This article has been written by Jatin Yadav and Pranav Jain, fourth-year students at Hidayatullah National Law University, Raipur
Introduction
Indian courts have time and again referred to Lord Mustill’s well-known comparison of the relationship between Courts and Arbitrators to a relay race which reads:
“In the initial stages, before the Arbitrators are seized of the dispute, the baton is in the grasp of the Court……When the Arbitrators take charge they take over the baton and retain it until they have made an award. At this point, having no longer a function to fill, the Arbitrators hand back the baton so that the Court can in case of need lend its coercive powers to the enforcement of the Award.”
However, constant judicial interference can severely affect the symbiotic functioning of the process of dispute resolution (or the relay race) as is apparent with the Indian arbitration regime. The recent ruling of the Supreme Court (“SC”) in the case of Delhi Metro Rail Corporation (“DMRC”) v. Delhi Airport Metro Express Pvt. Ltd)_(“DAMEPL”) has further exacerbated the government’s pro-arbitration approach for making India the hub of international commercial arbitration. The genesis of this ruling can be traced back to the 2008 agreement between DMRC and DAMEPL for the construction of an express metro line connecting the New Delhi airport with other vantage points in the city. In 2011, the Airport Express Line was opened only to be subsequently ceased in 2012 due to defects in the construction and designs of metro lines. This led DAMEPL to issue a 90-day notice for DMRC to cure the same; the failure of which would lead to the termination of the contract. As the defects remained uncured, DAMEPL terminated the agreement leading to the initiation of arbitration proceedings by DMRC. In May 2017 the arbitral tribunal passed an award in favour of DAMEPL for an amount of INR 3,000 crores. This award served as the basis for multiple rounds of litigation before the High Court under the Arbitration and Conciliation Act (“Act”) and subsequently before the Hon’able SC under the Constitution of India.
| Year | Court / Section | Decision in favour of |
| 2018 | Single Judge Bench of Delhi High Court (Section 34 of the Act) | DAMEPL |
| 2019 | Division Bench of Delhi High Court (Section 37 of the Act and Section 13 of the Commercial Courts Act, 2015) | DMRC |
| 2021 | Special Leave Petition before the Supreme Court (Article 136) | DAMEPL |
| 2021 | Review Petition before Supreme Court (Article 137) | DAMEPL |
The dismissal of review petition by the SC finally led to the filing of curative petition as the last resort by DMRC. In this post, the authors have analyzed the grounds on which the apex court has justified its interference via curative petition in an arbitral award and how the said interference completely fails to satisfy the threshold stipulated by the court itself in its groundbreaking verdict of Rupa Hurra v. Ashok Hurra .
Critique against SC ruling.
- Unwarranted review of merits
The SC in unprecedented turns of events has for the first time in the DMRC case annulled an arbitral award which was already examined under Section 34, 37 of the Act and Article 136, 137 of Constitution alike. The court has justified its verdict on the basis of ‘patent illegality’. This is in line with the Apex court’s previous rulings in Associate Builders v. DDA and Ssangyong Engg. & Construction Co. Ltd. v. NHAI. wherein the court accepted that while the interpretation of a contract is primarily the arbitrator’s domain, it is impermissible to construe a contract in a way that no fair-minded or reasonable person would.
However, this verdict poses a severe dilemma as the court, in exercising its curative jurisdiction, has examined the merits of the case to establish patent illegality. In Part G of the ruling, the court at length analyzed the termination clause and the mention of “effective steps” therein. This approach contradicts the established legal principle that once review jurisdiction has been exercised, parties cannot raise pleas on merits, whether pertaining to jurisdiction or miscarriage of justice. Courts have limited authority to review an arbitral award and can do so for the specific reasons mentioned under Sections 34 and 37 of the Act and not administer as appellate bodies. Additionally,the court’s power to examine the award is even more restricted under Article 136 of the Constitution as it is intended to prevent miscarriage of justice. Unlike the UK Arbitration Act wherein the courts are empowered under Section 67(1)(b) to review the merits of the case, the Indian Act does not grant any such powers to its courts.
Therefore examining the merits of the dispute in a curative petition sets a bad precedent as it is only meant to serve as the last resort for a litigant to rectify errors on procedural grounds not argue on merits. In light of this, it is crucial to examine the scope of the curative petition and the Rupa Hurra judgement as well.
- The conundrum surrounding the grounds of the curative petition
The SC’s decision in the case has puzzled commercial litigators and constitutional lawyers alike due to its unexpected impact on arbitration law and the use of curative petitions. Historically, the remedy of curative petition has been used in cases of cruelty, death penalty etc. and not in the cases concerned with arbitral award until the case of M/s Bhaskar Raju & Bros. v. M/s. Dharmaratnakara Rai Bahadur (wherein the court’s earlier judgement in NN Global II ) concerning the validity of unstamped arbitration agreement was referred to a larger bench. However, what sets this case apart is that it is the first for the court to entertain a curative petition solely on commercial grounds.
While justifying its jurisdiction to entertain a curative petition in the present case the court referred to Rupa Hurra wherein the court clarified that the pursuit of justice cannot be deemed less significant than the principle of finality. It recognized that there are specific instances where rectification of a final judgment is necessary to correct a miscarriage of justice even after a review has been denied. Such instances are characterized by situations where failing to reconsider the judgment would violate judicial conscience and result in irremediable injustice. However such reconsideration is only warranted in rarest of the rare cases, a principle which seems to be violated in the present case.
Justice Banerjee’s concurring opinion in Rupa Hurra outlined three key criteria for entertaining a curative petition which were (i) violation of natural justice, (ii) lack of jurisdiction, and (iii) a judge’s failure to disclose connections with the subject matter or parties, leading to potential bias. Although these criteria are referred to in the DMRC ruling, they are not thoroughly addressed. The court did not exactly discuss the invocation of its rare jurisdiction on any of these grounds. While the exact circumstances under which curative powers are exercised need not be strictly defined it is necessary that it must pertain significantly to issues aligning with these broad principles. Furthermore, the term “manifest injustice” as used by the SC in DMRC, introduces a vague and subjective element into a category traditionally defined by objective standards like natural justice and bias.
Additionally, the in-depth, merit-driven evaluation of the Award by SC exceeds the limitations established by the SC for utilizing curative jurisdiction in Rupa Hurra. This meticulous review goes against the purpose of the Act which envisages minimal judicial intervention under Section 5 and a hands-off approach to arbitration as evidenced in the ruling of NN Global.
What lies ahead post the ruling
The judicial intervention prolonged the dispute for nearly 8 years and led to the increase of the amount to be awarded from an initial award of INR 3,000 crore to INR 8,000 crore due to accrued interest. While the apex court (in paragraph number seventy) has emphasized that the verdict in DMRC should not be considered a norm, there exists a high possibility that commercial entities may face prolonged disputes and heightened legal costs due to increased judicial intervention through curative petitions. This increase in judicial intervention could deter businesses from opting for arbitration as a means of resolving commercial conflicts and the attractiveness of India as a business destination altogether. Such continuous interference by the courts goes against the intent of the legislators as well. While the government is surely taking steps to improve India’s position as the preferred seat of arbitration (including the recent launch of the Arbitration Bar of India) such judicial inferences would certainly lead to more harm than good exacerbating the situation even further. As a result, there is a need for legislative clarity and reforms along with minimum judicial intervention to ensure that arbitration remains a reliable and effective mechanism for resolving commercial disputes in India. Inspirations must be drawn from the United Kingdom where the Arbitration Act ( passed in the same year) has successfully placed London as one of the most preferred seats for arbitration due to minimum judicial interference with the arbitral process.