Supreme Court Restores ₹2,782 Crore Arbitral Award in Delhi Airport Metro Dispute; Warns Courts Against Re-Appreciating Evidence Under Sections 34 and 37

Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

Date: 14.09.2026

Supreme Court Restores ₹2,782 Crore Arbitral Award in Delhi Airport Metro Dispute; Warns Courts Against Re-Appreciating Evidence Under Sections 34 and 37

In a major ruling on the limits of judicial interference with arbitral awards, the Supreme Court ruled in favour of Delhi Airport Metro Express Pvt. Ltd. (DAMEPL) and set aside the Delhi High Court Division Bench judgment that had interfered with an arbitral award of ₹2,782.33 crore plus interest in DAMEPL’s favour against Delhi Metro Rail Corporation Ltd. (DMRC).

The Supreme Court strongly cautioned against courts effectively sitting in appeal over arbitral awards by reassessing facts and evidence and then characterising their disagreement with the arbitrator as “perversity” or “patent illegality”. The Court emphasised that the Arbitration and Conciliation Act, 1996 is founded upon the principle of minimal judicial interference with arbitration.

Dispute Arising From Delhi Airport Metro Express Line

• The dispute arose from the Airport Metro Express Line (AMEL) project connecting New Delhi Railway Station with Dwarka Sector 21 through Indira Gandhi International Airport.
• DMRC proposed to develop the approximately 22.7-km project through a public-private partnership. A consortium comprising Reliance Energy Limited, later renamed Reliance Infrastructure Limited, and Construcciones y Auxiliar de Ferrocarriles, S.A. was selected, following which DMRC and DAMEPL entered into a Concession Agreement dated 25 August 2008.
• Under the arrangement, DMRC was responsible for civil works, while DAMEPL was responsible for various systems including rolling stock, power supply, overhead equipment, signalling and other operational infrastructure. Commercial operations commenced on 23 February 2011.

Structural Defects Led to Termination Dispute

• DAMEPL subsequently raised concerns regarding defects in the viaduct and bearings. A joint inspection process followed, and DAMEPL eventually stopped operations on 8 July 2012.
• On 9 July 2012, DAMEPL issued a notice requiring DMRC to cure the defects within 90 days. It subsequently issued a termination notice dated 8 October 2012, alleging that the defects had not been cured within the stipulated period and that DMRC was consequently in default under the Concession Agreement.
• DMRC invoked arbitration on 23 October 2012. The Airport Metro Line later resumed operations at a reduced speed, but DAMEPL eventually ceased operations and handed the line over to DMRC.

Arbitral Tribunal Found DMRC in Breach

• The Arbitral Tribunal was principally required to decide whether DAMEPL’s termination of the Concession Agreement was valid.
• The Tribunal undertook a detailed examination of the structural defects and the remedial measures undertaken by DMRC. It found, among other things, 1,551 cracks across 367 girders, representing about 72% of the girders examined. It concluded that effective steps had not been taken within the stipulated 90-day cure period and held that DMRC was in breach of the Concession Agreement.
• The Tribunal also examined other alleged defects, including twists in girders and gaps involving structural components, and concluded that the defects had neither been cured nor had effective remedial steps been taken within the stipulated period. It therefore upheld DAMEPL’s termination notice.

Tribunal Awards ₹2,782.33 Crore Plus Interest to DAMEPL

• Following its finding that DAMEPL validly terminated the Concession Agreement due to a DMRC event of default, the Tribunal considered DAMEPL’s claim for termination payment.
• DAMEPL had sought approximately ₹3,470 crore. In calculating the amount payable, the Tribunal determined ₹611.95 crore to qualify as “Equity”, calculated “Adjusted Equity” at ₹983.02 crore and ultimately awarded ₹2,782.33 crore along with further interest as termination payment payable by DMRC to DAMEPL.

Single Judge Refused to Interfere Under Section 34

• DMRC challenged the award before the Delhi High Court under Section 34 of the Arbitration and Conciliation Act, 1996.
• A Single Judge dismissed DMRC’s challenge on 6 March 2018, holding that the Tribunal’s findings concerning facts, law and interpretation of the Concession Agreement fell within the arbitrators’ domain.
• The Single Judge also recognised the fundamental principle that where two views are possible and the view adopted by the Tribunal is plausible, a court exercising Section 34 jurisdiction cannot substitute its own interpretation merely because it prefers another view.

Delhi High Court Division Bench Partly Set Aside Award

• DMRC thereafter approached the Division Bench under Section 37 of the Arbitration Act.
• The Division Bench reversed the Single Judge and partly set aside the arbitral award. It found fault with the Tribunal’s reasoning concerning the termination date, the effect of the Commissioner of Metro Railway Safety’s certificate and the calculation of Adjusted Equity.
• The High Court concluded that the award suffered from perversity, irrationality and patent illegality. It consequently set aside the Tribunal’s conclusions concerning the validity of the termination notice and treatment of ₹611.95 crore as Equity, which resulted in the ₹2,782.33 crore award being set aside.
• DAMEPL then approached the Supreme Court.

Supreme Court Explains the Narrow Scope of “Patent Illegality”

1. The Supreme Court used the dispute to reiterate the narrow limits within which courts can interfere with arbitral awards.
2. It held that patent illegality must be an illegality that goes to the root of the matter. Every error of law committed by an arbitral tribunal cannot automatically be characterised as patent illegality, nor can an erroneous application of law by itself justify setting aside an award.
3. Most importantly, the Court held that courts cannot re-appreciate evidence in order to conclude that an award suffers from patent illegality because a court exercising jurisdiction under Section 34 does not sit as an appellate court over the arbitrator.
4. Interference may nevertheless be permissible where the arbitrator adopts a view that is not even a possible view, interprets the contract in a manner that no fair-minded or reasonable person could adopt, travels beyond the contract, gives no reasons, bases conclusions on no evidence, ignores vital evidence, or considers documents not supplied to the other party.

