“The role of arbitration is to provide quick, effective, and just resolution to disputes, but it must do so without judicial overreach. Yet, when an award threatens to undermine the sanctity of contracts or erode public trust, courts must intervene — not to dominate, but to restore fairness.” — Renowned Arbitration Scholar, Prof. Sundar Iyer.
The long-standing legal battle surrounding the Delhi Airport Metro Line, which began as an ambitious public-private partnership in 2007, culminated in 2024 with a historic yet controversial decision by the Supreme Court of India. This case has left an indelible mark on arbitration law, primarily by redefining the parameters of judicial intervention and the scope of judicial review under Indian arbitration laws.
This article delves into the legal complexities and highlights the pivotal moments in the dispute between DMRC and Reliance Infrastructure-led Consortium (Contractor) — a case1 that turned on the interpretation of contractual clauses and the curative jurisdiction of the Indian apex judiciary. Not only did this case have significant financial implications, but it also established important precedents for future arbitrations, making it one of the most talked about and criticised, judicial rulings in recent years.
The beginning of a promising partnership
In 2007, the Delhi Airport Metro Line project was initiated as a public-private partnership between Delhi Metro Rail Corporation (DMRC) and a consortium led by Reliance Infrastructure. The project was vital to improving connectivity to Delhi’s Airport, but it soon became the subject of an arbitration dispute that would drag on for over a decade.
The seeds of discord were sown between the parties in 2012, concerning design and quality defects over the work carried out by the Corporation. The contractor pointed out and notified the Corporation of the defects being of such a nature that eventually impacted the speed at which the metro trains could operate and its eventual operability. Following inspections by government authorities and technical experts, the line was deemed unsafe, bringing operations to a halt. Reliance Infrastructure put DMRC on notice, invoking a cure period for rectifying the defaults under the contract, failing which the project would have faced termination.
The arbitration proceedings: A turning point
After the notice by the contractor, some steps were taken to cure the defects notified. However, on account of the defects not being cured to the satisfaction of the contractor, the contract was terminated. Eventually, the contractor sought payments for termination as per the terms of the contract from the Corporation. The customary conciliation process between the parties to sort out their differences resulted in a stalemate and eventually, the parties were referred to Arbitration in 2013, which had expert engineers constituting the coram. The contractor in the public interest, did operate the metro line acting as an agent of the Delhi Metro Rail Corporation, which was done at the trains operating at lower speeds, however, that also eventually ended with the handing over of the line to the Corporation after some time, alleging non-payment of monies from the revenues as per terms of contract.
The burning issue between the parties in the arbitration revolved around whether the termination notice issued by the contractor was legal and whether it met the requirements envisaged under the contract. The contractor demanded that basis of the agreement, the Corporation was liable to deposit monies into an escrow account for payments on account of termination as well as revenues, since the project was handed over.
The arbitration proceedings concluded in favour of the contractor, with the termination upheld and the majority of the contractor’s claims allowed. The Corporation’s objections to this award sparked the first round of litigation in the Delhi High Court under Section 342 of the Arbitration and Conciliation Act, 19963.
Round one: DMRC’s challenge under Section 34
Round 1 of the ACL — “Award Challenge League” started here at Delhi High Court before a Single Judge under the narrow and strict confines of Section 34 of the Arbitration and Conciliation Act, 1996 (Arbitration Act).
The Corporation surmounted a significant challenge, that the interpretation and construction of the contractual clauses were erroneous by the Arbitration Tribunal. The thrust of the challenge was that the claims were passed in favour of the constructor while completely overseeing crucial evidence, which fell within the ambit of being against the public policy of India. Another interesting point raised by the Corporation was that the constructor was bound by estoppel owing to its conduct where the metro line was functioning successfully for 5 months under its operation before being handed over, which evinced that no defect came under the category of being cured that could have resulted in the termination and the claims sought thereto.
Per contra, it was the case of the contractor that the termination notice itself showed several latent/inherent defects which were non-exhaustive and even the correspondences as well as the report of technical consultants proved the same. Be that as it may, the Arbitral Tribunal came to a factual finding in favour of the contractor that there were indeed defects which were not cured within the period as under termination notice, and thus, the termination was rightful and thus, the consequent financial liability had to be made in favour of the contractor.
Defending the monetary and declaratory award in its favour, the contractor was of the view that the award warranted no interference under Section 34 of the Arbitration Act. Moreso, relying on settled principles of law that factual issues could not be raised at the stage of objections, certainly if not raised while adjudication of the claim. It was sought to be argued that once the Arbitral Tribunal declared that there was a breach of the contract that entitled termination, the consequence as claimed for the material adversities and the pecuniary compensation had to flow as “termination payment” as stipulated under the contract.
