2021 Supreme(SC) 489

SUPREME COURT OF INDIA
L. Nageswara Rao, S. Ravindra Bhat, JJ.
Delhi Airport Metro Express Pvt. Ltd. – Appellant
Versus
Delhi Metro Rail Corporation Ltd. - Respondent
Civil Appeal No. 5627 of 2021 (Arising out of SLP (C) No. 4115 of 2019) With Civil Appeal No. 5628 of 2021 (Arising out of SLP (C) No. 8311 of 2019)
Decided On : 09-09-2021

IMPORTANT POINTS
(1) Construction of contract is within jurisdiction of Tribunal and merely because another view is possible, Court cannot interfere with such construction and substitute its own view.
(2) If an arbitral award shocks conscience of court, it can be set aside as being in conflict with most basic notions of justice.
(3) Scope of interference with a domestic award – Patent illegality should be illegality which goes to root of matter. Very error of law committed by Arbitral Tribunal would not fall within expression ‘patent illegality’.
(4) If a dispute which is not capable of settlement by arbitration is subject-matter of award or if award is in conflict with public policy of India, award is liable to be set aside.

Headnote:

(A) Arbitration and Conciliation Act, 1996 – Section 34 read with Section 5 – Review of arbitral award – Judicial interference with arbitral awards is limited to grounds in Section 34 – While deciding applications filed under Section 34 of Act, courts are mandated to strictly act in accordance with and within confines of Section 34, refraining from appreciation or re-appreciation of matters of fact as well as law – limited grounds available to courts for annulment of arbitral awards are well known to legally trained minds – However, there is a disturbing tendency of courts setting aside arbitral awards, after dissecting and reassessing factual aspects of cases to come to a conclusion that award needs intervention and thereafter, dubbing award to be vitiated by either perversity or patent illegality, apart from other grounds available for annulment of award – This approach would lead to corrosion of object of 1996 Act and endeavours made to preserve this object, which is minimal judicial interference with arbitral awards – That apart, several judicial pronouncements of this Court would become a dead letter if arbitral awards are set aside by categorising them as perverse or patently illegal without appreciating contours of said expressions. (Paras 22 and 24)

(B) Arbitration and Conciliation Act, 1996 – Section 34 – Scope of interference with a domestic award – Patent illegality should be illegality which goes to root of matter – Very error of law committed by Arbitral Tribunal would not fall within expression ‘patent illegality’ – Likewise, erroneous application of law cannot be categorised as patent illegality – In addition, contravention of law not linked to public policy or public interest is beyond scope of expression ‘patent illegality’ – What is prohibited is for courts to re-appreciate evidence to conclude that award suffers from patent illegality appearing on face of award, as courts do not sit in appeal against arbitral award – Permissible grounds for interference with a domestic award under Section 34(2-A) on the ground of patent illegality is when Arbitrator takes a view which is not even a possible one, or interprets a clause in the contract in such a manner which no fair-minded or reasonable person would, or if Arbitrator commits an error of jurisdiction by wandering outside contract and dealing with matters not allotted to them – An Arbitral award stating no reasons for its findings would make itself susceptible to challenge on this account – Conclusions of Arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and can be set aside on the ground of patent illegality – Also, consideration of documents which are not supplied to other party is a facet of perversity falling within expression ‘patent illegality’ – If a dispute which is not capable of settlement by arbitration is subject-matter of award or if award is in conflict with public policy of India, award is liable to be set aside – An award would be in conflict with public policy of India only when it is induced or affected by fraud or corruption or is in violation of Section 75 or Section 81 of 1996 Act, if it is in contravention with fundamental policy of Indian law or if it is in conflict with the most basic notions of morality or justice – Contravention of a statute only if it is linked to public policy or public interest is cause for setting aside award as being at odds with fundamental policy of Indian law – If an arbitral award shocks conscience of court, it can be set aside as being in conflict with most basic notions of justice. (Paras 25, 26 and 27)

(C) Arbitration and Conciliation Act, 1996 – Section 37 read with Section 13 of Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 – Appeal against arbitral award – Dispute arising from Concession Agreement entered into between DMRC and DAMEPL for design, installation, commissioning, operation and maintenance of Indira Gandhi International Airport – Waiver of termination notice – There is no ambiguity in findings of Arbitral Tribunal regarding time given for curing defects and effective date of termination of Concession Agreement – Termination notice was issued as defects were not cured – Arbitral Tribunal in its award has clearly held that DMRC failed to cure defects before expiry of 90 days from initial notice laying down the non-exhaustive list of defects – Construction of a provision of Concession Agreement is within domain of Arbitral Tribunal – View taken by Arbitral Tribunal that defects have to be cured within 90 days from date of cure notice, failing which DAMEPL is entitled to terminate Concession Agreement, is a possible interpretation of Article 29.5.1 – Finding of Arbitral Tribunal that defects were not cured is one of fact which cannot be interfered with by court – Members of Arbitral Tribunal, nominated in accordance with agreed procedure between parties, are engineers and their award is not meant to be scrutinised in same manner as one prepared by legally trained minds – In any event, it cannot be said that view of Tribunal is perverse – As Arbitrator is sole Judge of quality as well as quantity of evidence, task of being a Judge on evidence before Tribunal does not fall upon court in exercise of its jurisdiction under Section 34 – On the basis of issues submitted by parties, Arbitral Tribunal framed issues for consideration and answered said issues – Subsequent events need not be taken into account – Conclusion of Division Bench that award of Arbitral Tribunal suffers from patent illegality and shocks conscience of court held to be erroneous – No fault in approach of Tribunal that understanding of term equity as per Companies Act, 2013 is not relevant for the purposes of determining ‘Adjusted Equity’ in light of express definition of term in Concession Agreement – However, Division Bench of High Court rightly refrained from interfering with findings on waiver by Tribunal – After a thorough consideration of Article 29.8 and Article 36.2.6.1 of Concession Agreement, High Court has rightly refused to interfere with findings by Tribunal relating to interest. [Rule 11 of Opening of Delhi Metro Railway for Public Carriage of Passengers Rules, 2002] (Paras 31, 33, 34, 35, 36, 42 to 46)

Facts of the case:

Whether in exercise of its power under Section 37 of Arbitration and Conciliation Act, 1996, Division Bench of Delhi High Court was right in interfering with award dated 11.05.2017 passed by Arbitral Tribunal in favour of the Appellant-Delhi Airport Metro Express Pvt. Ltd. (‘DAMEPL’ or ‘Concessionaire’), is the question that arises for consideration in these Appeals. Division Bench reversed the judgement of Single Judge and allowed the appeal filed by DMRC. Award passed by the Arbitral Tribunal was partly set aside. The parties were left to invoke the arbitration clause for adjudication of the issues that were not decided by Division Bench. The judgement of the Division Bench dated 15.01.2019 is assailed in these Appeals.

Findings of Court:

Even assuming view taken by the High Court is not incorrect, we are afraid that a possible view expressed by Tribunal on construction of the terms of the Concession Agreement cannot be substituted by the High Court. This view is in line with the understanding of Section 28(3) of 1996 Act as a ground for setting aside the arbitral award.

Result : Appeal filed by DAMEPL allowed and Appeal filed by DMRC dismissed.