2024 Supreme(SC) 328

SUPREME COURT OF INDIA
Dhananjaya Y Chandrachud, CJI., B R Gavai, Surya Kant, JJ.
Delhi Metro Rail Corporation Ltd. – Petitioner
Versus
Delhi Airport Metro Express Pvt. Ltd. – Respondent
Curative Petition (C) Nos.108-109 of 2022 In Review Petition (C) Nos.1158-1159 of 2021 In Civil Appeal Nos 5627-5628 of 2021
Decided On : 10-04-2024

IMPORTANT POINTS
(1) Curative jurisdiction – Curative jurisdiction should not be used to open floodgates and create a fourth or fifth stage of court intervention in an arbitral award.
(2) Appeal against arbitral award – No second appeal shall lie from an order passed under Section 37, but nothing in the section takes away constitutional right under Article 136.

Headnote:

(A) Constitution of India – Article 142 – Curative jurisdiction – Exercise of – Test of ‘manifest injustice’ – In essence, jurisdiction of Supreme Court, while deciding a curative petition, extends to cases where Court acts beyond its jurisdiction, resulting in a grave miscarriage of justice – Enumeration of situations in which curative jurisdiction can be exercised is not intended to be exhaustive – Exercise of curative jurisdiction of this Court should not be adopted as a matter of ordinary course – Curative jurisdiction should not be used to open 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. (Paras 34, 35 and 70)

(B) Arbitration and Conciliation Act, 1996 – Section 34 – Arbitral award – Setting aside of – 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 – Decision or award should not be perverse or irrational – An award is rendered perverse or irrational where findings are (i) based on no evidence; (ii) based on irrelevant material; or (iii) ignores vital evidence – Patent illegality may also arise where award is in breach of provisions of arbitration statute – A fundamental breach of principles of natural justice will result in a patent illegality – An award without reasons would suffer from patent illegality – Arbitrator commits a patent illegality by deciding a matter not within his jurisdiction or violating a fundamental principle of natural justice – A Judgment setting aside or refusing to set aside an arbitral award under Section 34 is appealable in exercise of jurisdiction of court under Section 37 of Arbitration Act. (Paras 38, 40 and 41)

(C) Arbitration and Conciliation Act, 1996 – Section 37 – Constitution of India – Article 136 – Appeal against arbitral award – No second appeal shall lie from an order passed under Section 37, but nothing in the section takes away constitutional right under Article 136 – In a sense there is a third stage at which this court tests exercise of jurisdiction by courts acting under Section 34 and Section 37 of Arbitration Act – This Court must be slow in interfering with a Judgment delivered in exercise of powers under Section 37 unless there is an error in exercising of jurisdiction by Court under Section 37 – Unlike exercise of power under Section 37 which is akin to Section 34, this Court under Article 136 must limit itself to testing whether court acting under Section 37 exceeded its jurisdiction by failing to apply correct tests to assail award. (Paras 42 and 43)

(D) Arbitration and Conciliation Act, 1996 – Section 34 – Metro Railways (Operations and Maintenance) Act 2002 – Section 14 – Arbitral award – Setting aside of – Dispute arising from public-private partnership for providing metro rail connectivity between New Delhi Railway Station and Indira Gandhi International Airport and other points within Delhi – Rather than considering vital evidence of CMRS certificate towards safety and effective steps, arbitral tribunal focused on conditions imposed by Commissioner on speed and regarding inspections – Cure notice which contains statements bearing on safety of line and other material indicating that line was running uninterrupted are matters of record – While cure notice contains allegations about line not being operational, there is evidence on record indicating that line was in fact running – DMRC took steps towards curing defects which led to eventual resumption of operations – Award contains no explanation as to why steps which were taken by DMRC were not effective steps within meaning of termination clause – In essence, award is unreasoned on important aspects – It overlooks vital evidence in form of joint application of contesting parties to CMRS and CMRS certificate – Arbitral tribunal ignored specific terms of termination clause – Division Bench correctly held that arbitral tribunal ignored vital evidence on record, resulting in perversity and patent illegality, warranting interference – Judgment of two-judge Bench of this Court, which interfered with judgment of Division Bench of High Court, has resulted in a miscarriage of justice – Division Bench applied correct test in holding that arbitral award suffered from vice of perversity and patent illegality – By setting aside Judgment of Division Bench, this Court restored a patently illegal award which saddled a public utility with an exorbitant liability – This has caused a grave miscarriage of justice which warrants exercise of power under Article 142 in a Curative petition – Curative petitions must be and are accordingly allowed – Parties restored to position in which they were on the pronouncement of Judgment of Division Bench. (Paras 65, 66, 67, 68 and 69)

Facts of the case:

Curative jurisdiction of this Court under Article 142 of Constitution has been invoked in regard to its decision in Delhi Airport Metro Express Private Limited vs. Delhi Metro Rail Corporation Ltd., (2022) 1 SCC 131. Judgment remained undisturbed in exercise of review jurisdiction of this Court. [Review Petition (C) Nos. 1158-1159/2921]

Findings of Court:

Judgment of Division Bench provided more than adequate reasons to come to the conclusion that arbitral award suffered from perversity and patent illegality. There was no valid basis for this Court to interfere under Article 136 of Constitution. Interference by this Court has resulted in restoring a patently illegal award. This has caused a grave miscarriage of justice.

Execution proceedings before High Court for enforcing arbitral award must be discontinued and amounts deposited by petitioner pursuant to Judgment of this Court shall be refunded. Part of awarded amount, if any, paid by petitioner as a result of coercive action is liable to be restored in favour of petitioner. Orders passed by High Court in the course of execution proceedings for enforcing arbitral award are set aside.

Result : Curative petitions allowed.