Opinion Express View: Back on track

In a welcome respite for the Delhi Metro Rail Corporation, the Supreme Court, on Wednesday, set aside its 2021 judgment that had upheld an arbitral award against the Corporation. The award, which was in favour of the Delhi Airport Metro Express Pvt Ltd, a Reliance Infrastructure firm, had granted it damages to the tune of Rs 2,782.3 crore plus interest. 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. For one, it points to the manner in which processes and systems can be manipulated. 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.

This episode also holds lessons for the larger policy-making and regulatory apparatus in the country. Consider the timeline. This issue dates back to 2008 when the Delhi Metro Rail Corporation and Reliance Infrastructure (Delhi Airport Metro Express Pvt Ltd) entered into an agreement for the Delhi Airport Express. 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. In 2017, the three-member tribunal passed an award in favour of DAMEPL. Thereafter, Delhi High Court upheld the award, but a division bench of the high court set it aside. And in 2021, the Supreme Court upheld the arbitral award, which it set aside three years later. 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.

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Given that “a patently illegal award” had “saddled a public utility with an exorbitant liability,” the Court has done well to right the wrong. However, this episode also holds a lesson for court interventions in the future. 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.