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TMI Blog2024 (4) TMI 557X X X X Extracts X X X X X X X X Extracts X X X X ..... nifest 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 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uously 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 Curati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il Corporation Ltd. (2022) 1 SCC 131. The judgment remained undisturbed in the exercise of the review jurisdiction of this Court. Review Petition (C) Nos. 1158-1159/2921. A. Factual Background 2. The petitioner, Delhi Metro Rail Corporation "DMRC" is a state-owned company wholly owned by the Government of India and the National Capital Territory of Delhi. The respondent, Delhi Airport Metro Express Private Limited "DAMEPL"/" Concessionaire" is a special purpose vehicle incorporated by a consortium comprising of Reliance Infrastructure Limited and Construcciones Y Auxiliar de Ferrocarriles SA, Spain. The consortium bagged the contract for the construction, operation and maintenance of the Delhi Airport Metro Express Ltd "AMEL" in 2008. The Concession Agreement "2008 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. 3. Under the 2008 Agreement, DAMEPL was granted exclusive rights, license and authority to implement the project and concession in respect of AMEL. This included the right to manage and operate the Project as a commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tration proceedings on 23 October 2012 under clause 36.2 of the 2008 agreement. 10. On 30 June 2013, DAMEPL halted operations and handed over the line to DMRC. Before this, on 19 November 2012, both parties made a joint application to the Commissioner of Metro Railway Safety "CMRS"/"Commissioner" for re-opening of AMEL for public carriage of passengers. Enclosed with the application, was an administrative note jointly signed by representatives of both DAMEPL and DMRC, which we shall avert to in the course of the judgment. 11. Following this application, after inquiry and inspection, the CMRS issued sanction on 18 January 2013. This sanction was subject to certain conditions including speed restrictions. Specifically, the metro was to be run at a speed of 50kmph, and an increase in speed beyond 50kmph up to 80kmph was to be authorized in steps of 10kmph at a time. For an increase in speed beyond 80kmph, DMRC was to approach the Commissioner for sanction with a justification as to the improvements carried out by it. 12. Consequently, on 22 January 2013, AMEL operations were commenced by DAMEPL. On 30 June 2013, the project assets were handed over by DAMEPL to DMRC. After that, fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under the 2008 agreement. DAMEPL, on the other hand, claimed that there were defects attributable to DMRC's faulty design; that these defects were not cured and no effective steps were taken to cure them within the 90-day cure period, resulting in material adverse effects to DAMEPL, entitling it to terminate the concession agreement. 18. The Tribunal was required to adjudicate on the validity of the termination notice. It framed the following issues: "Were there any defects in the civil structure of the airport metro line? If there were defects, did such defects have a material adverse effect on the performance of the obligation of DAMEPL under CA? If there were defects in the civil structure, which had a material adverse effect on the performance of the obligations under the CA by DAMEPL, have such defects been cured by DMRC and/or have any effective steps been taken within a period of 90 days from the date of notice by DAMEPL to cure the defects by DMRC and thus, were DMRC in breach of the CA as per 29.5.1 (i)?" 19. The Tribunal undertook an analysis of the defects in the structure and whether they had been cured or effective steps taken during the cure period. It no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Tribunal, in this case, had analysed material and evidence in great detail, and arrived at a plausible conclusion. 24. The Division Bench of the High Court "Division Bench" partly set aside the award as perverse and patently illegal, for the following reasons : 24.1. On the validity of the termination, ex-facie, the termination which was effective immediately from the date of termination was invalid. There was some ambiguity on the relevant date of termination. The award did not interpret clause 29.5.1(i) of the concession agreement regarding the duration of the cure period; 24.2. The speed restrictions were not stated as the reason for termination in the cure or termination notices and there was no deliberation on this being a justification for termination before the Tribunal. Thus, the award was silent and unreasoned on this issue; and 24.3. Underlining the significance of the CMRS sanction under the Act of 2002, the findings of the tribunal on this issue were incorrect because (i) the award overlooked the legal effect of the CMRS certificate which was binding on the tribunal; and (ii) the award erroneously treated the CMRS certificate as irrelevant to the issue of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffective steps' were taken by DMRC, culminating in cure compliance under the statutory process under the Metro Railways (Operation and Maintenance) Act, 2002 The 2002 Act, the termination notice was invalid; 28.3. Clause 29.5.1 of the agreement shows that the termination ought to have been effected after 90 days from the cure notice plus 90 days in addition. Termination was thus effective only on 07 January 2013 and on this date, none of the defects were pending to be rectified by DMRC; 28.4. The sanction/certificate granted by CMRS was issued on a joint application by both the parties after thorough inspection of the operations. The terms of the agreement and the provisions relating to the CMRS process under the 2002 Act are intrinsically connected; 28.5. The