Supreme Court Flags “Disturbing Tendency” of Courts Setting Aside Awards

• One of the most significant observations in the judgment concerns excessive judicial scrutiny of arbitral awards.
• The Supreme Court noted a “disturbing tendency” of courts to dissect and reassess factual aspects of arbitration disputes, reach their own conclusions and thereafter label the award perverse or patently illegal.
• Such an approach, the Court warned, would undermine the object of the Arbitration and Conciliation Act, which is to preserve minimal judicial interference with arbitral awards.
• This observation has significant implications for arbitration jurisprudence because it reinforces the distinction between judicial review of an award and an appeal on the merits of the dispute.

Interpretation of Contract Is Primarily for the Arbitrator

• The dispute also involved the interpretation of Article 29.5.1 of the Concession Agreement concerning the period available to DMRC to cure the alleged defects.
• The Arbitral Tribunal interpreted the provision to mean that DMRC had 90 days from the cure notice dated 9 July 2012 to cure the defects. The Supreme Court held that this represented a possible interpretation of the contractual provision.
• Even assuming that another interpretation could also have been adopted, the Court refused to interfere because construction of the Concession Agreement was within the domain of the Arbitral Tribunal.
• The ruling therefore reinforces the proposition that a court cannot substitute its preferred contractual interpretation for a plausible interpretation adopted by the arbitrator.

CMRS Safety Certificate Did Not Justify Setting Aside Award

• DMRC relied heavily upon the certificate issued by the Commissioner of Metro Railway Safety (CMRS) permitting resumption of operations.
• DMRC argued that the certificate demonstrated that the defects had been rectified and that the Tribunal had improperly disregarded important evidence.
• The Supreme Court, however, distinguished between the statutory question of whether the Metro Line was sufficiently safe to resume passenger operations and the contractual question before the Tribunal—whether DMRC had breached the Concession Agreement and whether the defects had been cured within the contractually prescribed period.
• The Supreme Court ultimately rejected the Division Bench’s conclusion that the Tribunal’s treatment of the CMRS certificate rendered the award patently illegal. It emphasised that the arbitrator is the judge of the quality as well as quantity of evidence, and a court under Section 34 cannot reassess that evidence as though exercising appellate jurisdiction.

₹611.95 Crore “Adjusted Equity” Finding Also Protected From Re-Appreciation

• Another important issue concerned the Tribunal’s treatment of ₹611.95 crore as Equity for determining the termination payment.
• The Delhi High Court Division Bench had found the Tribunal’s approach flawed and had interfered with the calculation. However, the Supreme Court examined the contractual framework governing termination payment and Adjusted Equity and concluded that the Division Bench had exceeded the permissible limits of judicial review.
• The Court’s approach once again emphasised that interpretation of contractual provisions and evaluation of evidence primarily belong to the arbitral tribunal unless the resulting view crosses the stringent threshold for interference under Section 34.

Sections 34 and 37 Do Not Permit an Appeal on Merits

1. The judgment assumes particular importance because the proceedings had travelled through both Section 34 and Section 37 of the Arbitration Act.
2. The Supreme Court made it clear that the narrow scope of interference applicable to Section 34 cannot be enlarged merely because the matter reaches the appellate stage under Section 37.
3. The underlying principle remains that arbitration is intended to provide finality to disputes and that judicial intervention must remain confined to the grounds expressly permitted by the Arbitration and Conciliation Act.
4. The Court noted that one of the principal objectives of the 1996 Act is to minimise the supervisory role of courts in arbitration, with Section 5 expressly restricting judicial intervention except where the Act provides otherwise.

Supreme Court Restores DAMEPL’s Victory

• Ultimately, the Supreme Court allowed DAMEPL’s appeal and set aside the Delhi High Court Division Bench judgment.
• DMRC’s connected appeal arising out of SLP (C) No. 8311 of 2019 was dismissed. The Supreme Court also declined to interfere with the Tribunal’s award of interest, noting that it had been granted in accordance with the terms of the Concession Agreement.
• The result effectively restored the arbitral award in DAMEPL’s favour, including the ₹2,782.33 crore termination payment along with further interest.

Why the Judgment Is Significant for Arbitration Law

• The decision is an important authority on the limits of the expressions “patent illegality”, “perversity” and “public policy” when courts review domestic arbitral awards.
• The judgment makes clear that disagreement with an arbitrator’s factual assessment is not enough. Nor is the availability of a better or alternative interpretation of the contract sufficient to justify judicial interference.
• The threshold is substantially higher: the defect must fall within the limited statutory grounds contemplated by Section 34.
• This distinction is crucial because permitting courts to reassess evidence, contractual interpretation and factual conclusions would effectively transform proceedings under Sections 34 and 37 into ordinary appeals—something the statutory arbitration framework deliberately seeks to prevent.

Key Takeaway

The Supreme Court’s ruling establishes a strong principle of arbitral finality and judicial restraint:

Courts cannot re-appreciate evidence or substitute their own interpretation merely because another view is possible and then characterise the arbitral award as “patently illegal” or “perverse”. Patent illegality must go to the root of the matter, and judicial interference must remain within the narrow boundaries prescribed by Section 34 of the Arbitration and Conciliation Act.

On the outcome, DAMEPL succeeded before the Supreme Court, while DMRC’s challenge failed. The Delhi High Court Division Bench judgment was set aside and the Tribunal’s award in favour of DAMEPL stood restored.

Connected Matter

Supreme Court: High Court Cannot Refuse Appointment of Arbitrator by Deciding Limitation at Pre-Reference Stage

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Source: Supreme Court

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