SC sets aside arbitral award of Rs 8K Cr in favour of Anil Ambani firm

New Delhi, Apr 10 (PTI) The Supreme Court on Wednesday set aside its own three year old judgment that awarded an Anil Ambani group firm Rs 8,000 crore in a dispute with Delhi Metro and asked the company to return about Rs 2,500 crore it had already received, holding that the previous verdict caused "grave miscarriage of injustice" to a public utility which was saddled with an exorbitant liability.

Allowing the curative plea of the Delhi Metro Rail Corporation (DMRC) against the 2021 judgement, a special bench headed by Chief Justice D Y Chandrachud said the order of the Delhi High Court division bench was a "well-considered decision" and "there was no valid basis" for the Supreme Court to interfere with it.

The interference by the apex court, in its earlier decisions, had resulted in restoring a patently illegal award, it said.

"The judgment of the two-judge Bench of this Court, which interfered with the judgment of the Division Bench of the High Court, has resulted in a miscarriage of justice.

"The Division Bench applied the correct test in holding that the arbitral award suffered from the vice of perversity and patent illegality. The findings of the Division Bench were borne out from the record and were not based on a misappreciation of law or fact. This Court failed, while entertaining the SLP under Article 136, to justify its interference with the well-considered decision of the Division Bench of the High Court," it said.

The decision of this court fails to adduce any justification bearing on any flaws in the manner of exercise of jurisdiction by the high court's division bench under the Arbitration Act, it said.

"By setting aside the judgement of the Division Bench, this Court restored a patently illegal award which saddled a public utility with an exorbitant liability," it said, adding that this warrants the exercise of the power under Article 142 in a curative petition, said the bench which also comprised justices B R Gavai and Surya Kant.

Now, the amount paid by the DMRC to the Reliance Infrastructure firm in pursuance of the award has to be paid back to the PSU.

As per the arbitral award, DAMEPL was entitled to Rs 2782.33 crores plus interest in terms of the concession agreement. This amount had swelled up to Rs 8,009.38 crore by February 14, 2022.

The apex court had on September 9, 2021 upheld the 2017 arbitration award enforceable against DMRC and said there was a disturbing tendency of courts setting aside such awards.

It had quashed the Delhi High Court order that set aside the arbitration award in favour of DAMEPL which pulled out of an agreement to run the Airport Express metro line over safety issues.

Later on November 23, 2021, the top court had dismissed DMRC's plea seeking review of its September 9, 2021 judgement saying no case for review is made out. Aggrieved by this order, DMRC filed a curative plea, the last legal recourse in SC, in 2022 against the dismissal of the review petition.

It is quite rare, especially in commercial matters, that the top court has reversed its two decisions rendered in an appeal and then in review while entertaining a curative plea.

Observing that there was no valid basis for the apex court to interfere under Article 136 of the Constitution (Special leave to appeal by the Supreme Court), the apex court said its interference resulted in restoring a patently illegal award.

"This has caused a grave miscarriage of justice. We have applied the standard of a 'grave miscarriage of justice' in the exceptional circumstances of this case where the process of arbitration has been perverted by the arbitral tribunal to provide an undeserved windfall to DAMEPL," the bench said while allowing the curative petitions.

The SC verdict said the amounts deposited by the DMRC till date shall be refunded and restored the parties to the position in which they were on the date of pronouncement of the Delhi High Court verdict.

"The execution proceedings before the High Court for enforcing the arbitral award must be discontinued and the amounts deposited by the petitioner pursuant to the judgment of this Court shall be refunded. The part of the awarded amount, if any, paid by the petitioner as a result of coercive action is liable to be restored in favour of the petitioner. The orders passed by the High Court in the course of the execution proceedings for enforcing the arbitral award are set aside," the bench said.

"Curative jurisdiction should not be used to open the flood gates and create a fourth or fifth stage of court intervention in an arbitral award under this court’s review jurisdiction or curative jurisdiction, respectively," it said.

The DMRC had challenged the arbitral award on several grounds, including that the notice of October 8, 2012 issued by DAMEPL terminating the concessionaire agreement related to running the airport metro line in the national capital was “illegal”.

In May 2017, an arbitral tribunal ruled in favour of DAMEPL, which had pulled out of the agreement, and accepted its claim that running the operations on the line was not viable due to structural defects in the viaduct through which the trains would pass. PTI