India has taken strides globally with a remarkable understanding of the trade nuances to become an impactful global player. Nevertheless, a decision rendered by the Supreme Court on April 10, 2024 using the curative jurisdiction has undermined expectations for timely dispute resolution.
This remarkable decision involved the Delhi Metro Rail Corporation (DMRC), a government company, and implicates the Airport Express Metro-Line, a premier infrastructure project commissioned in New Delhi.
In setting-aside a 2017 arbitral award that repeatedly withstood scrutiny at different levels of appeal (except at the Delhi High Court Division Bench) including by the (same) Supreme Court, the court showed scant regard for timely dispute resolution, effect on investments and principles of due process.
DMRC’s request for a curative hearing on the Metro-Line dispute was the culmination of a string of appeals challenging the execution of an arbitral award issued in 2017 and favouring DAMEPL, the other party to the litigation. The arbitration process started in 2012! For global legal experts, the Court lost an opportunity to showcase an ability to address nuances of abuse of rights when using the right to appeal.
Endless appeals
In indulging the DMRC, this judgment leaves every arbitral award open for endless appeals — an unwise move from a court already bogged down with backlogs. Thus, the judgment deals a blow to India’s goals to be a world-class arbitral hub.
Instead, the court’s propensity to indulge in arbitral-awards endlessly forces Indian companies to arbitrate abroad to resolve disputes in a timely manner. The judgment simply validates the lack of public trust over the judiciary owing to delays.
DMRC’s request for a curative hearing lacked the type of scintillating legal questions usually reserved for the Supreme Court’s consideration. That the Court seized curative jurisdiction — an extraordinary option — over an arbitral award that had attained finality, is surprising. Further, the court did not acknowledge the consequences of the extraordinary delay to execute a 2017 arbitral award.
By the time the court rendered the judgment in 2024, the interest component was nearly twice principal amount, totalling to ₹7,800 crore! Early execution could have averted interest accumulation. The Court seemed unconcerned that, DMRC, a government party, should know or ought to have known that the interest will be paid using tax-payers money.
The inconsistencies
The judgment portrays the Indian judiciary as mired with inconsistencies. That is, one of the justices who has signed-on to the curative judgement which states that the arbitral award is patently illegal had: (i) earlier signed on to a Special Leave Opinion (SLP) from the same court directing the Delhi High Court to expeditiously hear the execution matter; penned an opinion refusing to rehear the same dispute in May, 2022 when DMRC sought a petition against the Delhi High Court’s order to execute the arbitral award; (ii) penned an opinion in September 2022 unequivocally noting that the arbitral award had attained finality.
The government constituted an expert committee to institute a more sophisticated world-class arbitral system in 2023. It is sad that the expert committee did not submit an amicus to the Supreme Court on the matter.
The judgment goes against sound judicial discipline requiring courts to provide clear justifications to overstep stare decisis, which the Court has not convincingly done. It also ignores the clear mandate in the arbitration statute explicitly restraining judicial instincts to (re)appreciate matters of fact on appeal.
International worries
This curative judgment has should rightfully concern international trade experts and the US Trade Representative. The decision does disservice to India’s trade posture. One of the principal tenets of the trade regime of the World Trade Organization, to which India is a signatory, emphasises establishment of sophisticated and timely mechanisms for dispute resolution. The judgement portrays the country as incapable of managing projects with public-private partnership, and signals to the global community that India’s sophistication as a trade partner ends when a dispute begins!
Infrastructural deficit characterizes India’s constraint. Encouraging arguable abuse of process tactics does a disservice to the country.
A recent article by Nobel laureate Michael Spencer with Mohamed-A.EL-Erian, notes India needs to overcome reputational challenges.
Access to international markets entails sophisticated systems – infrastructure, dispute resolution, a reliable judicial process.
The writer is Professor of Law & Director of International Programs, Texas A&M School of Law
This judgment leaves every arbitral award open for endless appeals and deals a blow to India’s ambition to be a world-class arbitral hub