The Delhi High Court, led by Justice Dinesh Kumar Sharma, has ruled that courts cannot apply a "one-size-fits-all" approach when deciding petitions under Section 34 of the Arbitration & Conciliation Act, 1996. Judicial intervention is permissible only when the arbitral award is shockingly unjust or adversely impacts the administration of justice.
The court emphasized that a force majeure clause in a contract acts as an exception, suspending contractual obligations until the force majeure event ceases to exist. The determination of whether such an event has occurred, its existence, and its duration falls under the jurisdiction of the Arbitral Tribunal.
Case Background
The case involved an Operation, Management, and Development Agreement (OMDA) between the Airports Authority of India (AAI) and Delhi International Airport Ltd. (DIAL) regarding the management of Indira Gandhi International Airport, Mumbai.
- In March 2020, the COVID-19 pandemic and subsequent government restrictions disrupted aviation operations.
- DIAL invoked the force majeure clause (Article 16 of OMDA) to seek a waiver of the Monthly Annual Fee (MAF) for April to June 2020.
- The petitioner (AAI) asked for a Board resolution confirming the invocation of force majeure, but disputes arose over MAF payments.
- DIAL sought adjustments for an alleged excess Annual Fee payment from the previous financial year. However, AAI insisted that adjustments could only occur after verification by an Independent Auditor.
- DIAL proposed shifting MAF payments for FY 2020-21 to a cash-receipts basis, but the Board rejected the request.
- The petitioner denied an interest-free deferral of MAF payments for Q2 2020 and rejected force majeure claims.
- DIAL invoked arbitration under Clause 15.2 of OMDA, and the Arbitral Tribunal ruled in favor of DIAL.
- Aggrieved by the decision, AAI challenged the award under Section 34 of the Arbitration & Conciliation Act, 1996.
Court's Observations
The Delhi High Court upheld the Arbitral Tribunal's decision, ruling that:
"There is no perversity in the order of the Arbitral Tribunal. There is no evidence to suggest that any extraneous material was considered or any relevant material was ignored."
The court reaffirmed that the Arbitral Tribunal is the final authority on disputed facts. The issue of "inability" due to force majeure is a factual matter determined by the Tribunal based on presented evidence. The court cannot intervene unless the Tribunal's findings are "perverse."
Furthermore, the force majeure clause in contracts ensures that businesses do not suffer undue financial hardship. Its primary purpose is to allow businesses to recover or mitigate losses rather than collapse due to unforeseen events.
"The objective of a force majeure clause is not to terminate business operations but to provide temporary relief. The Tribunal correctly ruled that since the airport’s closure was not an option and operational costs exceeded revenue, DIAL deserved an exemption from MAF payments."
The court concluded that the dispute centered on contract interpretation, and the Tribunal had thoroughly analyzed the available evidence before issuing its ruling. It upheld the Tribunal’s decision, stating:
"Even if an alternative view exists, the court cannot replace the Arbitrator’s interpretation unless it is legally unsound."
The Delhi High Court dismissed the petition, ruling that there was no illegality or perversity in the Arbitral Tribunal's award. As a result, the arbitral award remained valid, reinforcing the principle that judicial interference in arbitration should be minimal unless fundamental legal errors exist.
Case Title: AIRPORTS AUTHORITY OF INDIA versus DELHI INTERNATIONAL AIRPORT LIMITED & ANR.
Case Number: O.M.P. (COMM) 186/2024
Counsel for the Petitioner: Mr. Tushar Mehta, Learned SGI with Mr. Raghavendra P Shankar, learned ASG with Mr. Karan Lahiri, Mr. Prateek Arora, Mr. Neelabh Bist, Ms. Rishieka Ray, Ms. Pallavi Misra, Advocates
Counsel for the Respondent: Mr. Parag Tripathi, Mr. Raj Shekhar Rao, Sr. Advs. with Mr. Rishi Agarwala, Mr. Apoorv P. Tripathi, Mr. Dheeresh Kumar Dwivedi, Mr. Manu Krishnan, Mr. Daksh Arora, Mr. Nikhil, Advocates for DIAL.
Date of Judgment: 07.03.2025
