nullity in execution proceedings under Section 47 CPC.
3. Whether the Facilitation Council retained jurisdiction to pass an arbitral award after the CIRP concluded and the resolution plan was approved.

Judgment:

The Supreme Court allowed the appeal and held:

• Award not executable: Once a resolution plan is approved under Section 31 of the IBC, all claims not included in the plan stand extinguished. The arbitral award, therefore, became legally unenforceable.
• No jurisdiction post-resolution: The Facilitation Council lacked jurisdiction to proceed with the arbitration once the claim stood settled at nil. Continuation of such proceedings post-approval of the resolution plan violates IBC's overriding effect (Section 238).
• Challenge maintainable under Section 47 CPC: Even if not challenged under Section 34 of the Arbitration Act, an award that is a nullity can be resisted at the execution stage. The Court reiterated that an award passed without jurisdiction is void and unenforceable.
• High Court and Executing Court decisions set aside. The execution proceedings were quashed.

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II. Case Title: Larsen and Tourbo Ltd. vs Puri Construction Pvt. Ltd.

Citation: 2025 SCC Online 830

Court: Supreme Court of India

Decided on: 21 April 2025

Brief Facts:

• Puri Construction Pvt. Ltd. (PCL) owned land in Gurgaon and had obtained licenses for developing a residential housing project. Initially partnered with ITCREF, PCL later brought Larsen & Toubro Ltd. (L&T) on board under a Development Agreement dated March 10, 1998.
• Disputes arose regarding L&T's performance, especially its alleged failure to fund External Development Charges (EDC), honour obligations to ITCREF, and commence timely construction.
• PCL terminated the Development Agreement in December 2000, citing breaches by L&T.
• Arbitration proceedings ensued, resulting in an award in favour of PCL, granting it substantial damages, a direction to L&T to repay loans, and an injunction against L&T from interfering with PCL's development rights.
• L&T filed a petition under Section 34 of the Arbitration and Conciliation Act challenging the award, which was partially allowed by a Single Judge.
• The Division Bench under Section 37 partly set aside and partly upheld the award, leading to cross-appeals before the Supreme Court.

Issues:

1. Whether the Development Agreement had been novated by the Supplementary Agreement.
2. Whether the Supplementary and Tripartite Agreements were vitiated by coercion or economic duress.
3. Whether L&T committed a fundamental breach entitling PCL to terminate the Development Agreement.
4. Whether the Arbitral Tribunal's award on damages and specific reliefs exceeded jurisdiction or suffered from patent illegality.
5. Whether the High Court's partial setting aside/modification of the award under Sections 34/37 was legally permissible.

Judgment:

The Supreme Court upheld the award in part and clarified the scope of court interference, making the following key rulings:

• The Court affirmed that the Development Agreement remained in force, as the conditions precedent under the Supplementary Agreement were not satisfied.
• The Tribunal's finding that PCL signed subsequent agreements under financial pressure due to L&T's failure to fulfil obligations was accepted as a plausible view, not open to interference under Section 34.
• L&T failed to pay EDC, abandoned the project, and did not secure necessary approvals. This conduct amounted to a fundamental breach justifying PCL's termination of the agreement.
• The Court held that certain parts of the award (like quantification of damages, indemnity clauses) required re-examination and were rightly set aside by the Division Bench. However, injunctions and directions for return of documents and discharge of obligations were valid.
• Following Project Director, NHAI v. M. Hakeem [(2021) 9 SCC 1], the Court reiterated that courts cannot modify or vary arbitral awards under Section 34. The remedy is limited to setting aside awards either wholly or partly, and the scope of review is narrow. The Court stated 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."
• The appeals by L&T were dismissed, and the findings of breach, coercion, and partial upholding of the award were sustained.
• The Court permitted PCL to pursue appropriate remedies afresh for quantification of monetary claims, and costs of arbitration were confirmed.

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III. Case Title: Tata Capital Ltd. vs Vijay Devji Aiya

Citation: Commercial Arbitration Application No. 237 and 243 of 2024

Court: High Court of Bombay

Decided on: 22 April 2025

Brief Facts:

Tata Capital Ltd. filed two applications under Section 11 of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator in connection with disputes arising out of a loan agreement dated January 31, 2016, and a top-up loan agreement dated October 31, 2017, entered into with the respondents.

The arbitration clause allowed disputes to be resolved through arbitration in Mumbai, with Tata Capital entitled to unilaterally appoint an arbitrator. However, it also contained a non-obstante clause permitting Tata Capital to opt out of arbitration if it became entitled to recover its dues under SARFAESI or DRT Acts, rendering the arbitration clause inoperative at Tata Capital's option.

