Introduction and Background
Recently, the Supreme Court (“SC”) in the case of Delhi Metro Rail Corporation Ltd. v. Delhi Airport Metro Express Pvt. Ltd. exercised its curative jurisdiction to set aside the arbitral award rendered in the matter between Delhi Metro Rail Corporation (“DMRC”) and Delhi Airport Metro Express Pvt. Ltd. (“DAMEPL”).
DMRC and DAMEPL had signed a concession agreement in 2008 (“Agreement”) for developing, managing, and maintaining the Delhi Airport Metro Express Ltd. (“AMEL”). According to the terms of the Agreement, DAMEPL was granted sole rights to finance, design, procure, and install AMEL’s railway systems until 2038, while DMRC was liable to secure clearances and bear the costs of land acquisition. In 2012, conflicts arose between DMRC and DAMEPL alleged breach of the Agreement.
DAMEPL sent a notice to DMRC requiring the correction of the several defects within a period of ninety days. According to the terms of the Agreement, especially Clause 29.5.1(i), DAMEPL had the right of Termination if DMRC failed to address the breach or make adequate progress in doing so within ninety days of receiving the notice. This clause read, “The Concessionaire may after giving 90 (ninety) days’ notice in writing to DMRC terminate this Agreement upon the occurrence and continuation of any of the following events (each a “DMRC Event of Default”), ……….
(i) DMRC is in breach of this Agreement and such breach has a Material Adverse Effect on the Concessionaire and DMRC has failed to cure such breach or take effective steps for curing such breach within 90 (ninety) days of receipt of notice in this behalf from the Concessionaire.”
As DMRC did not cure the defects within the specified timeframe, DAMEPL proceeded to terminate the Agreement. This was challenged by DMRC by initiating arbitration proceedings before an arbitral tribunal consisting of three engineers. DMRC argued that it had taken effective measures to rectify the defects, hence the Termination was unjustified. The arbitral tribunal delivered a unanimous award in 2017 in favor of DAMEPL, the monetary value of which amounted to around 8000 crore rupees.
Aggrieved by this decision, DMRC approached the Delhi HC under Section 34 of the Arbitration and Conciliation Act, 1996 (“Act”), with the plea of setting aside the award. A single-judge bench of the Delhi HC dismissed the petition, but upon an appeal under Section 37 of the Act, the division bench of the Delhi High Court partly set aside the award. This prompted DAMEPL to file a Special Leave Petition (“SLP”) to the SC. The SLP was allowed, which led to the restoration of the arbitral award. Subsequently, DMRC filed a review petition, which was dismissed by the SC. As a last resort, DMRC then initiated a Curative Petition.
In this regard, this article seeks to discuss the ramifications of the SC’s decision, examining its legal propriety and its potential consequences concerning judicial intervention, the finality of the award, and party autonomy. It argues that the decision deviates from the established principles under the Act and expands the scope of patent illegality. Highlighting its potential to undermine India’s arbitration ecosystem, the article emphasizes the need for judicial restraint to maintain arbitration’s efficiency, integrity, and appeal.
Curative Petitions: Analyzing the Jurisdictional Boundaries and Misuse
The concept of curative petitions was established in 2002 by the SC in Rupa Ashok Hurra v. Ashok Hurra (“Ashok case”) by invoking its inherent powers under Articles 129 and 142 of the Indian Constitution. A Curative Petition is the final remedy available to a litigant that can be resorted to in cases where the review petition is rejected by circulation, that is, without a formal hearing in the SC. However, as held in the Ashok case, it has to be admitted sparingly, only in the rarest of rare cases which involve a serious miscarriage of justice. A non-exhaustive list of such miscarriages includes a violation of the principles of natural justice, abuse of the court’s process, and any other instance causing serious prejudice to a party.
The claim that the present case falls within the threshold of this miscarriage is questionable. As per the decision, the Curative petition was held maintainable as the decision in the SLP led to the restoration of a patently illegal award which had the effect of saddling a public utility with an exorbitant liability and resulted in miscarriage of justice [¶68].
The problematic aspect of this position is that it significantly lowers the threshold for the maintainability of Curative petitions, deviating from the standards laid down in the Ashok case. Adopting this rationale implies that Curative petitions can be accepted in all cases involving similar awards against public utility undertakings. In the author’s view, this is not the correct approach since it would vitiate the very purpose of Curative petitions, which is to compensate for a gross miscarriage of justice, rather than to prevent the passing of unfavorable awards. The case, having gone through several stages of proceedings before reaching the curative stage, had been adequately adjudicated upon. It thus fell outside the limited jurisdiction of admitting a curative petition by the SC. Therefore, by undertaking a detailed examination of the merits and hearing the matter, the SC has overstepped its jurisdiction.
