Consent order for audit-based escrow deposit is binding, while disputes over the audit report and termination notices remain arbitrable.

A consent order in writ proceedings requiring audit of contractual debt and deposit of 80% into escrow was held binding according to its terms. The Court found that the audit mandate was limited to determining the debt due under the concession agreements, and objections based on alleged incompleteness, parallel investigations, or collateral forensic issues did not excuse compliance. At the same time, disputes over the audit report, termination notices, and related inter se claims were expressly reserved for arbitration, leaving the escrow obligation immediate while downstream merits issues remained for the arbitral forum.

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Issues: (i) whether the High Court's consensual directions requiring deposit of 80% of the debt due into escrow after the CAG audit could be reopened on the ground that the audit was incomplete or inconclusive; (ii) whether disputes regarding the correctness of the audit report and the validity of the termination notices were reserved for arbitration.

Issue (i): Whether the High Court's consensual directions requiring deposit of 80% of the debt due into escrow after the CAG audit could be reopened on the ground that the audit was incomplete or inconclusive.

Analysis: The directions of 20 September 2019, as modified later, were traced to a negotiated settlement between the parties in writ proceedings invoked to prevent disruption of public metro services. The operative terms required a financial audit of the debt due under the Concession Agreements, followed by deposit of 80% of the debt due in escrow within a fixed time. The Court held that the scope of the audit was limited to determining the debt due under the contractual definition, and that the CAG had followed a fair process, invited responses, and finalised the report within that limited mandate. The objections based on parallel investigations, forensic audits, and allegations against the IL&FS group did not justify non-compliance with the consent order.

Conclusion: The consent order remained binding, and HSVP was obliged to deposit 80% of the debt due as determined in the audit reports.

Issue (ii): Whether disputes regarding the correctness of the audit report and the validity of the termination notices were reserved for arbitration.

Analysis: The consent order, read with its later clarifications, expressly preserved the parties' rights to agitate disputes arising out of the CAG report, the validity of the termination notices, and past or future inter se claims in arbitration under the Concession Agreements. The Court held that the escrow deposit was a separate immediate contractual and consensual consequence, while downstream disputes were left to the arbitral forum. Remedies under the Arbitration and Conciliation Act remained available, and the writ proceedings were not to be used to defeat the agreed contractual mechanism.

Conclusion: The disputes concerning the audit report and termination notices were held to be arbitrable.

Final Conclusion: The appeals were allowed in substance by enforcing the escrow-deposit obligation and preserving the parties' arbitration remedies, while leaving pending investigations and criminal proceedings unaffected.

Ratio Decidendi: A consent order settling contractual disputes in writ proceedings is binding according to its terms, and where it expressly provides for an audit-based escrow deposit while reserving remaining disputes for arbitration, the parties cannot resist compliance on the basis of objections to the limited audit or collateral investigations.

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