DELHI HIGH COURT DECIDES ENFORCEMENT OF ARBITRAL AWARD AGAINST DELHI METRO RAIL CORPORATION

The Hon’ble Delhi High Court has in a recent case of Delhi Airport Metro Express Private Limited vs Delhi Metro Rail Corporation passed a Judgment dated 10-03-2022 and decided upon the issue of enforcement of Arbitral Award dated 11-05-2017 against Delhi Metro Rail Corporation (DMRC).

In the present case, the Delhi Airport Metro Express Private Limited (Decree Holder) won the arbitration proceedings and obtained an Arbitral Award dated 11-05-2017 (Arbitral Award) against DMRC (Judgment Debtor). The Award provides for the following amounts payable by DMRC to Decree-Holder:

1. Termination Amount of Rs. 2782.33 Crores along with Interest at the rate of SBI Prime Lending Rate +2% w.e.f. 07.08.2013 onwards
2. Post-Termination Expenses of Rs. 147.52 Crores with 11% p.a. interest
3. Cost of wrongful invocation of Decree Holder’s Bank Guarantee of Rs. 62.07 Crores with interest @11% p.a.
4. Security Deposits of Rs.56.80 Lakh with interest @11% p.a.

Aggrieved, DMRC filed a Petition under Section 34 of the Arbitration and Conciliation Act 1996 (Act) (Application for setting aside arbitral awards) before the Delhi High Court, thereby challenging the Arbitral Award. However, the said Section 34 Petition was dismissed by a Single Judge of the High Court, vide Judgment dated 06-03-2018. Aggrieved, DMRC filed an Appeal before the Division Bench of the High Court against the Judgment dated 06-03-2018 passed by the Single Judge, which was partly allowed vide Judgment dated 15-01-2019 and as a result, the Arbitral Award was set aside.

Aggrieved by the Division Bench Judgment dated 15-01-2019, the Decree Holder filed a Special Leave Petition before the Supreme Court, which was allowed vide Judgment dated 09-09-2021. Aggrieved, DMRC filed a Review Petition before the Supreme Court, which was dismissed vide Judgment dated 23-11-2021.

Hence, the Decree Holder filed for execution of the Arbitral Award before the Delhi High Court under Section 36 of the Act (Enforcement) and sought for directions to DMRC to pay them the following Decretal amount:

a) Termination payment amount

b) Interest on termination payment amount for the delayed period i.e. up to date of the Award 11-05-2017 at the rate of SBI Prime Lending Rate + 2% interest and

c) Compound Interest on such capitalisation amount from date of Award till date of payment i.e. from 11-05-2017 to 14-02-2022.

Whereas, DMRC contended that an arbitral tribunal has the discretion to allow or not allow for interest under Section 31 (7) of the Act and in this case, the Tribunal exercised its discretion and did not provide for interest for delayed period / till the date of Award. Thus, DMRC contended that they are not liable to pay interest. Section 31 (7) of the Act is reproduced below for easy reference:

31. Form and contents of arbitral award.—

(7) (a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.

(b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of two per cent. higher than the current rate of interest prevalent on the date of award, from the date of award to the date of payment.

The High Court passed a Judgment dated 10-03-2022 and made the following observations in this case:

1. That the Arbitral Award has attained finality, in view of the Supreme Court Judgment dated 09-09-2021 which refused to interfere with the Tribunal and High Court’s findings in respect of interest,
2. on the ground that the same was agreed to earlier by the Parties in the Concession Agreement.
3. That while filing the Execution Petition, the Decree Holder sought for interest up to date of Award for delayed payment of Termination Amount in accordance with the Concession Agreement, i.e. SBI Prime Lending Rate + 2%. Moreover, the Supreme Court has already held that the Courts cannot interfere with the interest component. Hence, the plea of DMRC that interest should have been calculated as per the rate changed by RBI and not the earlier rate notified by SBI, cannot be accepted.
4. On the other hand, the plea of the Decree Holder that they are entitled to future / compound interest if DMRC delays payment, cannot be accepted as well, as there is no clause to that effect in the Arbitral Award.
5. That during the pendency of the proceedings, DMRC made part payment of about Rs. 1678.42 Crores, which should be appropriated first towards the outstanding interest and costs and then towards the principal amount.

Thus, the High Court held that DMRC shall use its funds generated from various metro / rail projects, etc to pay the Award Amount to the Decree Holder, after seeking permission from the Central Government, if necessary, or raise loans, etc to satisfy the Award. In case DMRC falls short of funds to pay the balance amount to the Decree Holder, then with prior approval from the Central Government, properties such as rolling stock, metro railway tracks, machinery, plant, tools, fittings, materials provided by Metro Railway Administration, etc are liable to be attached and also other properties belonging to DMRC, which are under its disposing power, can also be attached in the Execution Proceedings.

Harini Daliparthy

Senior Associate

The Indian Lawyer