FACTS
The instant case dealt with the curative petition filed by Delhi Metro Rail Corporation Ltd (DMRC) under Article 142 of the Constitution. The respondent of this case is Delhi Airport Metro Express Pvt. Ltd. ( DAMEPL). Both these parties entered into an agreement in 2008, for providing metro connectivity between Indira Gandhi International Airport and New Delhi Railway Station. Under the agreement, DMRC has to obtain government clearances, undertake the finances of civil works and land acquisition while DAMEPL dealt with the implementation of the Project.
On 9 July 2012, the operations were halted by DAMEPL and sent a notice to DMRC listing out the defects to be cured within 90 days. According to the notice the defects were due to faulty construction and defective designs, which affected the project safety.
On 8 October 2012, DAMEPL sent the termination notice as the defects were not rectified by the DMRC. On 23 October 2012 DMRC started Arbitration proceedings. In November 2012, the Commissioner of Metro Rail Safety(CMRS) conducted an inspection and the operation of metro rail was started with speed restriction. But due to persistent defects and safety concerns DAMEPL completely halted the operation on 30 June 2013. Followed by this an Arbitral Tribunal was formed which passed the Arbitral Award in favor of DAMEPL.
DMRC filed an appeal before the Delhi High Court. On dismissal of the petition by the Delhi High Court, appeal was filed before the Division Bench, which partly set aside the arbitral award. Against this decision DAMEPL filed a Special Leave Petition before the Supreme Court of India and the arbitral award was restored. Aggrieved by the decision, DMRC filed a review petition. It was dismissed by the Supreme Court and as a last resort a curative petition was filed.
ISSUES RAISED
- Whether the curative petition is maintainable?
- Whether the decision of the Supreme Court to restore the arbitral award set aside by the High Court on the ground of patent illegality is justifiable.
CONTENTIONS
Petitioner
- The petitioner contended that the defects in the metro line had no “materially adverse effect” on the performance of the obligation by the DAMEPL. This can be substantiated by the successful running of the metro line.
- According to the termination clause in the agreement, DAMEPL can terminate the agreement if DMRC fails to take “effective steps” within 90 days of receiving the notice. The DMRC had taken “effective steps” to rectify the defects. Thus there is no ground to terminate the agreement.
- Regarding the speed restriction mentioned in the CMRS certificate, the contention was not raised before. Also, the court should have considered whether the CMRS certificate is legally binding or not.
- Even though the speed restriction of 50 km/hr was there. It was gradually increased, and just before the agreement was terminated the speed of the metro rail was 80km/hr. Also, the metro line was operated for five and a half years without any complications. This provides sufficient evidence that there were no major defects with the metro line
- Thus, the defects alleged by DAMEPL neither affected the operation of the metro line nor meddled with the obligations of DAMEPL, which makes the arbitral award “patent illegality”.
- In accordance with the decision in Rupa Ashok Hurra v Ashok Hurra the High Court has jurisdiction to hear appeal against the arbitral award on the ground of patent illegality.
Respondents
- Arbitral award being the final curative petition is not maintainable.
- In an arbitration proceeding, the arbitrator has the sole power to determine the quality and quantity of the evidence.
- The metro line was operated at 90km/hr till early march 2023 against the aimed speed of 120km/hr. This sufficiently shows that there were defects in the line and increasing the speed to 120 km/hr would be risky.
- In Rupa Hurra v Ashok Hurra (supra), Supreme court had held that curative petition is maintainable only in the case of “gross miscarriage of justice”. It cannot be considered as a second review and thus rehearing and re-examination of the evidence.
RATIONALE
The Supreme Court in this curative petition reversed its decision in the appeal and set aside the arbitral award of Rs 7687 Crore against DMRC which was to be paid to the DAMEPL.
In its decision the court held that the decision of Delhi High Court division bench was right as the arbitral award suffered from “patent illegality”. The decision made by the Division Bench under Section 37 of the Arbitration and Conciliation Act 1996 is legally valid on the grounds provided under Section 34 of the Act.
