2024 (4) TMI 557 - SC - Indian Laws

Maintainability of curative petition - restoration of arbitral award which had been set aside by the Division Bench of the High court on the ground that it suffered from patently illegality. Curative Jurisdiction may be invoked if there is a miscarriage of justice - HELD THAT - In RUPA ASHOK HURRA VERSUS ASHOK HURRA ANOTHER 2002 (4) TMI 889 - SUPREME COURT , a Constitution Bench of this Court dwelt on whether any relief is available against a final judgement of this Court after the dismissal of a petition seeking review of the judgement. Two opinions were authored. The main judgment was by Justice Syed Shah Quadri (on behalf of Chief Justice S P Bharucha, Justice Variava, Justice Shivraj Patil and himself). A concurring opinion was authored by Justice U C Banerjee - In his concurring opinion, Justice Banerjee also laid down a similar test of manifest injustice to exercise the jurisdiction of this Court under Article 142 while entertaining a curative petition. In essence, the jurisdiction of this Court, while deciding a curative petition, extends to cases where the Court acts beyond its jurisdiction, resulting in a grave miscarriage of justice. Scope of interference of courts with arbitral awards - HELD THAT - The contours of the power of the competent court to set aside an award under Section 34 has been explored in several decisions of this Court. In addition to the grounds on which an arbitral award can be assailed laid down in Section 34(2), there is another ground for challenge against domestic awards, such as the award in the present case. Under Section 34(2-A) of the Arbitration Act, a domestic award may be set aside if the Court finds that it is vitiated by patent illegality appearing on the face of the award. In ASSOCIATE BUILDERS VERSUS DELHI DEVELOPMENT AUTHORITY 2014 (11) TMI 1114 - SUPREME COURT , a two-judge Bench of this Court held that although the interpretation of a contract is exclusively within the domain of the arbitrator, construction of a contract in a manner that no fair-minded or reasonable person would take, is impermissible. A patent illegality arises where the arbitrator adopts a view which is not a possible view. A view can be regarded as not even a possible view where no reasonable body of persons could possibly have taken it. This Court held with reference to Sections 28(1)(a) and 28(3), that the arbitrator must take into account the terms of the contract and the usages of trade applicable to the transaction. The decision or award should not be perverse or irrational. 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. Patent illegality may also arise where the award is in breach of the provisions of the arbitration statute, as when for instance the award contains no reasons at all, so as to be described as unreasoned. While adjudicating the merits of a Special Leave Petition and exercising its power under Article 136, this Court must interfere sparingly and only when exceptional circumstances exist, justifying the exercise of this Court s discretion - Unlike the exercise of power under Section 37, which is akin to Section 34, this Court (under Article 136) must limit itself to testing whether the court acting under Section 37 exceeded its jurisdiction by failing to apply the correct tests to assail the award. The award was patently illegal - HELD THAT - In the case at hand, the Division Bench found the award to be perverse, irrational and patently illegal since it ignored the vital evidence of CMRS certification in deciding the validity of termination. This, the Division Bench held, overlooked the statutory certification deeming it irrelevant without reasons and thus the award was patently illegal according to the test in Associate Builders - The Tribunal did not appreciate the individual import of the two phrases separately from each other. This was not a matter of mere alternate interpretation of the clause, but an unreasonable and uncalled for interpretation of the clause, which frustrated the very provision, and which no reasonable person would have accepted considering the terms of the clause. It is clarified that Tribunal could have still arrived at the conclusion that the steps taken during the cure period were not effective within the meaning of the clause for certain reasons. However, such discussion and reasoning is conspicuously absent. In essence, therefore the award is unreasoned. It overlooks vital evidence in the form of the joint application of the contesting parties to CMRS and the CMRS certificate. The arbitral tribunal ignored the specific terms of the termination clause. It reached a conclusion which is not possible for any reasonable body of persons to arrive at. The arbitral tribunal erroneously rejected the CMRS sanction as irrelevant. The award bypassed the material on record and failed to reconcile inconsistencies between the factual averments made in the cure notice, which formed the basis of termination on the one hand and the evidence of the successful running of the line on the other. The Division Bench correctly held that the arbitral tribunal ignored vital evidence on the record, resulting in perversity and patent illegality, warranting interference. The parties are restored to the position in which they were on the pronouncement of the judgement of the Division Bench. The execution proceedings before the High Court for enforcing the arbitral award must be discontinued and the amounts deposited by the petitioner pursuant to the judgment of this Court shall be refunded. The Curative petitions must be and are accordingly allowed.

Summary

Issues Involved:
1. Maintainability of the curative petition.
2. Justification of restoring the arbitral award set aside by the Division Bench of the High Court on grounds of patent illegality.

Summary:

I. Curative Jurisdiction may be invoked if there is a miscarriage of justice.

In Rupa Hurra vs. Ashok Hurra, the Supreme Court held that curative jurisdiction under Article 142 can be invoked to prevent abuse of process or to cure a gross miscarriage of justice. The Court noted that such jurisdiction should be exercised in rarest of rare cases where declining to reconsider the judgment would be oppressive to judicial conscience and cause perpetuation of irremediable injustice.

II. Scope of interference of courts with arbitral awards.

Section 34 of the Arbitration and Conciliation Act allows setting aside an arbitral award if it is in conflict with the public policy of India or is vitiated by patent illegality. The Supreme Court in Associate Builders vs. Delhi Development Authority held that an award is perverse if it is based on no evidence, ignores vital evidence, or is irrational. The Court in Ssangyong Engineering & Construction Co. Ltd. vs. NHAI endorsed this view, stating that a finding based on no evidence or ignoring vital evidence would be perverse and liable to be set aside.

III. The award was patently illegal.

The Division Bench found the award to be perverse and patently illegal as it ignored the vital evidence of the CMRS certification in deciding the validity of termination. The Supreme Court, in appeal, incorrectly considered the CMRS certificate to be irrelevant to the validity of the termination. The Tribunal's interpretation of the termination clause was unreasonable and overlooked vital evidence and matters on the record.

The Tribunal failed to explain what amounts to an 'effective step' and how the steps taken by DMRC were not effective within the meaning of the clause. The Tribunal also ignored the joint application by both parties to the CMRS and the CMRS certificate, which indicated that certain repairs were completed and the line was safe for operations. The Tribunal's finding that the defects were not cured within 90 days was a factual finding, but it failed to consider whether effective steps were taken during the cure period.

Conclusion:

The Supreme Court's judgment, which interfered with the Division Bench's decision, resulted in a miscarriage of justice. The Division Bench correctly held that the arbitral award suffered from perversity and patent illegality. The curative petitions are allowed, restoring the parties to the position they were in before the Supreme Court's judgment. The execution proceedings for enforcing the arbitral award must be discontinued, and any amounts paid by the petitioner must be refunded.