The Corporation’s contentions of poking at the merits of the award were countered and the Single Judge of the Delhi High Court right across all issues held that the view of the Arbitral Tribunal was a plausible one. Thus, in the jurisdiction under Section 34 of the Arbitration Act, the Judge was not of the view to warrant any interference as it revolved on facts which were not of any grave errors. Reiterating the settled principles of law that the Court does not sit in appeal over the award in a Section 34 of the Arbitration Act proceeding and with there being a plausible view taken by the Arbitral Tribunal it was not correct for the Court to substitute its views.
The Delhi High Court dismissed DMRC’s challenge under Section 34 of the Arbitration Act, citing the principle that courts should not act as appellate forums in arbitral matters.4 The Court emphasised that unless there were grave errors of law or fact, it would not interfere with the Arbitral Tribunal’s findings. As a result, the arbitral award in favour of Reliance Infrastructure was upheld, and DMRC was ordered to deposit INR 3500 crores into an escrow account for the benefit of the lenders.
Round 1 under Section 34 of the Arbitration Act ended in favour of the contractor and considering the narrow ambit of maintaining such a challenge, legal pundits would say that this battle should have ideally ended there, having defended the award in its favour.
Round two: The Division Bench’s intervention
Undeterred, DMRC filed an appeal under Section 375 of the Arbitration Act before a Division Bench of the Delhi High Court, aggrieved of the decision under Section 34 proceedings. This marked a significant turning point in the case. The Division Bench takes a myopic view of the case history, and this is where things get interesting. Going into specifics, reading and interpreting the contract threadbare; the Division Bench dealt with the issue of the termination notice and the prerequisites attached to it.
What often appears as merely compliance, should never be taken lightly, is the learning from these proceedings. Once a process is agreed upon under a contract, the clause must be followed in letter and spirit. While analysing what constitutes an event of default, the Division Bench laid great emphasis on the fact once it was decided that post defects notice 90 days was to be given to cure the same, the date of termination becomes a materially significant fact that can change the entire outcome of proceedings. Going through the award and the Single Judge’s judgment in challenge, the Division Bench lamented the situation that how such a significant date in the circumstances was not even discussed, and hence there was no proper adjudication to determine what constituted an “event of default” and from which date, thus the entire claims that hinged on the most crucial aspect was overlooked.
Even on the issue of granting a certificate of operation for the metro line, the Division Bench raised doubts over the Arbitral Tribunal’s contradictory findings that once the speeds of the metro rails were being allowed to be increased and with there being no safety issues/problems reported, the obviating fact was that there were no lapses on part of the Corporation which was given a complete bypass.
The Division Bench under Section 37 proceedings held6 that the arbitral award was “ambivalent” and “confusing”, and that it failed to address key issues such as the operational certification of the metro line and the timing of the termination. The Court deemed the award to be patently illegal and set it aside, ruling in favour of DMRC. This decision significantly reduced DMRC’s financial liability, effectively saving it from having to pay thousands of crores to Reliance Infrastructure.
Round three: Supreme Court’s restoration of the award
The battle then shifted to the Supreme Court, where Reliance Infrastructure filed a special leave petition (SLP) challenging the Delhi High Court’s Division Bench ruling. The contractor was left with all to fight for and that too in a SLP jurisdiction of the Supreme Court, which is narrower than the narrowest lanes one can think of.
The Supreme Court found the Division Bench’s incision of the award under the narrow parameters of Sections 34/37 of the Arbitration Act to be a disturbing trend of courts to set aside awards which is an antithesis of the arbitration law.7 The Supreme Court deprecated the scrutiny undertaken by the Division Bench of the High Court of an award passed by technical engineers who formed the Arbitral Tribunal and labelled the judgment as a substitution of the court’s view over that of the arbitrators which is not permissible as per settled law and on account of minimal judicial intervention principles.
Round 3 resulted in the contractor winning the crucial round and in effect having its award restored and the High Court Division Bench judgment set aside. Even a student of law at this stage would have advised the contractor that this put a lid on this litigation battle and should move forward with the execution of the decree to realise its monies. The Corporation filed a review and just like any other review petition, it saw the fate of being dismissed by way of circulation itself.8 Yet, another reason for the contractor to have become sure of its award. However, the Corporation was not going to give up till the final possible opportunity it had, and the saying came to be correct — “it’s true, it’s never over till it’s over”.
The curative petition: A last-ditch effort
Finally, we reach the most important round of this battle. The gloves are not off, with the Corporation taking a final attempt in the rarest of rare jurisdictions, knocking the curative jurisdiction of the Supreme Court seeking to overturn a decision passed by the Supreme Court itself earlier.
