Curative relief for Delhi Metro

The SC has overturned its 2021 judgment that upheld an arbitral award in a commercial dispute, sparing the govt from having to cough up Rs.8,000 cr. What is the case, and history of the SC’s curative jurisdiction?

The Supreme Court on 10 April 2024 ruled that the Delhi Metro Rail Corporation (Hereinafter referred to as "DMRC") will not have to pay nearly Rs.8,000 crore to the Delhi Airport Metro Express Private Limited (Hereinafter referred to as "DAMEPL"), an Anil-Ambani owned Reliance Infrastructure company, which was awarded by a 2017 arbitral award.?

The award, which was in favour of the DAMEPL, had granted it damages to the tune of Rs 2,782.3 crore plus interest.?

The ruling overturned the Supreme Court’s September 2021 judgment that upheld the arbitral award. A month after the 2021 judgment, the court had dismissed a plea seeking a review-the final step in the appeal process after which a ruling of the highest court attains finality.

The court has now exercised its “extraordinary powers” in a curative writ petition to correct a “fundamental error” in its judgment.

The SC verdict, which comes at a time when the government is making a concerted attempt to ramp up physical infrastructure across the country, is significant for many reasons.

History of the case?

This episode also holds lessons for the larger policy-making and regulatory apparatus in the country. Consider the timeline. In 2008, the DMRC entered into a public private partnership with DAMEPL, a consortium led by Reliance Infrastructure Ltd, for the construction, operation, and maintenance of the Delhi Airport Metro Express. While DMRC acquired the land and bore the cost of construction, the consortium was to design, install, and commission the railway systems in two years. Thereafter, until 2038, DAMEPL was to maintain the line and manage its operations, while paying a “concession fee” to DMRC.

However, a year after the line became operational, the consortium asked DMRC if it could defer payment of the concession fee. Among the reasons cited were delays in providing access to the stations by DMRC, and that retail activity had not picked up on the line. This triggered a dispute between the consortium and the Union Ministry of Urban Development.

Subsequently, barely a year into its operations, the line was shut following a complaint from DAMEPL that it was “unsafe to operate”. The? consortium triggered a termination of its agreement alleging there were technical problems in the civil structure of the Metro corridor, for which DMRC was responsible as per the agreement.

In 2012, the Reliance Infrastructure company terminated the agreement stating that the defects in the metro line had not been corrected in the “cure period”, even though certain repairs had been completed. This led to DMRC invoking the arbitration clause.

Before operations were finally handed over to DMRC in June 2013, DAMEPL and DMRC made a joint application before the Commissioner of Metro Railway Safety for reopening the line. While the line started functioning again, the government and Reliance began a battle before an arbitration tribunal for losses due to cancellation of the agreement.

Rulings of courts

In 2017, the panel of three arbitrators decided in favour of Reliance and ordered DMRC to pay nearly Rs.8,000 crore. This included termination payment of Rs.2,782.33 crore, interest to the tune of 11% bank guarantees, and expenses incurred in operating the Metro for a few months between the decision to terminate the agreement and the date on which operations were handed over to DMRC.

When the consortium sought to enforce the award, DMRC moved the Delhi High Court. A single judge Bench of the HC refused to interfere with the award, and directed DMRC to deposit 75% of the award in an escrow account.

The government then moved an appeal before a two-judge (division) Bench of the High Court. In 2019, the division Bench overturned the arbitral award, ruling in favour of DMRC. The Bench held that the tribunal had not considered some key facts, and had left some ambiguity in interpreting when the termination of the agreement took place.

This led DAMEPL to approach the Supreme Court against the High Court verdict. The SC heard the case, and in September 2021 reversed the HC verdict. A Bench comprising Justices L Nageswara Rao and S Ravindra Bhat underlined that courts must exercise restraint when interfering with arbitral awards.

This is crucial, since arbitration is an institutionalised alternative form of dispute resolution. It is devised and regulated by a 1996 statute to ensure speedy disposal of cases, especially commercial matters which suffer due to delays in the judicial system. The Legislation and a plethora of SC judgments underline this aspect of minimum judicial interference with arbitral awards.

In November 2021, the SC dismissed a review petition against its judgment. Almost eight months later, DMRC filed a curative writ petition, the last resort to correct a judgment of the Supreme Court.

Curative jurisdiction?

A curative writ petition as a layer of appeal against a Supreme Court decision is not prescribed in the Constitution. It is a judicial innovation, designed for correcting “grave injustices” in a ruling of the county’s top court.

The SC first articulated the concept of curative writ in Rupa Ashok Hurra Vs Ashok Hurra (2002). If there was a significant miscarriage of justice due to a final decision of the Supreme Court, could the court still correct it? One the one hand was the issue of finality and closure to a case, and on the other hand was the substantive question of rendering justice in its true sense. In answering this question, the SC said that its “concern for rendering justice in a cause is not less important than the principle of finality of its judgment”.

However, curative writs are sparingly used. There are narrow, mostly procedural grounds that permit the filing of a curative writ. A claim must be made that principles of natural justice were not allowed-for example, that a party was not heard, or that a judge was biased, or had a conflict of interest. These petitions need to be approved by a senior advocate designated by the court.

Curative writs are filed mostly in death penalty cases. The SC in the Yakub Memon case (2015) and the Delhi gang rape convicts case (2020) dismissed curative writs challenging death sentences. In 2023, in the Bhopal gas tragedy case, the SC refused to exercise its curative powers to enhance the compensation provided to victims that was deemed grossly inadequate.

After the judgment?

The SC notes that the division bench of the high court had applied the correct test when it held the arbitral award to be “perverse, irrational and patently illegal”. In fact, the award had “overlooked crucial facts and evidence on record” central to the determination of the issues before it. This led to an “undeserved windfall” for a private firm at the expense of the public entity which serves lakhs of commuters every day.

Such a long drawn out resolution process will only undermine the confidence of private capital when it comes to greenfield infrastructure projects. Such delays block time and capital. Resolution of business disputes should be carried out in a timely manner. In fact, disputes such as these underline the need for an independent regulator.

The restoration of the 2019 position means that DMRC does not have to pay the arbitral award. About Rs.2,600 crore that DMRC had deposited with the High Court in a escrow account will be restored

Allowing a curative petition at the government’s instance almost two and a half years after its final verdict marks a significant moment in the way the court has exercised its vast powers. Lawmakers often argue for judicial restraint, especially with regard to the exercise of powers that the court has given to itself by going beyond the letter of the Constitution. While the government had high stakes in this case, such exercise of the curative jurisdiction could have a bearing on investor confidence.

After all, the Court has acknowledged that it “erred in interfering with the decision of the Division Bench of the High Court,” and “caused a miscarriage of justice”. Given expectations that the country is on the cusp of an uptick in the investment cycle, systems and processes have to be put in place to guard against such a miscarriage and the high toll it takes on the system.

Justice Rao and Bhat who delivered the 2021 verdict and dismissed the review are now retired.