The respondents opposed the applications, arguing:

• The arbitration clause lacked mutuality, making it unenforceable.
• Tata Capital had already invoked SARFAESI proceedings and was estopped from invoking arbitration.
• An earlier arbitration initiated by Tata Capital had lapsed without extension under Section 29A, and thus could not be revived.

Issues:

1. Whether the absence of mutuality in the second part of the arbitration agreement destructive of the very existence of the arbitration agreement.
2. Whether invocation of remedies under the SARFAESI Act bars the lender from initiating arbitration.
3. Whether earlier lapsed arbitration proceedings preclude a fresh reference to arbitration.

Judgment:

The Court allowed the applications and appointed a sole arbitrator, holding as follows:

• The Court distinguished the Delhi High Court's decision in Tata Capital Housing Finance Ltd. v. Shri Chand Construction, which had held an identical clause void for lack of mutuality. Justice Sundaresan held that such a clause need not be entirely invalidated; instead, the unilateral opt-out feature can be excised or interpreted narrowly to preserve the enforceability of the arbitration agreement.
• Citing M.D. Frozen Foods v. Hero Fincorp Ltd. [(2017) 16 SCC 741], the Court reaffirmed that lenders can pursue both SARFAESI and arbitration remedies simultaneously. The invocation of SARFAESI does not extinguish the arbitration agreement.
• The Court held that since the earlier arbitration was initiated through unilateral appointment (now impermissible under law), the lapse of that proceeding was immaterial. A fresh appointment under Section 11 was therefore maintainable.
• The Court clarified its limited scope under Section 11(6A), which is restricted to examining the existence of a valid arbitration agreement. Any objections regarding jurisdiction or validity may be raised before the arbitral tribunal under Section 16 of the Act.

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IV. Case Title: Consolidated Construction Ltd. vs Software Technology Parks of India

Citation: 2025 SCC Online 956

Court: Supreme Court of India

Decided on: 28 April 2025

Brief Facts:

• The respondent, Software Technology Parks of India (STPI), awarded a construction contract to the appellant, Consolidated Construction Consortium Ltd. (CCCL), through a tender process for an office and incubation centre. The total contract value was approximately ₹16.48 crores, with the original completion date set as January 15, 2007.
• CCCL completed the work only on November 30, 2007—nearly 10 months late. STPI invoked the liquidated damages clause (Clause 26 of the contract) and deducted ₹82.43 lakhs from the final payment.
• CCCL raised claims, including a challenge to the liquidated damages, and the matter proceeded to arbitration. The arbitrator upheld STPI's deduction of liquidated damages and dismissed both CCCL's claims and STPI's counterclaims, issuing a "nil" award.
• CCCL challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996. A Single Judge of the Madras High Court allowed the petition and set aside the award, ruling that STPI had extended time for completion, thus nullifying the claim for liquidated damages.
• STPI appealed under Section 37, and the Division Bench reversed the Single Judge's decision, restoring the arbitral award.
• CCCL then appealed to the Supreme Court.

Issues:

1. Whether the High Court's Division Bench was justified in restoring the arbitral award under Section 37 of the Arbitration and Conciliation Act, 1996.
2. Whether the Single Judge's interference with the award under Section 34 exceeded the permissible scope of judicial review.
3. Whether STPI was entitled to levy liquidated damages even after granting extensions of time for completing the contract.

Judgment: -

The Supreme Court dismissed the appeal and upheld the arbitral award as restored by the Division Bench, holding as follows:

• The Court reiterated that the power under Section 34 is confined to specific grounds and is not appellate in nature. Reappreciation of facts or alternate interpretation of contractual clauses is beyond the jurisdiction of a Section 34 court.
• The arbitrator's interpretation of the contract, particularly the deduction of liquidated damages, was held to be a plausible view based on evidence and the contract clauses. Courts cannot substitute their own views merely because a different conclusion is possible.
• Despite granting extensions, STPI had repeatedly reserved its right to levy liquidated damages. Moreover, CCCL continued working even beyond the final extended period without formal approval, justifying the deductions.
• The Single Judge exceeded the scope of Section 34 by substituting the arbitral tribunal's findings with personal interpretations, which the Supreme Court found impermissible.
• The Court held that Clause 26 (liquidated damages) and Clause 27 (extension of time) must be read harmoniously, and the imposition of damages in the event of delayed performance was justified under the facts.

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