Author: Aditya Vaid
Third-year law student at Jindal Global Law School, Sonipat
I. Introduction
A curative petition, filed under Article 137 of the Constitution, is an exceptional recourse usually sought after the Supreme Court declines to reconsider its decision. a curative petition is primarily founded on the notion that the court’s commitment holds equal importance and significance as the principle of finality. In the recent Delhi Metro Rail Corporation v Delhi Airport Metro Express Private Limited ruling the Supreme Court has overturned an arbitral award by invoking its curative jurisdiction due to clear illegality.
While the judgment of Delhi Metro Rail Corporation (“DMRC”) (supra) has faced considerable criticism for undermining the credibility of arbitration in India, the author suggests that the ruling of the Supreme Court is a forward-thinking action. In this article, the author will delve into how it resolves longstanding disputes and carries significant implications, especially concerning Public-Private Partnership ("PPP"), investor trust and the legal system. Furthermore, the author will also delve into the observations of the Supreme Court analyzing how it offers an opportunity for streamlining the appellate process arising from challenges to arbitral awards.
II. Background
The DMRC and the Delhi Airport Metro Express Private Limited (“DAMEPL”) in 2008 entered into a concession agreement which envisaged a PPP for establishing a metro rail links connecting New Delhi Railway Station to the Indira Gandhi International Airport and various other locations within the city of Delhi. Due to certain structural defects, the DAMEPL terminated the concession agreement citing the DMRC’s inability to rectify its shortcomings. In 2017, an arbitral tribunal passed an award in favour of DAMEPL against DMRC. Thereafter, the arbitral award was initially upheld by a Single Judge of the Delhi High Court, partially altered by the Division Bench of the High Court. The DAMEPL subsequently approached the Supreme Court and filed a Special Leave Petition under Article 136 of the Constitution. By way of the aforementioned appeal, the court reinstated the initial award, consequently resulting in the overturning of the High Court’s divisional judgment. Finally, the DMRC under Article 142 invoked the curative power of the Supreme Court. As a result, the court overturned its judgment and relieved the DMRC of a significant financial burden in the outstanding dispute with DAMEPL.
III. Criteria for Exercising Curative Jurisdiction
In the case of Rupa Hurra v Ashok Hurra, the Supreme Court laid down two grounds for when the Supreme Court may entertain a curative petition. The two grounds are, “abuse of power” and “gross miscarriage of justice”. Moreover, the court provided examples of such situations, including a breach of natural justice principles or a judge not disclosing their connection to the case, which could raise concerns about impartiality.
The author contends by overturning the ruling of the Division Bench of Delhi High Court, the Apex Court reinstated an unlawful award, imposing an excessively burdensome liability on a public service entity. The same consequently resulted in a “gross miscarriage of justice”, as the Supreme Court reinstated an illegal award that imposed an exorbitant liability on a public utility, thereby justifying the use of Article 142 in the present curative petition.
Furthermore, to prevent a litigant from inundating the legal system with multiple review petitions, the court observed that the utilization of the curative authority under Article 142 should not be utilized in routine practice. The same must not be employed to initiate further layers of court intervention beyond the existing stages of review jurisdiction.
IV. Debunking the scope of interference with arbitral awards
Section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) outlines the reasons for outlining an arbitral award. As per Section 34(2-A) of the Arbitration Act, a domestic award can be nullified if the Court determines that it is tainted by a clear and obvious illegality evident within the award itself.
In Associate Builders v Delhi Development Authority, the court laid down the grounds on which an arbitral award may be rendered perverse or irrational. First, where a conclusion is drawn without any supporting evidence. Second, wherein an Arbitral Tribunal considers something unrelated to the decision it makes. Third, an arbitral award may be rendered irrational if the Arbitral Tribunal disregards crucial evidence while making its decision.
The court ruled that the Arbitral Tribunal failed to appreciate crucial evidence and records. The Tribunal incorrectly determined that the imposition of inspection conditions and speed/safety restrictions by Commissioner of Metro Railway Safety (“CMRS") indicated that the defects were not completely resolved. As per the Supreme Court, the Arbitral Tribunal neglected to consider the crucial evidence provided in the form of a CMRS certificate on safety and effective measures, instead, it focused solely on the conditions imposed by CMRS regarding speed and inspections. Therefore, the Supreme Court ruled that the Division Bench of the High Court correctly applied the appropriate criteria in determining that the arbitral award was afflicted by the flaws of irrationality and blatant illegality. Furthermore, the Court clarified that Section 37 of the Arbitration Act allows for a legal appeal against a decision either supporting or invalidating an arbitral award, with no provision for a subsequent appeal. The author argues that despite the provisions of Section 37 of the Arbitration Act, the act does not prevent the constitutional recourse of a special leave petition to the Supreme Court. The present ruling outlines the court’s power to hear a Special Leave Petition on the rationale of whether the lower court overstepped its jurisdiction by not applying the appropriate criteria when deciding challenges to arbitral awards.
V. Potential Implications of the Ruling
It is not often that the Supreme Court overturns its judgment, but the current ruling sheds light on the ambiguities and fault lines within arbitration law and procedures in India.
First, the present ruling underscores the importance of precise and straightforward contractual terms, particularly in PPP projects. It emphasizes the necessity for parties to uphold their commitments to prevent conflict and legal intricacies.
Second, public and private entities engaged in infrastructure projects must maintain accountability and transparency. Improper terminations and perverted arbitration procedures may result in adverse and substantial financial consequences, consequently undermining public confidence. The judgment of the Court reaffirms the core principle that significant benefits should not be withheld solely due to procedural errors.
Third, efficient dispute-resolution mechanisms are vital for PPP projects. Arbitration and judicial involvement are pivotal in guaranteeing equity and fairness in contractual terms. The author contends that the present verdict enhances the arbitration ecosystem in India as this ground-breaking decision highlights the weaknesses in arbitration laws in India. Furthermore, it sets a precedent for arbitrators and courts to follow when dealing with current and future arbitration disputes with significant implications.
Fourth, acute regulatory certificates, like the safety certificates issued by competent authorities, play a crucial role in assessing projects. In the present scenario, while the Division Bench accurately acknowledged the relevance of the CMRS certificate regarding the termination’s validity, the Supreme Court in its original judgment determined that safety was not a subject under consideration, despite the DAMEPL’s insistence on halting operation due to safety concerns. The author suggests that disregarding essential evidence can jeopardize the fairness of arbitration proceedings and result in unfair conclusions.
VI. Conclusion
In considering the curative petition, the Supreme Court permitted a review of its judgment and reversed an arbitral award to prevent a “serious miscarriage of justice”. Naturally, the judgment of the Court may be considered controversial in the public domain for seemingly contradicting the principle of minimal intervention in arbitral awards and undermining the notion of judgment finality. The author contends that the present ruling, if adhered to faithfully, should result in fewer Special Leave Petitions being considered against judgments pronounced under Section 37 of the Arbitration Act, thereby fulfilling the aim of preventing second appeals in disputes over arbitral awards.
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