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Case Title: Delhi Metro Rail Corporation Ltd. v. Delhi Airport Metro Express Pvt. Ltd

Case No.: Curative Petition (C) No(s). 108-109 of 2022Dated: 10th April, 2024
Quorum: CJI Dr. D.Y. Chandrachud, Justice B.R. Gavai and Justice Surya Kant

FACTS OF THE CASE:
This case revolves around the Delhi Metro Connectivity issue with Delhi Metro Rail Corporation Ltd. as the Petitioner. The Respondent (Delhi Airport Metro Express Pvt. Ltd.) is incorporated with a consortium.

The parties entered into a Concession Agreement in 2008 (hereinafter referred to as ‘The Agreement’). The agreement was regarding the construction, operation and maintenance of Delhi Airport Metro Express Ltd. The primary focus of the agreement was revolving the connectivity of focal locations in Delhi. In April 2012, DAMEPL requested a concession fee deferment due to station access delays in their public-private partnership with DMRC. A Joint Inspection Committee was formed to investigate defects. Operations were stopped on 08 July 2012 as per the will of the Respondent.

A notice was issued by the Respondent stating a list of 8 ‘non exhaustive’ defects which, as per their contentions, affected the smooth operation of the metro. Eventually, a notice of Termination was issued by the Respondent as 90 days’ time period had expired with regards to the ‘cure period’.

In 2013, DAMEPL handed over AMEL operations to DMRC. The Commissioner of Metro Railway Safety (CMRS) had issued sanctions with certain restrictions of speed limit. DMRC sought arbitration proceeding in 2013. Order passed was in 2017 in favour of DAMEPL.

Subsequently, DMRC filed a petition in Delhi HC which was dismissed, an appeal was filed which was allowed. Thus, DAMEPL filed an SLP in the apex court to no avail.

CONTENTIONS OF THE PETITIONER:
DMRC claimed that it promptly addressed the defects upon receiving the ‘cure notice’. They engaged with SYSTRA, the original design consultant, and held meetings with the Ministry of Urban Development. It was further DMRC v. DAMEPL contended that DAMEPL played an active role in these measures.

The Petitioner further contends that the termination notice was ultimately triggered by the project’s financial infeasibility, not the aforementioned reasons. DMRC seeks to nullify the termination notice and compel the respondent to fulfill their obligations under the 2008 agreement.

CONTENTIONS OF RESPONDENT:
The Respondent contends that there were delays in providing access to the Stations in question by the DMRC. DAMEPL, further expressed its intention to stop the operation of the metro with immediate affect by issuing a non exhaustive list of 8 defects which hampered the performance of contract as per the the Agreement, 2008.

DAMEPL further contended that these defects rather a “material adverese effect” on the performance of obligations in order to operate, manage and maintain the project.

LEGAL PROVISIONS:
S.34 of Arbitration and Conciliation Act, 1996 provides for Application for setting aside Arbitral Awards: If an aggrieved party is unsatisfied with the award of Arbitration, the only option to set aside the award is to apply to a Court.
S.37 of Arbitration and Conciliation Act, 1996 provides for Appealable Orders: It is the only appellate remedy available against a decision under Section 34.

ISSUES:
– Whether the curative petition is maintainable.
– Whether this Court was justified in restoring the arbitral award which had been set aside by the Division Bench of the High court on the ground that it suffered from patently illegality.

COURT’S ANALYSIS AND JUDGMENT:

The Supreme Court pronounced the judgement and analyzed it in 3 parts-
i) “Curative Petition may be invoked if there is a miscarriage of justice”-
It was held that the court can entertain a Curative Petition only when there is a prima facie scope to prevent the abuse of its process, to prevent infringement or abuse of justice particularly in instances where the principles of natural justice have been violated.

ii) “Scope of interference of Courts with arbitral awards”-
S.34 of the Act lays down provision for setting aside an arbitral award only by means of application to competent courts. It was held that apart from the grounds in S.34(2) , there is another ground for challenging the award which is if the court determines that there’s a clear and obvious legal error in the arbitration award, they can set it aside. This error is known as “patent illegality,” and it’s evident from the award itself. So, in simpler terms, if there’s a glaring legal mistake, the court can intervene and nullify the award.

iii) “The award was patently illegal”-
It was held that there is a prima facie fundamental error, inter alia, in the way the Division Bench of the High Court dealt with the challenge. The Division Bench of the High Court reviewed a decision made under Section 37. They found that the arbitration award had ignored essential facts and evidence that were vital for resolving the issues before the arbitral tribunal.

The Supreme Court further held that The Tribunal’s decision centered around the presence of defects after the cure period. According to their reasoning, the existence of defects at the end of the cure period indicated that they were not fully resolved. However, the Tribunal did not clarify what qualifies as an “effective step” during the cure period. They treated in-progress actions that hadn’t yet resulted in complete defect resolution as insufficient to offset termination. Essentially, the Tribunal equated the components of defect curing and taking effective steps, emphasizing only completed defect resolution as relevant. Yet, they did not elaborate on what constitutes an effective step or why DMRC’s actions fell short within that context.

To summarize it, the Supreme Court swiftly dealt with the fiasco of unanswered questions pertaining to Curative Petition and relieved the Petitioner of about 8000 Crore arbitral award to the Respondent.

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Judgment reviewed by- Riddhi S Bhora

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