Even assuming that the curative petition is maintainable against an arbitral award – the grounds-drawing from Ashok Hurra case-would likely be bias on the part of the arbitrator(s), lack of jurisdiction, violation of natural justice principles and so on. They cannot by any stretch of imagination be extended to permit reappreciation of merits of the dispute, as was done in the present case
Judicial Intervention in Arbitration: A Violation of Party Autonomy?
The exercise of the power of setting aside an arbitral award under curative petition also fails to meet the threshold specified under Sections 34 and 37 of the Act. Section 34 enumerates certain grounds on which an award can be set aside. These include situations that cause prejudice to either party, such as inadequate notice given to the party, an invalid arbitration agreement, incapacity of the party, and so on. Section 37 enlists outcomes on which an appeal can be preferred. As held in the Project Director, National Highways Authority of India v. M. Hakeem, these provisions have a narrow scope and need to be strictly interpreted. Paragraph 21 of the judgment held that they do not permit judicial authorities to reexamine the merits of the case.
Additionally, as per Section 34 of the Act, even evidence cannot be reappreciated. This has been reiterated in a plethora of cases including paragraph 31 of the 2025 Bombay High Court decision in Union of India v. Emami Agrotech Limited. Moreover, Section 5 of the Act provides for minimum judicial intervention, except in cases explicitly specified by the Act. Since the curative petition does not fall within the scope of the limited grounds specified for judicial intervention under Sections 34 and 37 of the Act, the SC is not justified in setting aside the award.
Additionally, judicial intervention violates the fundamental tenets of arbitration, which includes party autonomy, confidentiality and cost-efficient resolution of disputes. This is because by interfering with arbitral awards, the court deviates from the dispute resolution method envisaged by parties, discloses confidential information through public hearings, and contributes to excessive delays and increased costs. For instance, the curative petition amounted to a fifth round of adjudication, which considerably delayed the enforcement of the arbitral award delivered around seven years ago. Ironically, the importance of quick enforcement was emphasized by the SC itself while hearing the SLP in this case. It is important to note here that not only a curative petition but also an SLP under Article 136 of the Indian Constitution (especially in the context of a further appeal after exhausting the rights under Section 37 of the Act) has to be used sparingly, only in exceptional circumstances. By allowing a SLP followed by a subsequent curative petition, the SC, in this case, has exceeded its jurisdiction and delayed the enforcement of the arbitration award.
Examining the Patent Illegality Angle: Expanding Judicial Oversight Beyond Limits
An important consideration that the SC factored in when discussing the contours of Section 34 in this case is the concept of patent illegality enshrined under Section 34(2)(a) of the Act. As explained in Ssangyong Engineering and Construction Co. Ltd. v. The National Highways Authority of India and Associate Builders v. Delhi Development Authority, patent illegality is attracted when arbitrators construe the contract in a manner that deviates from the reasonable person standard. It is also invoked when the decision of the arbitrators is based on irrelevant or insufficient evidence, in breach of the provisions of the Act, or in violation of the core principles of natural justice. These grounds have not been fulfilled in the present case.
The SC stated that the tribunal had failed to correctly interpret the Termination clause by not considering the substantial progress made in rectifying the defects. However, this observation is incorrect because the tribunal considered the progress [ see ¶ 34 of award quoted in ¶ 57 of judgement] but differed factually from the SC by holding that progress had not been made. The situation is the same when it comes to the consideration of the Commissioner of Metro Railway Safety (“CMRS”) certificate. The SC in this judgment has observed that the Tribunal has failed to consider the CMRS certificate while deciding whether sufficient progress in rectifying defects had been made. However, this observation is incorrect because the Tribunal analysed the CMRS certificate in detail [¶78 of judgement] and reached its conclusion because the CMRS certificate explicitly imposed conditions of rigorous monitoring and speed restrictions, thus showing its cautious approach and indicating that the defects had not been substantially corrected. This is especially in light of the project’s very purpose being that of high-speed connectivity, which did not justify speed restrictions unless there were material defects that did not permit high-speed operations due to safety concerns. This clearly indicates that sufficient steps had not been taken by DMRC and the Tribunal was justified in reaching its conclusion. Therefore, the SC, while reconsidering the merits of this dispute and revisiting the evidence, has set aside the award on factual grounds by incorrectly reading it into the garb of patent illegality. The effect of this decision thus is the expansion of the scope of patent illegality under Section 34(2)(a) of the Act, which will operate as a bad precedent due to the excessive judicial interference it authorizes.
