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Navy will still go ahead with the German option because it is proven at sea. L&T might get some subcontractor work but that is it.
MDL being a PSU will ease 'single vendor' concerns.
There is another oddity where HSL is being built up as a submarine builder by MDL.

Two Indian shipbuilders to collaborate on indigenous submarine construction
Indian naval shipbuilders Mazagon Dock Shipbuilders (MDL) and Hindustan Shipyard (HSL) have entered into a memorandum of understanding (MOU) to collaborate on t
So if this isn't progressing because L&T is upset, that development wouldn't make sense.
L&T going to get ghanta anyway
I think the setup is MDL will subcontract atleast 3 German subs to HSL, MDL themselves will build the 3 additional Scorpenes and 3 German Uboots.
Anyway in the following months we will know.