By entertaining the Special Leave Petition and by reversing the decision of the Division Bench, it had caused “gross miscarriage of justice”. Thus the Supreme court accepted the curative petition filed under Article 142 of the Constitution. Court also noted that curative petition shall be used only in exceptional circumstances and not in ordinary course.
DEFECTS OF LAW
Curative jurisdiction of Supreme Court
The curative jurisdiction of the Supreme Court is extensively dealt in Rupa Hurra v Ashok Hurra(supra). Court observed that there will be certain exceptional situations where re-consideration of the decisions will be necessary. The blanket application of the principle of finality can cause injustice at least in some cases. The very purpose of the judiciary is to ensure justice to everyone. Thus in cases where “gross miscarriage of justice” has been caused, regardless of the principle of finality the court has to re-examine its decision. So a curative petition can be entertained to re-examine the final judgment. But this is a matter of discretion of the court and it cannot be exercised as an inherent right.
In this instant case, the Supreme Court entertained curative petition because the reversing of decision of Division Bench of Delhi High Court in the review petition had caused injustice to the DMRC.
Finality of arbitral award and patent illegality
Section 34 of the Arbitration and Conciliation Act 1996 deals with ground for setting aside an arbitral award. According to Section 34-2A of the Act, a competent court can set aside an arbitral award on the ground of “patent illegality appearing on the face of the award”.
In Associate Builders vs. Delhi Development Authority, Supreme Court discussed patent illegality. In that decision the court noted that an arbitrator can interpret the agreement, but such construction shall not be illogical or irrational to logical minds. A patent illegality arises where the arbitrator adopts a view which is not a possible view. An award is rendered perverse or irrational where the findings are (i)based on no evidence; (ii) based on irrelevant material; or (iii) ignores vital evidence.
In DMRC v DAMEPL, an arbitral tribunal gave undue weightage to the CMRS certificate. In the instant case the fundamental question before the arbitral tribunal was whether there was a breach of agreement by the DMRC. The CMRS certificate is not valid evidence to show the breach of the agreement. Arbitral tribunal arrived at the conclusion based on the speed restrictions mandated by the CMRS.
Arbitral tribunal failed to reflect upon the “effective steps” taken by the DMRC. During the 90 days period mentioned in the termination notice DMRC had taken measures to rectify the defects. By the time an arbitral award was given, the speed of the metro was gradually increased to 120 km/hr from 80 km/hr. Tribunal failed to understand the intention of the term “taking effective steps”. It did not necessarily mean to completely cure the defects by the end of 90 days rather the intention between the parties is to give reasonable time to each other to rectify the defects.
In Ssangyong Engineering & Construction Co. Ltd. vs. NHAI, the Supreme Court held that “a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality”. Hence the decision of the arbitral tribunal suffered patent illegality.
INFERENCE
The decision of the Supreme Court in the instant case has far fledged consequences in cases of arbitration in India. Arbitration, as an alternate dispute resolution mechanism, is aimed at reducing the burden of judiciary and cost-effective,quick and amicable solutions to parties. By this case the Supreme Court once again reiterated that if the decisions of the court or tribunal causes injustice to the parties the Supreme Court will not refrain from correcting its own judgment.
The decision of the Supreme Court to entertain curative petition in commercial cases might lead to flooding of similar cases. But the court had clearly stated that curative petition can be filed only in exceptional situations when grave injustice is caused to the party. This narrows down the scope of filing of curative petitions.
The decision of the Supreme Court also raises questions regarding the integrity of arbitral proceedings. This case stands as an example that lack of efficiency of arbitration proceedings can lead to long legal battles. And that will in effect undermine the very objective of the arbitration. Thus measures have to be taken to maintain the quality and efficacy of decision making through an arbitration mechanism.
Sreelekshmi I Nair
H. H. Maharajas Government Law College, Ernakulam