Potential Impacts
This decision threatens to erode the finality and integrity of arbitration as a method of resolving disputes, as it implies the intervention of courts even in the absence of the specified grounds clearly laid down under the Act. This may deter parties from choosing arbitration because of prolonged litigation and uncertainty, thus making it less attractive for speedy and confidential resolution of disputes.
In addition, in expanding the scope of patent illegality, the ruling aids greater judicial supervision over arbitral awards. It may further encourage disappointed or aggrieved parties to resort to courts for greater redress after arbitration, bringing about delays and higher costs, contradicting the fundamental goals of arbitration.
The liberalisation of the limited use of curative petitions may potentially open the floodgates of litigation with litigants attempting to avail this last resort even in cases that do not call for the exercise of this right. Eventually, this precedence would upset the balance between judicial regulation and arbitral independence, adversely influencing the confidence of domestic as well as foreign investors in India’s arbitration regime.
The recently introduced Arbitration and Conciliation (Amendment) Bill, 2024, explicitly aims to reduce judicial intervention through the incorporation of detailed provisions to that effect. These provisions include Section 9A which enables emergency arbitrators to facilitate the grant of interim measures prior to the constitution of the arbitral tribunal and Section 34A which proposes the establishment of appellate arbitral tribunals, allowing parties to challenge awards before these tribunals rather than directly approaching the courts.
Moreover, even international practice aligns with this position. For example, Article 5 of the UNCITRAL Model Law restricts judicial interference to only those provisions that explicitly permit the same. The position is the same in the United Kingdom where courts are generally reluctant to interfere in arbitration, unless serious injustice is caused under Section 68 of the English Arbitration Act. This was upheld in the UMS Holding Limited v. Great Station Properties SA case. Moreover, jurisdictions like Sweden, and Switzerland majorly uphold a pro-arbitration approach, whereas others including France, Netherlands, Austria, and Germany, permit limited judicial interference in matters necessitating the same such as the passage of interim orders. Institutional rules such as those of the LCIA and the ICSID also follow the latter approach. Therefore, a global analysis clearly reveals the accepted international best practice of limiting judicial interference unless extremely necessary. This questions the relevance and viability of this decision, especially in light of the legal developments such as the introduction of amendment bill in the aftermath of this judgment.
In fact, the impact of this decision is visible through subsequent cases that have been decided in the past few months. There has been a frequent resort to the invocation of the ground of patent illegality to set aside arbitral awards, as done in cases such as Ashok Thakur v. The State of Himachal Pradesh, The State of Tripura v. Sri Binode Bihari Das Contractor, Union of India v. Reliance Industries Limited, and Haldia Development Authority v. Konarak Enterprise, among others. Interestingly, the common thread between these cases is their reference to the DMRC v. DAMEPL decision. This trend risks developing the tendency of excessive judicial interference in arbitration, thus deviating from its core pillars.
The Positive Outlook
With respect to the admissibility of Curative Petitions, the DMRC v. DAMEPL decision raised apprehension acceptance of such petitions in the future against arbitral awards. However, the SC has very recently in the In Re: Interplay between Arbitration Agreements v. Nikhil Nayyar case, passed an order on February 28, 2025, stating that the Curative Petition filed in that case is not maintainable because the threshold laid down in the Ashok case is not fulfilled. This order presents an optimistic outlook for the future since it reinforces the exceptional nature of Curative Petitions in arbitration, thus upholding the integrity and efficacy of the arbitration process. These cases posit an amalgamation of uncertainty, and it will be interesting to observe the course that this decision adopts in the future.
Conclusion
This judgment significantly hampers India’s ambition to become a global arbitration hub due to the skepticism it creates about the effectiveness, integrity, and finality of the arbitral process and mechanism. Ironically, it comes at a juncture when the Legislature is endeavoring to promote the inculcation of the arbitration culture by reducing the burden on traditional court mechanisms, as is evident from the introduction of the new Bill. With alternative dispute resolution gradually emerging as the new way of life in the twenty-first century, this decision necessitates reconsideration to safeguard the credibility and appeal of India’s arbitration landscape and ensure that it aligns with global standards and investor expectations.
Author(s)
Manav Pamnani
Student at NALSAR, Hyderabad