How final is final? A recent decision by India’s Supreme Court has set out the special conditions in which an arbitral award can be reviewed because of a miscarriage of justice

The Supreme Court’s April 2024 decision in Delhi Metro Rail Corporation Ltd. v Delhi Airport Metro Express Pvt. Ltd. has reignited a question familiar to everyone that has been tracking Indian jurisprudence on review of arbitral awards over the years: how final is final?

The decision, passed by the Supreme Court in a fifth round of scrutiny over an arbitral award in a rarely used mechanism called a “curative petition”, overturned an award of over INR 30.37 billion (USD 363.5 million) despite two different benches of the very same court upholding the award.

The dispute, first referred to arbitration in 2013, arose out of a 2008 contract between Indian state-owned Delhi Metro Rail Corporation (DMRC) and special purpose vehicle (SPV) Delhi Airport Metro Express (DAME) under which DAME was to build, operate, and maintain a metro line connecting an airport, a railway station, and some other points in the city of New Delhi. DAME was a consortium of Indian Reliance Infrastructure Limited and Spanish Construcciones Y Auxiliar de Ferrocarriles SA, Spain.

In 2012, DAME identified eight defects attributable to DMRC, alleging that this affected DAME’s ability to perform its obligations under the contract safely. DAME asked DMRC to cure these effects within ninety days, failing which it would be entitled to terminate the agreement. DAME thereafter terminated the agreement citing non-compliance with the requirement to cure the breach in ninety days. Following a failed attempt at conciliation, DMRC initiated arbitration in October 2012.

In May 2017, a three-member arbitral tribunal issued a unanimous award in favour of DAME, holding that it was entitled to a termination payment, expenses incurred, bank guarantee refunds, and a concession fee totalling over INR 30.37bn (USD 363.5m) along with interest on these sums.

DMRC challenged this award before the Delhi High Court under Section 34 of the Arbitration & Conciliation Act, 1996 (Arbitration Act). Section 34 allows a court to set aside an arbitral award under a very limited set of circumstances. The court dismissed this challenge.

DMRC then filed an appeal before a two-judge bench of the same high court, which allowed the appeal in part. DAME then took the matter before the Supreme Court, seeking special leave to appeal under Article 136 of the Indian constitution. The court allowed this appeal, found in DAME’s favour, and restored the original arbitral award.

Launching a final appeal based on a miscarriage of justice

DMRC then filed a review petition, which the Supreme Court dismissed. Finally, again, the DMRC filed a curative petition following the review petition’s dismissal. A curative petition, which the court hears under its ‘inherent power’ to do justice under Articles 137 and 142 of the Indian Constitution, can be entertained if there is a ‘miscarriage of justice’.

This is a procedural innovation devised by the court in its 2002 decision in Rupa Hurra v. Ashok Hurra. The philosophical underpinning of such an exercise is that the principle of finality is less important than rendering justice, according to the court’s observation in Hurra.

Elaborating on the scope of a court’s interference with an arbitrator’s award, the Supreme Court, in DMRC’s case, acknowledged that interpretation of a contract was exclusively within the domain of the arbitrator. However, it said that construction of a contract in a manner that no “fair-minded or reasonable person” would adopt would give rise to a “patent illegality”. 

In DMRC’s case, the court disagreed with the arbitral tribunal’s construction of the contract, particularly the terms governing the obligation to cure a breach. The court found that the clause did not require DMRC to “cure” a breach within ninety days, it just required DMRC to “take effective steps” to cure a breach within ninety days. The court said that the tribunal did not identify how the steps taken by DMRC to cure the breach were not effective, despite the breach not actually being cured within ninety days.

Therefore, the court said, the tribunal had reached a conclusion which was not possible for “any reasonable body of persons to arrive at”. The court said that a grave miscarriage of justice had been caused, requiring it to exercise its power in this curative petition, and set aside the arbitral award, halting enforcement proceedings.

This exercise of curative jurisdiction by the court, at a fifth review of an arbitral award, raises more questions on the finality of an award and how far a court can interfere with an interpretation of a contract adopted by an arbitral tribunal. The judgment made clear that this curative jurisdiction cannot be adopted as a matter of ordinary course and should not be used to open the floodgates and create a fourth or fifth stage of judicial intervention after an arbitral award.

Only time will tell whether this will remain a one-off incident designed to remedy this particular ‘miscarriage of justice’ or will be used by recalcitrant respondents going forward to re-argue decided issues and delay enforcement. In the meanwhile, investors looking to design arbitration clauses in their contracts should add this to the list of jurisdiction risks in choosing an India-seated arbitration.