DMRC vs DAMEPL: The fallout of Supreme Court’s judgement

The judgement of DMRC v. DAMEPL may have been a victory for the Delhi Metro Railway Corporation, but it is a great loss to India as an arbitration centre.

The setting aside of an award of nearly Rs 8000 crores in favour of Delhi Airport Metro Express Pvt Ltd (DAMEPL) by the Supreme Court, that too after seven years of its the pronouncement by the arbitral tribunal, has stunned the legal world. The judgement of DMRC v. DAMEPL may have been a victory for the Delhi Metro Railway Corporation (DMRC), but it is a great loss to India as an arbitration centre. The multi-national corporations are rethinking their strategies about their investment in India. Perhaps even the domestic corporations will need to strategise about entering into a public-private partnership (PPP) with the Public Sector Undertakings (PSUs).

In order to escape the dire consequences of the judgement, we need to consider the options available to the corporations while trying to resolve their commercial disputes within the arbitral system.

The Arbitration and Conciliation Act and Its Effect

In order to facilitate effective and efficient resolution of commercial disputes, in 1996, the Parliament enacted the Arbitration and Conciliation Act. The Act not only classified arbitration as domestic versus international, but also prescribed different procedures for each one of them. While Part I of the Act deals with domestic arbitration, Part II deals with International one. Domestic arbitration undergoes a labyrinthine process, from the constitution of the arbitral tribunal to the award, to enforcement or challenge of the award. This process takes the litigant through different strata of the judiciary—from the tribunal, to the District Court, to the High Court, and eventually to the Apex Court. At times, the process is as cumbersome as in a civil litigation. The convoluted procedure is beginning to tax the minds of the litigant, the lawyers, and the judges. The Parliament is still grappling with ways and means to streamline the domestic arbitration process. The judgement of DMRC v. DAMEPL has further aggravated the situation by setting aside the award after critically analysing the evidence in curative jurisdiction.

On the other hand, the international arbitration has a more efficient and effective procedure. The parties, both national and international, are permitted to have the arbitral “seat” outside the country. Thus, the parties can choose the well known venues of arbitration such as Singapore, Dubai, and London, as the “seat” of arbitration. The parties can also choose the laws applicable to the commercial dispute. Since international arbitration is done through arbitral institutions, such as SIAC, DIAC, and LIAC, the parties enjoy all the benefits of institutional arbitration. Further, the ground of “patent illegality” for challenging the award is unavailable in international award. Thus, the enforcement of foreign arbitration award is easier than the domestic arbitration award.

Advantages to Foreign Arbitral Cases

Due to the advantages of international arbitral award, the parties, both Indian and foreign, are likely to opt for international arbitration centers such as London, Dubai and Singapore. In fact, the foreign arbitration centers are waiting for arbitration cases to shift from India to their jurisdiction. For, India’s loss will be their gain.

Opting for foreign arbitration may appear to be an expensive proposition. But the difficulties in enforcing a domestic arbitral award, the endless wait in the judicial process of enforcement, the uncertainty of the final outcome may encourage the business houses to choose foreign arbitration.

Further, the advantages of institutional arbitration such as appointment of domain experts as the arbitrator, the efficient procedure for deciding the commercial disputes, the effective execution of the arbitral award, will also attract both Indian and foreign litigants towards foreign seated arbitration.

Mediation an Alternate Resolution Mechanism

Recently, the Parliament enacted the Mediation Act, 2023. The Act offers mediation as an alternative dispute resolution mechanism. Mediation has certain advantages over arbitration. It is voluntary, strictly private, it respects party autonomy, it is supervised by a trained mediator, it resolves the dispute quickly, effectively and efficiently. The settlement agreement cannot be challenged except on the ground of fraud, corruption and impersonation. Therefore, the parties are saved from the roller coaster ride of the judicial process. The recent judgement may prompt parties involved in commercial dispute to switch the gear from arbitration to mediation. Thus, the judgement acts as a catalyst for fast forwarding mediation in India. This may be a blessing in disguise.

Hence, the judgement has both a negative and positive impact on the legal landscape. While it may dent the arbitration system, it may encourage the growth of mediation mechanism in India.

Views are personal, and do not represent the stand of this publication.