India: Reaffirming Alternate Dispute Resolution – Giving Teeth To The Arbitral Tribunal

In two recent judgments, the Delhi High Court dismissed the challenges to the decisions of Arbitral tribunal terming it as 'unnecessary challenges' and refrained from interfering with the decisions of the tribunal as the same led to immense waste of judicial time and energy. The ratio as laid down by the Hon'ble High Court in the cases - NHAI Vs. M/S Bsc-Rbm-Pati Joint Venture and Delhi Metro Rail Corporation Limited Vs. Delhi Airport Metro Express Private Limited" was a humdinger and has provided a muchneeded check on the unnecessary challenges to the awards especially by the Public Sector Undertakings.

A BRIEF FACTUAL MATRIX OF BOTH THE CASES IS ENUMERATED BELOW:

NHAI VS. M/S BSC-RBM-PATI JOINT VENTURE (THE NHAI CASE)

The matter related to a construction contract awarded by the National Highway Authority of India (NHAI) to a contractor. Disputes arose between the parties regarding the sums payable for the excavation of unsuitable construction material. The Tribunal issued an award against the NHAI in October 2014, directing the parties to adhere to the rates as was enumerated in the contract. NHAI assailed the award under Section 34 of the Arbitration and Conciliation Act 1996(Act). When this challenge was dismissed, NHAI appealed to the Division Bench under Section 37 of the Act.

DELHI METRO RAIL CORPORATION LIMITED (DMRC) VS. DELHI AIRPORT METRO EXPRESS PRIVATE LIMITED (DAMEPL) - (THE DMRC CASE)

The DMRC case is related to the construction and maintenance of a high-speed metro railway in New Delhi. DMRC, a state-owned corporation, and DAMEPL entered into a public–private partnership for the construction and operation of the metro railway. DAMEPL terminated the agreement when the DMRC allegedly failed to cure defects in the Civil Works within the notice period. DMRC disputed the validity of the termination and argued that the agreement was terminated due to other issues with the project and not any defects, and that DMRC had performed all the obligations on its part with respect to the repair and maintenance. The Tribunal passed an award upholding DAMEPL's termination and awarding it damages on May 2017. DMRC made an application to set aside the award under Section 34 of the Act in March 2018.

PERTINENT ISSUES THAT EMERGED FOR CONSIDERATION IN THE PRESENT JUDGMENTS UNDER DISCUSSION

  1. Whether the Court can sit as a Court of appeal and is expected to re-appreciate the entire evidence and reassess the case of the parties?
  2. To what extent can the Court interfere with the award passed by the Tribunal?

CONCLUSION

In both the cases the Hon'ble Court exercised circumspection in interfering with the award made by the Tribunal and held that it was the duty of the Court to see whether the view of the Tribunal is arrived at holistically after appreciation of the facts, pleadings and evidence placed before it. Further, it was held by the Court that if there were two possible views and the Tribunal had taken one of them, Court could not substitute its judgment for the judgment of the Tribunal just because there is a challenge to the award.

In the NHAI case, the Court reiterated the same view and held that the Tribunal was the final arbiter on factual and legal issues, and that errors "which stop short of perversity'' must not be interfered by the court. The Court further went on to hold that as long as the Tribunal's view was "plausible and not merely possible'' the court would not intervene.

The observation of the Hon'ble Court in both the NHAI and DMRC judgments signify the "minimalistic intervention approach" of the Court to applications to set aside arbitral awards since the same is not always filed as a result of an apparent error of law but only as a routine exercise to delay the enforcement of the award. It was further noted in the two judgments that such frivolous challenges not only waste the precious judicial time but also demonstrates the high handedness of the public corporations which have financial might to assail the award on frivolous grounds. In a welcome step in both the cases, the Court awarded costs to the award creditor on the basis that the award debtor had perused a meritless and vexatious set aside application. To sum up, just because a right to challenge the award is provided under the statute it should not be a trend to file meritless and frivolous application to set aside the same simply because the award debtor has the means and financial ability to do so and such practices should be nipped in the bud.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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