Source: The Hindu

Introduction

The Supreme Court of India has recently made headlines by utilizing its curative jurisdiction to overturn its previous judgment from 2021. This unprecedented move has relieved the Delhi Metro Rail Corporation (DMRC) of a staggering burden of ₹7,687 crore in a dispute with a former concessionaire.

What is the Background of DMRC Case?

• Facts:
  • Delhi Metro Rail Corporation (DMRC), a state-owned company, and Delhi Airport Metro Express Private Limited (DAMEPL), a consortium comprising Reliance Infrastructure Limited and Construcciones Y Auxiliar de Ferrocarriles SA, Spain, entered into a Concession Agreement in 2008.
  • The agreement aimed at establishing a metro rail connectivity project between New Delhi Railway Station and the Indira Gandhi International Airport in Delhi.
  • DAMEPL was granted exclusive rights and authority to implement the project, while DMRC was responsible for clearances and certain costs.
  • Disputes arose regarding delays, defects in construction, and financial viability.
  • DAMEPL issued a termination notice, leading to arbitration proceedings.
  • The arbitral tribunal awarded in favor of DAMEPL, entitling it to termination payment and other expenses.
• Judgment of the High Court:
  • The Single Judge upheld the arbitral award.
  • The Division Bench partly set aside the award, citing ambiguity in termination, lack of reasoning on speed restrictions, and misinterpretation of the CMRS certificate.
• Supreme Court's Decision in Appeal:
  • The Supreme Court set aside the Division Bench's decision and restored the arbitral award.
  • It held that termination was valid, defects weren't cured, and CMRS certificate didn't conclusively prove cure.
  • The Court emphasized the tribunal's expertise and declined to interfere with its factual findings.

What is the Decision of Supreme Court in DMRC Case?

• The Supreme Court found that a two-judge bench's judgment interfered with the decision of a Division Bench of the High Court, resulting in a miscarriage of justice.
• The Division Bench correctly applied the test, identifying issues with the arbitral award.
• The Supreme Court's prior decision led to restoring an illegal award, causing a grave miscarriage of justice.
• The court allowed curative petitions, restoring parties to their pre-judgment positions and discontinuing execution proceedings.
• It emphasized that curative jurisdiction shouldn't become an ordinary course of action and warned against opening floodgates for further court interventions.
• In this specific case, the court concluded that the Supreme Court’s prior judgment erred in interfering with the Division Bench's decision, resulting in a grave miscarriage of justice.
• The court allowed curative petitions based on exceptional circumstances where the arbitration process was perverted, leading to an unjust outcome for one party.

What are the Landmark Cases Cited in DMRC Case?

• Rupa Hurra v. Ashok Hurra (2002):
  • This case established principles regarding the court's reconsideration of final judgments, emphasizing the importance of rectifying a miscarriage of justice even after the dismissal of a review petition.
  • It clarified that certain circumstances, such as a violation of natural justice or apprehension of bias, may warrant reconsideration of a final judgment to prevent irremediable injustice.
• Associate Builders v. Delhi Development Authority (2015):
  • This case outlined the scope of interference with arbitral awards, emphasizing that while the interpretation of a contract primarily lies with the arbitrator, the interpretation must not be unreasonable.
  • It established that an award can be set aside if it is found to be perverse or irrational, based on no evidence, based on irrelevant material, or if it ignores vital evidence.
• Ssangyong Engineering & Construction Co. Ltd. v. NHAI (2019):
  • This case reiterated the principles established in Associate Builders Case regarding the scope for interference with domestic awards under the Arbitration and Conciliation Act, 1996 (A&C Act).
  • It emphasized that an award can be set aside if it is found to be irrational or perverse, or if it ignores vital evidence, or if it breaches the principles of natural justice.

What was the Legal Provision Involved in DMRC Case?

• The legal provision discussed in the case is Section 34 of the A&C Act which delineates the grounds for setting aside an arbitral award.
• This provision specifies the circumstances under which an arbitral award may be set aside by the court, including situations where the subject matter of the dispute is not capable of settlement by arbitration under the law, or where the award is in conflict with the public policy of India.
• It also includes grounds such as the arbitral award being induced or affected by fraud, corruption, or being in violation of specific sections of the A&C Act or being in contravention with the fundamental policy of Indian law.
• Additionally, it provides for setting aside an award if it is vitiated by patent illegality appearing on the face of the award.

Conclusion

The ultimate verdict in the DMRC case marks the role of arbitrators and appellate judges in meticulously analyzing both factual and legal aspects. Any oversight in this regard can discourage commercial litigants from resorting to arbitration, undermining the efficiency and efficacy of alternative dispute resolution mechanisms.