SC allows DMRC's curative plea challenging arbitral award in favour of DAMEPL

New Delhi: The Supreme Court, delivering its verdict on a curative petition by the Delhi Metro Rail Corporation (DMRC), on Wednesday overturned the September 2021 decision which had upheld the arbitral award in favour of the Delhi Airport Metro Express Pvt Ltd (DAMEPL), which used to operate the Delhi Airport Metro line.

A bench, headed by CJI D.Y. Chandrachud, ordered that the execution proceedings pending before the Delhi High Court for enforcing the 2017 arbitral award must be discontinued and the amounts deposited be refunded to the DMRC.

“The part of the awarded amount, if any, paid by the petitioner (DMRC) 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," said the Bench, also comprising Justices B.R. Gavai and Surya Kant.

The decision came on a curative plea filed by DMRC challenging the restoration of the award in favour of Reliance Infrastructure arm DAMEPL.

In 2017, a three-member arbitral tribunal passed a unanimous award in favour of the DAMEPL accepting the Airport Metro operator's claim that running operations on the line was not viable due to reasons such as structural defects.

Subsequently, a division bench of the Delhi High Court partly allowed the appeal filed by the DMRC. However, the award was restored by the Supreme Court on a special leave petition filed by the DAMEPL.

In its latest judgment, the apex court said: “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…..The award contains no explanation as to why the steps which were taken by the DMRC were not 'effective steps' within the meaning of the termination clause."

Further, it said that the arbitral tribunal ignored the specific terms of the termination clause and erroneously rejected the CMRS (Commissioner of Metro Railway Safety) sanction as irrelevant.

The Supreme Court said that the "Division Bench (of the High Court) correctly held that the arbitral tribunal ignored vital evidence on the record, resulting in perversity and patent illegality, warranting interference".

The Division Bench applied the correct test in holding that the arbitral award suffered from the vice of perversity and patent illegality, it added.

In 2008, the DAMEPL entered into a contract with the DMRC for running the Airport Metro line till 2038. As disputes arose between the parties, the DAMEPL stopped operating the Metro on the airport line and invoked the arbitration clause against the DMRC, alleging a violation of the contract and sought a termination fee.