DMRC vs DAMEPL: A contest stranger than fiction

I am reminded of the old adage ‘Truth is often stranger than fiction’, as I pen down my thoughts and views on the recent judgment of the Supreme Court in the curative petition filed by Delhi Metro Rail Corporation (DMRC) in the arbitration case with Delhi Airport Metro Express Private Limited (DAMEPL), owned by Reliance Infrastructure Limited.

I was once called to judge a moot court competition where the moot problem dealt with an arbitration matter that went up to the Supreme Court, until the curative petition. I immediately discussed the moot proposition with the organisers and urged them to limit the problem at the Special Leave Petition (SLP) stage under Article 136, since curative petitions are a rarity, that too in an arbitration matter. The organisers, however, insisted on running the full board to delve into the scope of intervention at different stages of the award. That said, the moot problem did not deviate from the normal course and did not contemplate any interference at the curative stage based on the principles of Rupa Hurra v. Ashok Hurra.

While I had a hard time digesting the fact that a curative petition was filed in that arbitration problem, the latest judicial developments seem to have vindicated the organisers and given me a reality check. The curative petition was not just filed, but also allowed by the Supreme Court in the case of DMRC v. DAMEPL, thereby setting aside the arbitral award and heralding a fresh round of arbitration between the parties. The Court applied the settled principles governing the scope of intervention in an arbitral award and the test of patent illegality to set at naught the arbitral award passed in favour of DAMEPL.

As for the significance, the verdict would surely change the way courts look at the arbitral awards from now on. The inordinate certitude about piousness and sanctity of the awards is likely to be shaken. The upside to the setting aside of an arbitral award at the curative stage is that the courts would not shy away from examining the awards at the initial stages, perusing the documents and evidence filed by the parties, interpreting the contract and consequently correcting any blatant errors by the arbitrators. While legitimizing the appraisal of the award at the stage of Section 34 and 37, the Court has delimited the scrutiny under Article 136 to only “testing whether the court acting under Section 37 exceeded its jurisdiction by failing to apply the correct tests to assail the award,” thereby thwarting any attempts of the Supreme Court to resurrect or set aside the award after an independent assessment from the standpoint of Section 34.

The Supreme Court has yet again conferred absolute primacy to the contract between the parties and held that what has been agreed on the dotted lines cannot be overlooked, diluted or misinterpreted by anybody at all. The judgments that have laid down that an arbitrator is the master of the factual arena and that interpretation of the contract lies exclusively in the domain of the arbitrator can no longer be mechanically invoked. The factual findings and interpretation of the contract given by the arbitrator can be assailed and set aside at any stage of the proceeding.

The Court was mindful of the unintended consequences of its judgment and cautioned that “curative jurisdiction should not be used to open the floodgates and create a fourth or fifth stage of court intervention in an arbitral award”. However, I apprehend this is precisely what may happen in the coming days. No party wants to be on the losing side, especially when it comes to heavy stake arbitration matters. With the door left ajar by the Supreme Court, there will be many hopefuls trying to push it open. The judgment has given a new lease of life to the matters which were done and dusted, and might provoke a fresh round of litigation by parties.  

This can be partially remedied by expanding the contours of interference under Section 34 of the Act. I have always been a huge proponent of permitting at least one round of review or appeal on substantive merits of the award. There has to be some balance between judicial restraint and judicial interference. The offshoot of such widening of jurisdiction would be curtailment of the need for the Apex Court to examine the merits of the award at the final stage. It might also silence the growing clamour for certainty and finality in the arbitration lifecycle.

I am dissuaded from making predictions about the impact of this judgment on the future of arbitration in India. That said, the arbitration jurisprudence is constantly evolving and the international arbitration community is keeping a close watch on the legislative and judicial developments surrounding arbitration in India. Unsettling as it may seem, it is necessary to evolve and adapt.

Abhishek Gupta is an Advocate practicing before the Supreme Court of India.