The three-Judge Bench, led by the Chief Justice of India, took up two critical questions: whether the curative petition was maintainable, and whether the arbitral award was indeed flawed in a manner that justified setting it aside.
The final round: Supreme Court’s landmark judgment9
The Corporation raised several issues with the thrust being that the Division Bench of the Delhi High Court rightly intervened to set aside the award, which was otherwise patently illegal, as it ignored crucial evidence and thus the interference was well within the justified ground of Section 37 of the Arbitration Act. It was also contended that the interference by the Supreme Court under SLP jurisdiction amounted to a miscarriage of justice, which is the required principle for interference under the curative jurisdiction of the Supreme Court to justify the undoing of patent illegality.
Countering this, the contractor urged the Supreme Court to not entertain the curative petition, for being an exercise of evaluating facts which was not permissible under the Arbitration Act, much less under curative jurisdiction, after the Supreme Court had already passed a judgment which also stood the test in review. It was also contended that the curative jurisdiction should not be misused as the second round of review and appellate jurisdiction of sitting against the earlier order of the Supreme Court, as the Corporation was now resorting to all steps possible to merely avoid pending payment under the award of around INR 5000 crores while having paid INR 2600 crores.
The Bench delved into the aspects of the law concerning curative petitions and what weighed with the Bench was that the basic parameter that should be considered while exercising powers under curative jurisdiction is that, there is a miscarriage of justice which ought to be cured and there was an abuse of process with the end goal being that what was eventually prayed for, fell within the meaning of doing “manifest justice”.
Having considered the scope of curative petitions, the Supreme Court moved in the correct direction to be sure that it had not chartered in the forbidden waters of Sections 34/37 of the Arbitration Act. Discussing the principles of patent illegality, tracing its roots to the celebrated decisions, it was summarised that what had to be seen was whether the view of the Arbitral Tribunal was based on no evidence or ignoring vital evidence, which would be against the public policy of India.
The Supreme Court interpreted the sub-sections of Section 34 of the Arbitration Act which are seldom read or discussed i.e. while it is the law that no second appeal was to be allowed after the Section 37 stage, however, the legislature has explicitly laid down that nothing shall take away the right of a litigant under Article 13610 of the Constitution of India, if aggrieved, and approach the Supreme Court. The Supreme Court went on hold that such a provision showed that the intent of the legislature was clear that it was left in the hands of the Supreme Court to be the ultimate decision maker whether the exercise of judicial intervention under Sections 34/37 was correct or not, as Article 136 was to be exercised in the most sparing and exceptional circumstances.
Applying the law, it was observed that the Division Bench of the High Court while sitting in Section 37 of the Arbitration Act, jurisdiction was correct to find the award to be patently illegal and endorsed the views therein. It held that the interpretation of the contract in the case was so absurd by the Arbitral Tribunal regarding the termination clause, as no ordinary person would have made such an observation, which warranted the rarest of rare interventions in curative jurisdiction, because justice done was overturned by the Supreme Court in SLP.
Taking the finding of the Arbitral Tribunal for curing defects, it was held by the Supreme Court that the Tribunal interpreted “curing of defects” and taking effective steps to “cure the defects” to be at par, which could not be the same by any stretch of interpretation. Analysing the terms of the agreement, it was seen that the contract specifically used the term “effective steps” for curing defects. Thus, it was held that what had to be seen was whether after being notified of defects, the opposite party should be seen to have taken “steps in aid of removing the defects” which would be sufficient compliance of the clause and not to determine whether the defects were cured or not. Hence, the Arbitral Tribunal and the Single Judge of the High Court as well as the earlier Supreme Court decision placing reliance on the fact that the metro line was functional had no relevance once the Corporation had shown that it took steps to cure the defects pointed out by the contractor, which was done in the present case and which had been completely overlooked by all courts before, except the Division Bench of the Delhi High Court which took the same interpretation of the term in the agreement in stricto sensu and which was the correct and legal way to interpret contracts.
It was thus held that such an interpretation by the Arbitral Tribunal led to complete frustration with the clause as agreed between the parties and could not have been considered permissible. It was held that when the arbitrator is the master of facts and evidence in arbitration proceedings, then the interpretation adopted by the Tribunal is contrary to the understanding necessitated intervention.
Considering the overall facts, it was seen that some defects were completely cured, and the fact that even the contractor was of the view that only if the defects were cured, could the metro line be made operational, even if at lower speeds. Once this situation came to be in existence, thus the entire construction of the termination clause was misconstrued by all the courts concerned below, as the safety and completion of the project was done through a certification under a legislative enactment.
