DMRC vs DAMEPL: SC broadens
scope of court intervention in arbitral awards
Recently, the Supreme Court (SC), in the
judgment of Delhi Metro Rail Corporation Ltd (DMRC) vs Delhi Airport Metro Express
Pvt Ltd (DAMEPL), set aside the arbitral award by exercising its curative
jurisdiction. Perusing this judgment, one gets reminded of the quote said by
Justice Burrough that "Public Policy is an unruly horse where once you
stride on it you do not know where it is going to take you". The recent
judgment rendered by the SC has proved that the same applies to the arbitration
regime in India. The Arbitration Amendment Act, 2015 was enacted with the
intent of reducing the courts' interference in arbitral awards to make India an
arbitration hub. However, acting contrarily, the Supreme Court, by exercising
its extraordinary curative jurisdiction under Article 142 of the Constitution
of India, has interfered with the arbitral award and quashed it. This has now raised
the issue of wide interference with the arbitral award. The SC vide this
judgment has enlarged the scope for courts to interfere with the arbitral
award.
The DMRC and the consortium comprising
Reliance Infrastructure Limited and Construcciones Y Auxiliar de Ferrocarriles
SA, Spain namely, Delhi Airport Metro Express Ltd, entered into an agreement in
2008 for the construction, operation, and maintenance of the DAMEPL. The
concession agreement envisaged a public-private partnership for providing metro
rail connectivity between New Delhi Railway Station and the Indira Gandhi
International Airport and other points within Delhi. The DAMEPL was granted the
exclusive right to manage the project as a commercial enterprise. DMRC was
supposed to look after the clearances and costs regarding the land acquisition,
and civil structures, whereas the DAMEPL was supposed to carry out other things
such as the design, supply, installation, testing, and commissioning of railway
systems. The DAMEPL sought deferment of the concession fee in 2012 owing to the
delays in providing access to the stations by DMRC. The operations were stopped
by the DAMEPL in July, 2012, and thereafter, the arbitration proceedings were
initiated in October, 2012. The arbitration proceedings were conducted by the
tribunal comprising three members. The three-member tribunal passed the
arbitral award in favour of the DAMEPL.
Aggrieved by the arbitral award, the
DMRC filed an application under Section 34 of the Arbitration &
Conciliation Act (hereinafter referred to as the Act ) which was dismissed by
the Single Judge of the Delhi High Court. DMRC, then filed an appeal under
section 37 of the Act against the dismissal of the section 34 application, and
the same was partly allowed by the Division bench of the Delhi High Court. The
DAMEL then approached the Supreme Court by filing an appeal under Article 136
of the Constitution of India and the same was allowed meaning thereby, that the
division judgment of the high court was set aside. Thereafter, the review
petition was filed which was again rejected and then the curative petition was
filed by the DMRC before the SC. The apex court made an unprecedented move by
setting aside the award in its curative jurisdiction.
The Investors' Viewpoint
A robust dispute mechanism is essential
to attract foreign investors. It boosts the economy and helps the country
become an international hub of arbitration, consequentially generating
employment opportunities. A reasonable investor gives paramount importance to
the dispute resolution mechanism of the country s/he is investing in. For
instance, investors notice the approach of courts of that particular country
regarding certain issues. An investor looks for comfort and therefore, desires
a strong and effective dispute resolution mechanism so that the business cannot
be subjected to any kind of hindrance or prolonged litigation.
Although the arbitration regime in India
is more focused on not subjecting the arbitral award to court interference, it
has been observed over time that when the investor files for the execution of
the arbitral award, courts in the country have developed this tendency of
giving wide interpretation to public policy and thereby, set aside the arbitral
award.
A perusal of the judgment in DMRC vs
DAMEPL would show that the SC has interpreted the terms of the contract and
that too, in its curative jurisdiction meaning thereby that by exercising its
power which is supposed to be used in the rarest of the rare cases as per the
Rupesh Kumar Hurra vs Ashok Hurra judgment, the SC has interpreted the terms of
the contract between the parties. This has now opened floodgates and has paved
the way for prolonged litigation.
Curative jurisdiction was not
appropriate in the present case. To check whether a particular award is
patently illegal or not, the court is not supposed to go in the merits of the
award. It is a settled principle that patently illegal means that on the face
of it the arbitral award is against the fundamental policy, therefore, it is
patently illegal. The SC in the present case, in its curative jurisdiction,
decided the case on merits and interpreted the terms of the contractor thereby,
acting contrary to the settled principles. An arbitrator is the one who
interprets the terms of the contract but the Apex Court, vide its verdict, has
made an unprecedented approach and has therefore broadened the scope of the
court s intervention in the arbitral award.
The government is trying hard to make
India an investment hub. Since investors give a lot of importance to dispute
resolution mechanisms in a country, it becomes necessary to provide a robust
framework for the resolution of disputes. If the investor's interests are not
safeguarded, the financial growth of the country will be adversely impacted.
Not only the government, the judiciary is also responsible in formulating an
effective framework for dispute resolution in the country by passing
progressive judicial pronouncements. This judgment poses various challenges and
might hamper the financial growth of the nation.
www.business-standard.com
dt. 25.04.2024