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imposes ₹5 lakh costs on DMRC for misusing arbitration provision
A Division Bench of the has imposed costs of ₹5 lakh on the for filing a "classic case of " of of the . While the court set aside a Single Judge's order that had dismissed DMRC's challenge to an arbitral award as , it sternly penalised the public sector undertaking for attempting to obtain "" to challenge the substantive award.
The bench, comprising Justice C. Hari Shankar and Justice Om Prakash Shukla, held that even a or application under can extend the for filing a petition if it was formally made within the prescribed time and with notice to the other party. However, the court noted that such can be met with heavy costs.
The Background: A Contract Dispute and a Misguided Application
The dispute arose from a civil works contract dated between DMRC and (the respondent). After HCC Samsung raised a compensation claim in July 2018, which DMRC rejected, the matter was referred to a three-member arbitral tribunal. The majority award was released on , with a dissenting award on .
On , DMRC filed an application under of the Act, ostensibly seeking correction of the award. However, the application did not point to any clerical or typographical errors. Instead, it sought to challenge the tribunal's interpretation of contractual provisions, its calculations, and substantive findings—essentially amounting to a of the award on merits.
The arbitral tribunal rejected the application on . DMRC then filed a petition under to set aside the award on . The respondent argued that the petition was because the application was a and could not extend the .
The Single Judge's Order and the Appeal
The learned Single Judge agreed with the respondent, holding that the application was "mischievous" and an attempt to avoid the limitation provided in (3). The petition was dismissed as barred by time. DMRC appealed to the Division Bench.
In the appeal, DMRC relied on the 's decisions in Geojit Financial Services Ltd. v. Sandeep Gurav (2025) and National Highways Authority of India v. T. Younis (2026). The respondent, on the other hand, placed reliance on State of Arunachal Pradesh v. Damani Construction Co. (2007), which held that a letter seeking review could not extend limitation.
The Court's Legal Analysis: Distinguishing Damani and Applying Geojit
The Division Bench found that the present case was factually different from Damani . In Damani , the party had not filed a formal application under but had merely sent a letter. Here, DMRC had filed a formal application, which was considered and rejected by the tribunal.
The court noted that the in Geojit had clarified that once a formal application is made within the statutory period—regardless of whether it is maintainable—the limitation for a challenge runs from the date of its disposal. The bench observed:
"What is material for the purpose of computation of limitation under sub-section (3) of the 1996 Act, where a request was made in terms of , is not whether such request fell within the purview of the said provision or not, but only the factum that such request was made in the manner delineated under ."
The court further held that the decision in T. Younis had explicitly stated that where a application is found to be a , the court can and must award , but the petition cannot be dismissed as .
Key Observations: A Classic Case of
The court was scathing in its observations on DMRC's conduct. It noted that the application was
"completely lacking in
"
and went beyond the scope of
:
"It is not possible for us to believe that an organization such as the appellant did not know the fundamentals of and what is permitted thereunder. This, therefore, is a classic case of of , perhaps with a view to obtain to launch the challenge to the substantive award."
The bench also remarked that the application essentially sought a of the entire dispute, which is not permitted under .
The Decision: Petition Held Not , but Costs Imposed
The court set aside the Single Judge's order and held that DMRC's petition could not have been rejected as . However, it imposed costs of ₹5 lakh on DMRC, payable to within twelve weeks. The court noted that DMRC is a public sector undertaking, and the impact of the costs would ultimately fall on the public exchequer, but still found it necessary to penalise the .
The appeal was disposed of accordingly, with the court directing that the judgment be uploaded on its website forthwith.
Implications of the Ruling
The ruling clarifies that the for a challenge runs from the date of disposal of a application, even if the application is later found to be or beyond the scope of . However, parties who face the risk of substantial . This decision serves as a strong deterrent against filing such applications merely to gain additional time.
