<img src="https://www.livelaw.in/images/placeholder.svg" alt="Supreme Courts Delhi Metro Judgment Caused Extensive Damage To Arbitration In India: Justice Ujjal Bhuyan”>
The Supreme Court’s 2024 Delhi Metro Rail Corporation Ltd. v. Delhi Airport Metro Express Pvt. Ltd. judgment has caused “the most extensive damage to arbitration in India” and undermined the country’s efforts to emerge as a global arbitration hub, Supreme Court judge Justice Ujjal Bhuyan said on Saturday, expressing grave concern over increasing judicial interference in arbitral awards.
Delivering a lecture on “Arbitration in India: Reform, Relevance & the Road Ahead”, at an event organisedby The Law Forum, Justice Bhuyan said theDelhi Metro ruling, rendered in the Supreme Court’s curative jurisdiction, sent shock waves through the arbitration community. He pointed out that the judgment triggered a series of policy decisions by the Union Government discouraging arbitration, thereby reversing years of legislative reforms aimed at making India an arbitration-friendly jurisdiction.
The Delhi Metro judgment referred to by Justice Bhuyan was delivered on April 10, 2024 by a three-judge Bench comprising then Chief Justice of India DY Chandrachud, Justice BR Gavai and Justice Surya Kant. The bench allowed a curative petition filed by the Delhi Metro Rail Corporation (DMRC) and set aside a nearly ₹2,800-crore arbitral award in favour of Delhi Airport Metro Express Pvt. Ltd. (DAMEPL), holding that the award suffered from patent illegality and that its earlier restoration by the Supreme Court had resulted in a grave miscarriage of justice.
Justice Bhuyan said that it was an “unprecedented move”, as the three-judge Bench exercised its extraordinary curative jurisdiction under Article 142 in April 2024 to set aside a high-value arbitral award more than seven years after it was rendered. He pointed out that the award had already survived challenges under Sections 34 and 37 of the Arbitration and Conciliation Act, proceedings under Article 136 and even a review petition before being overturned. In curative proceedings, the Supreme Court reappreciated evidence and effectively undertook a merits review in what became the fifth round of challenge to the award.
“While declaring and clarifying that exercise of curative jurisdiction should not be adopted as a matter of ordinary course… the Bench did just the opposite,” Justice Bhuyan remarked. He said the judgment had raised serious questions regarding the extent of judicial intervention in arbitral awards and India’s suitability as an arbitration hub for commercial disputes. “Arbitrators and critics are aghast; this judgment is a clear case of judicial intrusion into the domain of arbitration, much beyond the statute,” he said.
Justice Bhuyan further said the Delhi Metro judgment directly led to the Finance Ministry’s Office Memorandum dated June 3, 2024, which discouraged government departments and public sector undertakings from including arbitration clauses in contracts involving disputes exceeding ₹10 crore. The Office Memorandum reasoned that arbitration involving the government had failed to achieve finality because arbitral awards were routinely challenged in courts, making arbitration “an additional layer of adjudication”, and instead encouraged mediation.
Describing the Office Memorandum as a “sharp, sudden and controversial policy shift against arbitration”, Justice Bhuyan said it was followed by decisions of OIL and ONGC to avoid arbitration in high-value procurement contracts, the Delhi PWD’s decision to delete arbitration clauses from future contracts altogether, and the Ministry of Road Transport and Highways’ 2026 instructions excluding arbitration for disputes of ₹10 crore and above. According to him, these measures were in direct conflict with India’s declared policy of promoting arbitration and establishing itself as a global arbitration centre.
Gayatri Balasamy judgment opened a ‘can of worms’
Justice Bhuyan also criticised the Constitution Bench ruling in Gayatri Balasamy v. ISG Novasoft Technologies Ltd., saying it had “literally opened up a can of worms.” Referring to the majority’s recognition of limited powers to modify arbitral awards, he cautioned that the judgment had “opened up the window for increased judicial interference in arbitral awards.” He added that the Expert Committee’s proposal to permit partial modification of awards under Section 34, as well as the proposal to establish an Appellate Arbitral Tribunal, would only increase judicial intervention instead of reducing it.
Reiterating that the Arbitration and Conciliation Act is founded on the principle of minimal judicial interference, Justice Bhuyan referred to his own judgments (Somdatt Builders Vs. NHAI & Construction Consortium Limited Vs. Software Technology Parks of India) emphasising that courts exercising jurisdiction under Section 34 cannot act as appellate courts or reappreciate evidence. Frequent interference with arbitral awards, he said, defeats the very purpose of the 1996 Act.
Concerns raised over move to create Arbitration Appellate Tribunals
Justice Bhuyan also voiced strong reservations about the legislative proposal to establish an Appellate Arbitral Tribunal for hearing challenges to arbitral awards. Referring to the recommendations of the Expert Committee on arbitration reforms, he noted that the proposal seeks to create two parallel forums for challenging arbitral awards under Section 34 ,courts and an Appellate Arbitral Tribunal , leaving parties free to choose either.
While the proposal is intended to reduce judicial intervention, Justice Bhuyan said he was “afraid” that, given India’s judicial history, it would achieve the opposite. According to him, the creation of such a tribunal would merely add another layer of adjudication without reducing court involvement.“Constitution of such Appellate Arbitral Tribunal may not achieve its intended goal of reducing judicial involvement and expediting dispute resolution; rather, it may end up adding one more layer of adjudication, besides enhancing judicial intervention,”he cautioned.
Concluding his address, Justice Bhuyan warned that the Delhi Metro judgment, followed by the Finance Ministry’s policy shift, had damaged years of legislative reform aimed at enhancing ease of doing business and making India a predictable arbitration jurisdiction. He urged policymakers and the legal community to reverse these “regressive moves” and ensure that arbitration “continues to remain alive and kicking in India.”
“Erratic court verdicts and regressive policies like the above act as barriers to India’s efforts to position itself as a global arbitration hub. If this is the approach of the authority, is there any need for celebrating arbitration weekends? We need to ask ourselves. I would therefore urge upon all right thinking people to seriously consider the damaging impact of such regressive moves and to ensure that arbitration, statutorily recognised and celebrated, continues to remain alive and kicking in India,”Justice Bhuyan said.
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