The case has shown that though arbitration tribunals are expected to give clear verdicts with specialised judges, this often doesn’t happen. Cases then land in courts which are ill-equipped to handle complex disputes
By Sanjay Raman Sinha
The slew of judicial verdicts which preceded the final judgment in the Delhi Metro Rail Corporation Ltd vs Delhi Airport Metro Express Pvt. Ltd. case is symptomatic of the problem facing contentious arbitral awards. The case also flags the use of curative petitions in commercial cases.
The Supreme Court abrogated its previous judgment that directed the Delhi Metro Rail Corporation (DMRC) to pay an arbitral award of Rs 8,000 crore (adjusted for interest) to Reliance Infrastructure’s subsidiary, the Delhi Airport Metro Express Private Limited (DAMEPL).
A three-judge bench, comprising Chief Justice of India DY Chandrachud, Justices BR Gavai and Surya Kant, said: “By setting aside the judgement of the Division Bench, this Court restored a patently illegal award which saddled a public utility with an exorbitant liability. This has caused a grave miscarriage of justice, which warrants the exercise of the power under Article 142 in a Curative petition, in terms of Rupa Hurra.”
DMRC and DAMEPL had entered into a public-private partnership for providing metro rail connectivity between New Delhi Railway Station and Indira Gandhi International Airport and other points within Delhi. Under the 2008 agreement, DAMEPL was granted exclusive rights and authority to implement the project. This included the right to manage and operate the project as a commercial enterprise. However, DAMEPL expressed its intention to halt operations, alleging that the line was unsafe to operate. Operations were stopped on July 8, 2012. In August 2013, an arbitral tribunal, comprising AP Mishra, SS Khurana and HL Bajaj, was constituted. On May 11, 2017, the tribunal passed a unanimous award in favour of DAMEPL. The award held that DAMEPL was entitled to the termination payment of Rs 2,782.33 crore, plus interest in terms of the concession agreement, and many other subsidiary charges dovetailed with the cancelled agreement.
DMRC then moved an application before the Delhi High Court under Section 34 of the Arbitration and Conciliation Act 1996. The single-judge bench of the High Court dismissed the petition. This gave rise to an appeal under Section 37 before a division bench of the High Court. The appeal was partly allowed. Against the decision of the division bench, DAMEPL moved a Special Leave Petition under Article 136 of the Constitution.
A two-judge bench of the Supreme Court allowed the appeal and restored the award. The review petition challenging this decision was dismissed. This gave rise to the curative petition before the three-judge bench of the apex court.
Two significant things happened in this case. Firstly, a curative petition was allowed in a commercial dispute and secondly, the Court dovetailed it with the exercise of power under Article 142 in order to do complete justice.
Curative petition is a tool which was devised by the Supreme Court in Rupa Ashok Hurra vs Ashok Hurra case in 2002 in order to do complete justice or to cure a gross miscarriage of justice. Justice SSM Quadri observed in the Hurra case: “ …except when very strong reasons exist, the Court should not entertain an application seeking reconsideration of an order of this Court which has become final on dismissal of a review petition. It is neither advisable nor possible to enumerate all the grounds on which such a petition may be entertained.”
The second point to be noted in accepting curative petition is to remedy manifest injustice. Manifest injustice means a mistake made during a trial that is obvious. The Court uses Article 142 to correct “manifest injustice”.
The regimen of a Court while deciding a curative petition extends to cases where it acts beyond its jurisdiction, resulting in a grave miscarriage of justice. Under these two guideposts of doing complete justice and/or curing a gross miscarriage of justice, the current verdict was executed.
The division bench found the award illegal as it ignored the vital evidence of certification by the Commissioner for Metro Rail Safety (CMRS) in deciding the validity of contract termination. The CMRS certificate is evidence of the safety of the structure, which was ignored. “We have applied the standard of a ‘grave miscarriage of justice’ in the exceptional circumstances of this case where the process of arbitration has been perverted by the arbitral tribunal to provide an undeserved windfall to DAMEPL,” the Court held in its final verdict.
An arbitral award can be set aside by the court when it finds that the subject-matter of the dispute cannot be settled by arbitration under the law for the time being; the arbitral award is in conflict with the public policy of India; it is in conflict with morality or justice.
The Court, while deciding on the matter, advised that “curative jurisdiction should not be used to open the floodgates and create a fourth or fifth stage of court intervention in an arbitral award”.
This gives an indication of the concern of the apex court on the way arbitral awards move up from tribunals to courts by repeated review pleas. Long winded court battles over arbitral awards defeat the purpose of arbitration tribunals which were set up to provide a speedy and cost-effective dispute resolution mechanism. The tribunals are expected to give clear verdicts, which in most cases are binding. Specialised judges, time-bound proceedings and alternative dispute resolution methods ensure watertight verdicts.
The need for arbitration tribunals was felt when a World Bank report had placed India abysmally low in the Ease of Doing Business index. Though things have improved a lot since then, much remains to be done. This was amply brought out by a 2021 Niti Aayog report which stated: “Though India has made recent advancements in the ease of doing business ranking released by the World Bank, the inefficiency of the dispute resolution framework prevents the country from providing an ideal environment for businesses and entrepreneurs.”
Arbitration law itself is evolving. The cases in which it is applied tests its efficacy and rigour. Thus, it is no surprise that when commercial disputes move from tribunals to courts, it is primarily to clarify crucial law points. Last year alone, no less than a dozen big commercial cases involving multinational and corporate mammoths came up before the Supreme Court for dispute settlement and to clarify arbitration law points.
There are a few grey areas in the current arbitration law. For one, the “public policy” clause is vague and opens the doors of extra-tribunal hearings in courts. Arbitral verdicts in big ticket contracts are often challenged in courts. And courts are not fully equipped technically to handle complex commercial cases. Specialised judges are lacking. There is no timeline to fast track such disputes in the courts which are saddled with back-breaking pendency. In such a scenario, the unrestrained use of curative petitions proves counterproductive, as cautioned by the apex court.