Tribunal should have considered the binding effect of the CMRS sanction as the issue of speed was neither raised, nor deliberated before it and was irrelevant to the termination; 28.6. The line has been running since 1 July 2013. The speed of operations was sanctioned at 50kmph, and has been progressively increased to 60 kmph in January 2013, 80 kmph in August 2013, 90 kmph in July 2019, and ultimately 100 kmph and then 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The award was made after 68 hearings and after consideration of 35,000 pages of documents and oral evidence. It has been two and a half years since this Court restored the award on 09 September 2021 and the review against this decision was dismissed on 23 November 2021; 29.6. According to the decision in Rupa Hurra (supra), the court is not supposed to sit over a judgment like a court of appeal. The scope of the review jurisdiction is narrow in itself and does not warrant rehearing and correction of a judgment. Curative proceedings cannot be treated as a second review; and 29.7. DAMEPL is not unjustly enriching itself. DAMEPL completed the project with an investment of Rs 2802 Crores comprising of debt and equity contributions and it continued to service the debt even after handing over the line to DMRC. DMRC on the other hand, has paid the decretal amount of Rs 2599.18 Crores while Rs 5088 Crores under the decree is outstanding as on 31 January 2024. G. Analysis I. Curative Jurisdiction may be invoked if there is a miscarriage of justice 30. Senior Counsel for the respondent set forth preliminary objections challenging the maintainability of the Curative Petition, in view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to specify the requirements to entertain such a curative petition under the inherent power of this Court so that floodgates are not opened for filing a second review petition as a matter of course in the guise of a curative petition under inherent power. It is common ground that except when very strong reasons exist, the Court should not entertain an application seeking reconsideration of an order of this Court which has become final on dismissal of a review petition. It is neither advisable nor possible to enumerate all the grounds on which such a petition may be entertained. 51. Nevertheless, we think that a petitioner is entitled to relief ex debito justitiae if he establishes (1) violation of the principles of natural justice in that he was not a party to the lis but the judgment adversely affected his interests or, if he was a party to the lis, he was not served with notice of the proceedings and the matter proceeded as if he had notice, and (2) where in the proceedings a learned Judge failed to disclose his connection with the subject-matter or the parties giving scope for an apprehension of bias and the judgment adversely affects the petitioner." 34. The enumeration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ward : Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence." ( emphasis supplied ) 37. 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. 38. In Associate Builders vs. Delhi Development Authority 2015 3 SCC 49 , 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 person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2-A). 41. … Thus, 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. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse." ( emphasis supplied ) 40. In essence, the ground of patent illegality is available for setting aside a domestic award, if the decision of the arbitrator is found to be perverse, or so irrational that no reasonable person would have arrived at it; or the construction of the contract is such that no fair or reasonable person would take; or, that the view of the arbitrator is not even a possible view. Patel Engineering Limited vs North Eastern Electric Power Corporation Limited (2020) 7 SCC 176. A 'finding' based on no evidence at all or an award which ignore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion by the Court under Section 37 as delineated above. 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. III. The award was patently illegal 44. 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 (supra). Division Bench, paras 98-99. 45. This Court in appeal against the judgment of the Division Bench of the High Court held that the award was not perverse. Factual findings such as the finding that the cure period was 90 days and that DAMEPL was entitled to terminate the contract, could not, it was held, be interfered with. Civil Appeal, para 31. On the CMRS Certificate, this Court held that the arbitral tribunal was deciding wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r take effective steps for curing such breach" within the cure period. Pertinently, the clause uses two separate phrases, "cure" and "effective steps to cure". The clause reads as follows: "29.5.1 The Concessionaire may after giving 90 (ninety) days' notice in writing to DMRC terminate this Agreement upon the occurrence and continuation of any of the following events (each a "DMRC Event of Default"), unless any such DMRC Event of Default has occurred as a result of Concessionaire Event of Default or due to a Force Majeure Event. (i) DMRC is in breach of this Agreement and such breach has a Material Adverse Effect on the Concessionaire and DMRC has failed to cure such breach or take effective steps for curing such breach within 90 (ninety) days of receipt of notice in this behalf from the Concessionaire;" ( emphasis supplied ) 49. The Tribunal found that since certain defects remained after the cure period, this was indicative of the fact that the defects were not cured and that no effective steps were taken. However, logically, the fact that defects existed at the end of the cure period relates to one aspect of the termination clause - that the defects were not completely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red within the cure period in order to avoid termination. 