2024 Supreme(Online)(SC) 3151

SUPREME COURT OF INDIA
Dhananjaya Y Chandrachud, CJI
Delhi Metro Rail Corporation – Appellant
Versus
Delhi Airport Metro Express – Respondent
Curative Petition (C) Nos.108-109 of 2022 | Review Petition (C) Nos.1158-1159 of 2021 | Civil Appeal Nos 5627-5628 of 2021

A court may exercise curative jurisdiction to set aside an arbitral award that is patently illegal or perverse due to the omission of vital evidence or an unreasonable interpretation of the contract, when such errors result in a grave miscarriage of justice.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 34, 37 - Constitution of India - Article 142 - Curative Petition - Scope of interference with arbitral awards - Patent illegality - An arbitral award may be set aside under the head of 'patent illegality' if the arbitrator’s findings are perverse, irrational, based on no evidence, or ignore vital evidence - The court in exercise of its curative jurisdiction must interfere if there is a miscarriage of justice caused by the restoration of a patently illegal award. (Paras 35, 38, 40, 68)

(B) Contractual Interpretation - Unreasonable interpretation - If the interpretation of the terms of a contract by a tribunal is such that no fair-minded or reasonable person would adopt, it is amenable to challenge as perverse - An award must not render specific contractual provisions 'otiose'. (Paras 47, 54)

(C) Evidence - Appellate Review - A court sitting in review or appeal under the arbitration statute must ensure that findings are based on evidence and consider all vital material on record; ignoring relevant evidence leads to perversity. (Paras 38, 67)

Facts of the case:
A dispute arose regarding the termination of a concession agreement for the construction and operation of a public infrastructure project. The concessionaire issued a termination notice alleging defaults in the structural integrity of the project. The tribunal ruled in favor of the concessionaire, granting significant termination payments. This award was challenged by the state-owned entity, initially upheld by a single judge, then partially set aside by a division bench, and subsequently restored by the Supreme Court. The current proceedings involve a curative petition filed against the restoration of the award.

Findings of Court:
The tribunal and the subsequent court order overlooked vital evidence, including the joint application made by the parties for statutory safety certification, and failed to consider the distinction between 'curing a breach' and 'taking effective steps to cure'. The interpretation of the contractual clause regarding termination was found to be unreasonable, as it rendered the phrase 'effective steps' redundant. The award was found to be patently illegal and perverse, leading to an undeserved windfall.

Issues: The central issues were: (i) whether the curative petition was maintainable; and (ii) whether the restoration of the arbitral award was justified, or if it suffered from patent illegality and perversity leading to a miscarriage of justice.

Ratio Decidendi: The court ruled that curative jurisdiction under Article 142 is available in 'rarest of rare' cases to rectify grave miscarriages of justice. It held that an award which disregards vital evidence on record and adopts an interpretation of a contract that is not even a possible view is patently illegal. The failure to appreciate specific contractual terms and ignoring relevant statutory safety certifications warranted the interference of the court to prevent the perpetuation of irremediable injustice.

Result: Curative petitions allowed; judgment of the Supreme Court restoring the award is set aside; parties restored to the position as it was post the High Court division bench decision.