Delhi High Court refuses to entertain DAMEPL challenge to London-seated €4.76 million arbitral award

The Delhi High Court on Wednesday dismissed an appeal by Delhi Airport Metro Express Private Limited (DAMEPL) against an arbitral award passed in a London-seated International Chamber of Commerce (ICC) arbitration [Delhi Airport Metro Express Private Limited (India) v. Construcciones Y Auxiliar De Ferrocarriles & Anr]..A Bench of Justices C Hari Shankar and Om Prakash Shukla held that Indian courts lack jurisdiction under Part I of the Arbitration and Conciliation Act, 1996."Having regard to the totality of circumstances, the evolved position of law, and the clear contractual intent, this Court finds no error in the impugned judgment. Since the seat of arbitration is outside India, the bar contained in Section 2(2) of the Act squarely applies and the jurisdiction of Indian courts is excluded, rendering Part I of the Act inapplicable. The dispute shall be governed by the arbitral proceedings in London as per the ICC Rules, Paris.".The litigation stems from the Airport Metro Express Line project, which connects New Delhi to the Indira Gandhi International Airport. DAMEPL, a special purpose vehicle 95% owned by Reliance Infrastructure Limited, entered into agreements with Spanish manufacturer CAF on June 30, 2008. Both agreements mandated that disputes be resolved via arbitration under the ICC rules.While the contracts were governed by Indian substantive law, the supply contract designated London as the "seat" of arbitration and the other contract stipulated that arbitration "shall take place" in London. In 2014, DAMEPL encashed CAF’s bank guarantee for €4,761,963.50, alleging technical failures regarding noise levels. CAF subsequently invoked arbitration in London, arguing that the retention of these funds was unlawful.The tribunal eventually ruled in favor of CAF, finding that while the trains did not meet noise specifications, DAMEPL failed to prove actual financial loss and must, therefore, refund the €4,761,963.50. DAMEPL challenged the validity of this award in the Delhi High Court, contending that the contract's close connection to India and its governance by Indian law should grant Indian courts supervisory jurisdiction..It contended that since the contracts were executed prior to the Supreme Court’s 2012 decision in BALCO, Indian courts retained jurisdiction under the earlier Bhatia International regime.However, a single-judge rejected this contention, holding that the designation of London as the seat of arbitration, coupled with the adoption of ICC Rules and the express exclusion of Part I in one of the contracts, showed a clear intention to exclude Indian court jurisdiction..Affirming the single-judge’s view, the Division Bench held that the seat of arbitration is the decisive factor for determining supervisory jurisdiction. It held, "The Apex Court has, in a plethora of decisions has consistently emphasized “party autonomy” as the cornerstone of arbitration. Parties have liberty to determine the seat of arbitration, the procedural law governing the arbitration, and the substantive law governing the contract."The Court observed that the two contracts were interlinked and formed part of a composite commercial arrangement and, therefore, had to be read harmoniously.“The designation of London as the seat of arbitration, read with the agreed arbitral framework, unequivocally demonstrates the parties’ intention to exclude Part I of the Act,” the Bench held..DAMEPL was represented by Advocates Anirudh Bakhru, Rishi Agarwal, Tarini Khurana and Shruti Arora.CAF was represented by Advocates Shantanu Tyagi, Aishani Das and Balapragatha Moorthy..[Read Judgment].Follow Bar and Bench channel on WhatsAppDownload the Bar and Bench Mobile app for instant access to the latest legal news.