54. The judgment of this Court also never tested the relevance of the CMRS certificate vis-à-vis "effective steps". This Court accepted a reading of the termination clause by the Arbitral tribunal and the Single Judge that was not even a possible view and could not have been arrived at on any objective assessment. This Court not only overlooked the plain words of the clause but also rendered the phrase "effective steps" otiose. ii. The award overlooked vital evidence and matters on the record 55. The erroneous and misleading framing of the issue as noted above led to the ignoring of vital evidence relevant to the issue of termination. The arbitral tribunal held that since the Commissioner imposed conditions of inspection and speed restrictions, this meant that the defects were not fully cured. 56. Certainly, the imposition of conditions shows that the defects were not cured completely, to warrant an unconditional sanction for full speed operations. However, as the Division Bench of the High Court correctly observed, the separation of the validity of termination and relevance of the CMRS certificate was the reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... functioning at various speeds including the speed of 120kmph". It is apparent on the face of the record that certain repairs were completed by DMRC and the trials had been completed at full speed as on the date of application, 19 November 2012. 59. On 9 July 2012, about four months before the date of the joint application, DAMEPL had averred in the cure notice that the project was not 'safe for operations' and that it posed a threat to life and property. The arbitral tribunal was correct in concluding that the joint application does not constitute a waiver of the termination, but this evidence was vital considering the change in DAMEPL's position on the safety of the line from the date of the cure notice to the date of the joint application. DMRC did take certain steps to alleviate DAMEPL's concerns so as to warrant this change of position. There is no explanation forthcoming in the award about why none of these steps initiated during the cure period were 'effective steps'. This gap in reasoning stems from the arbitral tribunal wrongly separating the issue of termination and the CMRS certificate. 60. Besides the effective steps aspect, there is another reason why the CMRS certifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner, may sanction the opening of the metro railway under Section 14 as such or subject to such conditions as may be considered necessary by it for the safety of the public. 18. Power to close metro railway opened for public carriage of passengers.--Where, after the inspection of the metro railway opened and used for the public carriage of passengers or any rolling stock used thereon, the Commissioner is of the opinion that the use of the metro railway or of any rolling stock will be attended with danger to the public using it, the Commissioner shall send a report to the Central Government who may thereupon direct that-- (i) the metro railway be closed for the public carriage of passengers; or (ii) the use of the rolling stock be discontinued; or (iii) the metro railway or the rolling stock may be used for the public carriage of passengers subject to such conditions as it may consider necessary for the safety of the public. 21. Delegation of powers.--The Central Government may, by notification, direct that any of its powers or functions under this chapter, except power to make rule under Section 22, shall, in relation to such matters and subject to such condit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AMEPL insisted on discontinuing operations citing safety concerns. We respectfully disagree with this Court's re-assessment of the Division Bench's interpretation. The cure notice was relevant for the reasons stated above. Moreover, the fact that DAMEPL premised it on safety could not have been overlooked by the Tribunal. In doing so, it overlooked vital evidence pertaining to an issue that goes to the root of the matter. The cure notice was obviously on the record and merited consideration for its contents bearing on vital elements of safety. 66. The cure notice, which contains statements bearing on the safety of the line and other material indicating that the line was running uninterrupted are matters of record. While the cure notice contains allegations about the line not being operational, there is evidence on the record indicating that the line was in fact running. Even if we were to accept that the finding of the arbitral tribunal that the defects were not completely cured during the cure period is a factual finding incapable of interference, it is clear from the record that DMRC took steps towards curing defects which led to the eventual resumption of operations. The award ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 part of the awarded amount, if any, paid by the petitioner as a result of coercive action is liable to be restored in favour of the petitioner. The orders passed by the High Court in the course of the execution proceedings for enforcing the arbitral award are set aside. 70. Before concluding, we clarify that the exercise of the curative jurisdiction of this Court should not be adopted as a matter of ordinary course. The curative jurisdiction should not be used to open the floodgates and create a fourth or fifth stage of court intervention in an arbitral award, under this Court's review jurisdiction or curative jurisdiction, respectively. 71. In the specific facts and circumstances of this case to which we have adverted in the course of the discussion, we have come to the conclusion that this Court erred in interfering with the decision of the Division Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X
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