The case involving DMRC (Delhi Metro Rail Corporation) and DAMEPL (Delhi Airport Metro Express Pvt Ltd) that has been in and out of courts for over a decade, has concluded with the Supreme Court verdict on April 10. This judgment is rare, momentous and could be the guiding precedent for arbitration tribunals and courts. It also has implications for the delivery of public services in partnership mode and is a marker in how we litigate around infrastructure and build resilience into the projects that will be needed to build India’s future.
While deciding the curative petition, the bench headed by CJI D Y Chandrachud observed in a rare departure that the Court in deciding the civil appeal and the review petition had erred by interfering with the decision of the Division Bench of the Delhi HC. It also observed that the interference by the Court had resulted in restoring a patently illegal arbitral award, causing grave miscarriage of justice. The judgment upholds the order of the Division Bench of the Delhi High Court which had set aside the arbitral award granted to DAMEPL, thereby granting major relief to the DMRC.
This curious case has its origin in the Airport Metro Express Line, developed and operated in 2011 under a PPP model between DMRC and DAMEPL. Under this arrangement, all civil structures, including tunnels, viaducts and station buildings were constructed by DMRC and laying of tracks, OHE, signalling and procurement of rolling stock, etc., were done by concessionaire DAMEPL. The saga begins with the suspension of operations on this line by DAMEPL in 2012, citing defects in civil engineering works done by the DMRC. It was requested that these defects be cured within 90 days, failing which it would be treated as material breach entitling DAMPL to terminate the agreement. Subsequently, DAMPEL issued a notice of termination, stating that the defects could not be cured by the DMRC.
Conciliation proceedings initiated by the DMRC could not succeed. Interestingly, in the meantime, the identified defects were fixed, and a joint application was submitted by the DMRC and DAMPEL in November 2012 to the commissioner of metro rail safety for inspection and granting of permission to commence operations. Train operations were restored by DAMPEL on the airport line in 2013. By March, the speed of trains on this line increased to 80 kmph. In June 2013, however, DAMPEL advised their unwillingness to continue to operate this line and ceased operations almost immediately. In the larger public interest, the DMRC took over the almost abandoned airport line and started operating trains and other ancillary services. The subsequent claims and counter claims resulted in the formation of an arbitration tribunal. The next decade was witness to a fascinating process of litigation. The tribunal declared the termination notice given by DAMPEL as valid and awarded termination payment of Rs 2,782 crore along with interest.
The DMRC challenged the award by filing a petition before the single-judge Bench of the Delhi High Court. It upheld the tribunal award in 2018 on the general premise and principle that so long as the award was reasonable and plausible, no interference was required. The petition by the DMRC was dismissed. It filed an appeal against the order before a Division Bench of the Delhi HC. The Division Bench took note of the tribunal’s lack of deliberation on the safety aspects, inspection of CRMS, the efforts made by the DMRC in curing the defects, lack of interpretation of clause 29.5.1(i) and the ambiguity about the date of termination itself, allowed the appeal, and set aside the arbitration award.
But this wasn’t the end with Special Leave Petitions filed in the Supreme Court. The Supreme Court set aside the order of the high court and restored the arbitral award in September 2021. A review petition filed against this judgment was also dismissed.
As a last resort, a curative petition was filed by the DMRC.
This was entertained by the apex court in exercise of its inherent powers under Article 142 of the Constitution.
The judgments considered several factors — including the factual background, the DMRC’s claim and the tribunal’s findings, the decisions of the High Court, the judgment of the apex court in appeal, issues in the curative petition and the submissions made by the counsels for the petitioners and the respondents. Its analysis covers in detail the invoking of curative jurisdiction in the event of miscarriage of justice and scope of interference of courts with arbitral awards.
The Court held that, in essence, the arbitral award overlooked vital evidence and failed to reconcile inconsistencies. It held that the Division Bench of the High Court correctly held that the award suffers from perversity and patent illegality. It is also held that by setting aside the judgment of the Division Bench, the Court restored a patently illegal award. which saddled a public utility with an exorbitant liability. This caused grave miscarriage of justice.
Almost following the principle of fiat justitia ruat caelum, the curative petition was allowed on April 10 and the parties were restored to the position in which they were on the pronouncement of the judgment of the Division Bench of the High Court. An ex debito justitiae for the DMRC. It was also observed in the concluding paragraph that, “We have applied the standards of a ‘grave miscarriage of justice’ in the exceptional circumstance of this case where the process of arbitration has been perverted by the arbitral tribunal to provide an undeserved windfall to DAMEPL.”
There are many lessons to be learnt from this judgment, specifically, the roles and responsibilities of arbitration tribunals, and the requirement of careful and in-depth examination of agreements and contractual clauses. This judgment shall be the guiding light in deciding innumerable pending arbitration and court cases specifically in the infrastructure sector.
The writer is former member, Central Administrative Tribunal and former member Indian Railway Board
