| Headnote |
Curative Petition – Curative Jurisdiction may be invoked if there is a miscarriage of justice: Held: The Supreme Court laid down an overarching principle in Rupa Hurra v. Ashok Hurra [2002] 2 SCR 1006 that the Court may entertain a curative petition to (i) prevent abuse of its process; and (ii) to cure a gross miscarriage of justice – The enumeration of the situations in which the curative jurisdiction can be exercised is not intended to be exhaustive – The Court went on to lay down certain procedural requirements to entertain a curative petition such as a certificate by a Senior Advocate about fulfilling of the requirements. [Paras 33 and 34] Arbitration and Conciliation Act 1996 – s.34 – Scope of interference of courts with arbitral awards:Held: Section 34 of the Arbitration Act delineates the grounds for setting aside an arbitral award – In addition to the grounds on which an arbitral award can be assailed laid down in section 34(2), there is another ground for challenge against domestic awards, such as the award in the present case – Under Section 34(2-A) of the Arbitration Act, a domestic award may be set aside if the Court finds that it is vitiated by ‘patent illegality’ appearing on the face of the award. [Paras 36, 37] Arbitration and Conciliation Act 1996 – s.34 – Setting aside of domestic award – Ground of patent illegality:Held: The ground of patent illegality is available for setting aside a domestic award, if the decision of the arbitrator is found to be perverse, or so irrational that no reasonable person would have arrived at it; or the construction of the contract is such that no fair or reasonable person would take; or, that the view of the arbitrator is not even a possible view – A ‘finding’ based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside under the head of ‘patent illegality’ – An award without reasons would suffer from patent illegality – The arbitrator commits a patent illegality by deciding a matter not within his jurisdiction or violating a fundamental principle of natural justice. [Para 40] Constitution of India – Art.136 – Arbitration and Conciliation Act 1996 – ss. 34, 37 – Remedy u/Art. 136 against a decision rendered in appeal u/s. 37 of 1996 Act:Held: In the statutory scheme of the Arbitration Act, a recourse to s.37 is the only appellate remedy available against a decision u/s. 34 – The Constitution, however, provides the parties with a remedy u/Art. 136 against a decision rendered in appeal u/s. 37 – This is the discretionary and exceptional jurisdiction of the Supreme Court to grant Special Leave to Appeal – While adjudicating the merits of a Special Leave Petition and exercising its power u/Art. 136, this Court must interfere sparingly and only when exceptional circumstances exist, justifying the exercise of this Court’s discretion – The Court must apply settled principles of judicial review such as whether the findings of the High Court are borne out from the record or are based on a misappreciation of law and fact – In particular, this Court must be slow in interfering with a judgement delivered in exercise of powers u/s. 37 unless there is an error in exercising of the jurisdiction by the Court u/s. 37. [Paras 42 and 43] Curative Petition – The petitioner-DMRC and DAMEPL (a special purpose vehicle incorporated by a consortium) entered into the Concession Agreement (2008 agreement) – DAMPEL was to undertake among other things, the design, supply, installation, testing and commissioning of railway system – Dispute arose between the parties – DAMEPL alleged that the line was unsafe to operate – Operations were stopped – DAMEPL issued a notice to DMRC listing defects attributable to faulty construction and deficient designs which affected project safety – DMRC was requested to cure the defects within 90 days from the date of this notice – Thereafter, DAMPEL issued another notice terminating the 2008 agreement as defects were not cured within 90 days – Arbitral Tribunal passed award in favour of DAMPEL – Single Judge of the High Court dismissed the petition filed u/s. 34 of 1996 Act – Division Bench of the High Court allowed the appeal u/s. 37 of 1996 Act in part – DAMEPL moved a SLP u/Art. 136 of the Constitution – A two-judge bench of the Supreme Court allowed the appeal, and restored the award – Correctness:Held: Commissioner of Metro Railway Safety (CMRS), after inquiry and inspection had issued sanction for running of the metro line – In the instant case, the Division Bench of the High Court found the award to be perverse, irrational and patently illegal since it ignored the vital evidence of CMRS certification in deciding the validity of termination – It underlined the significance of the CMRS sanction under the Metro Railways (Operation and Maintenance) Act, 2002 – Also, clause 29.5.1(i) of the 2008 agreement entitles the concessionaire to terminate the agreement if DMRC “failed to cure such breach or take effective steps for curing such breach” within the cure period – Pertinently, the clause uses two separate phrases, “cure” and “effective steps to cure” – The Tribunal found that since certain defects remained after the cure period, this was indicative of the fact that the defects were not cured and that no effective steps were taken – The Tribunal fails to explain what amounts to an ‘effective step’ and how the steps taken by DMRC were not effective, within the meaning of the phrase – Parties clearly intended that once a cure notice was served on a party, it would be open to them to either cure defects or to initiate effective steps, even if they could not culminate into the complete curing of defects within the cure period – Incremental progress, even if it does not lead to complete cure, is an acceptable course of action to prevent termination according to the 2008 Agreement – The decisions of the Single Judge of the High Court and this Court (two-judge bench) are similarly silent on the aspect of “effective steps” – The judgment of this Court also never tested the relevance of the CMRS certificate vis-à-vis “effective steps” – Admittedly, some of the defects were cured in their entirety and steps were taken by DMRC to cure the remainders – DMRC did take certain steps to alleviate DAMEPL’s concerns so as to warrant this change of position – There is no explanation forthcoming in the award about why none of these steps initiated during the cure period were ‘effective steps’ – This gap in reasoning stems from the arbitral tribunal wrongly separating the issue of termination and the CMRS certificate – The structure and safety of the project, as certified by the CMRS, were thus relevant before the Tribunal, making the CMRS certificate a vital piece of evidence in deciding the issue – The CMRS certificate was relevant evidence about the safety of the structure – The arbitral tribunal erroneously rejected the CMRS sanction as irrelevant – The Division Bench correctly held that the arbitral tribunal ignored vital evidence on the record, resulting in perversity and patent illegality, warranting interference – The conclusions of the Division Bench are, thus, in line with the settled precedent including the decisions in Associate Builders and Ssangyong – 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 – Thus, Curative Petitions allowed. [Paras 44, 48, 49, 50, 53, 54, 58, 67, 68] |