What had to be seen was that once “effective steps” as per the agreement were taken by the Corporation, the termination notice had served its purpose, and the termination could not have been upheld under any form of interpreting the termination clause. While exercising the jurisdiction under the curative petition, the Supreme Court held that the view taken by the Division Bench of the Delhi High Court was correct for having rightly interpreted the termination clause and had come to the right conclusion of the award being laced with patent illegalities and the vice of being perverse. This view was completely in line with the tests laid down under Section 34 of the Arbitration Act, which should have not been entertained, let aside overturned while in SLP.
Considering all the factors, the Supreme Court did the right thing which was to do “manifest justice” while invoking its powers under curative jurisdiction. Tracing back to the basic issue of curing the defects in the cure period or facing termination, is the bare-bone charter of a built-operate-transfer contract. Having held the termination to be illegal, the Corporation being a public entity was even directed to be refunded of the payments made and the entire liability of almost INR 8000 crores was set aside. Before parting, the Supreme Court clarified that the decision cannot and ought not be considered as allowing four stages of appeal and instead went on the principle that the entire controversy could have been avoided and the rounds of litigation before the Supreme Court could have been avoided had the ruling of the Division Bench of the High Court not been interfered with.
Conclusion: A precedent for the future
What is clear and discerning from the above is that while it is true that the litigation on the award travelled through multiple rounds over the years, which on the face of it showed the level of judicial intervention that was a complete anathema to the core of the Arbitration Act. But this judgment strongly reinforces the principles under the Constitution of India that if a particular case meets the requirements of curative jurisdictions, then such rarest of rare cases can be entertained. What also weighed with the Supreme Court was that a public corporation dealing with public monies was being saddled with the economic burden of thousands of crores, in what was a commercial dispute that was not appreciated in a legally correct manner by the Arbitral Tribunal.
It was earlier observed at the High Court, that the Arbitral Tribunal comprised of engineers and thus Judges and Lawyers, those with legal minds should be circumspect in their review. However, that very logic ought to cut both ways, as the engineers may have been technically sound in their approach, but probably lacked the experience of legally interpreting clauses of contracts, on which the entire controversy hinged upon. Undoubtedly, this case has raked up a lot of criticism of the Supreme Court for having interfered at the stage of curative petition after these many years of litigation. However, while as a concept the critics may have a valuable point on the issue of judicial intervention and what stages and how many rounds, however, the critics ought to have not lost sight of the fact that being a commercial arbitration, the issues of outstanding payments attracted interests at the rate of commercial borrowings. Thus, the issue of long pending litigations may not be the correct prism to view such disputes, where the award was set aside for being palpably legally impermissible for being based on an incorrect interpretation of the contract, which vitiated the entire arbitration proceedings.
As it is often said, justice may be delayed but not denied, that is the principle upheld in the present case. However, the impact of such cases in promoting India as a hub of arbitration, which is strongly mooted by the Supreme Court Judges itself, leaves an indelible doubt in the minds of investors, conglomerates, etc. who are commercially involved in their businesses in India and those looking to invest and enter India.
As India positions itself as an international hub for arbitration, this case serves as a reminder that judicial intervention, though limited, remains an essential safeguard to ensure fairness and legality in commercial disputes. The ruling also emphasises the importance of careful contract drafting and the need for arbitrators to strike a balance between technical expertise and legal rigour.
In the words of Lord Denning, “Arbitration is good so long as it is expeditious and just. If it becomes dilatory or unjust, then it is worse than litigation itself.” The curative stitch applied by the Supreme Court in this case indeed saved Delhi Metro — and arbitration in India — from an outcome that could have undermined public trust in both institutions.
*Partner, Luthra & Luthra Law Offices India. The author can be reached out at: sanjeevk@luthra.com.
**Partner, Luthra & Luthra Law Offices India. The author can be reached out at: asehgal@luthra.com.
1. DMRC Ltd. v. Delhi Airport Metro Express (P) Ltd., (2024) 6 SCC 357.
2. Arbitration and Conciliation Act, 1996, S. 34.
3. Arbitration and Conciliation Act, 1996.
4. DMRC Ltd. v. Delhi Airport Metro Express (P) Ltd., 2018 SCC OnLine Del 7549.
5. Arbitration and Conciliation Act, 1996, S. 37.
6. DMRC Ltd. v. Delhi Airport Metro Express (P) Ltd., 2019 SCC OnLine Del 6562.
7. Delhi Airport Metro Express (P) Ltd. v. DMRC Ltd., (2022) 1 SCC 131.
8. DMRC Ltd. v. Delhi Airport Metro Express (P) Ltd., 2021 SCC OnLine SC 3613.
9. DMRC Ltd. v. Delhi Airport Metro Express (P) Ltd., (2024) 6 SCC 357.