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Issues: (i) Whether the concessionaire had waived the termination notice by its subsequent conduct and participation in the rectification and recommencement process; (ii) whether the arbitral finding that DMRC committed a DMRC Event of Default, failed to cure the defects within the contractual period, and that the CMRS sanction did not cure the defects could be sustained; (iii) whether Rs. 611.95 crores could be treated as equity for computing adjusted equity and termination payment under the Concession Agreement; (iv) whether the award of interest on termination payment under the contract could stand.
Issue (i): Whether the concessionaire had waived the termination notice by its subsequent conduct and participation in the rectification and recommencement process.
Analysis: The contractual clauses on waiver, conciliation, and continuation of rights pending arbitration were read with the contemporaneous letters reserving rights and the repeated assertion that participation was without prejudice. The subsequent cooperation in meetings, CMRS application, and temporary operation of the line was treated as conduct directed toward safety, project protection, and dispute resolution, not as abandonment of the termination notice. Waiver by election required an unequivocal act inconsistent with termination, which was not established.
Conclusion: The finding rejecting waiver was sustained and was in favour of the respondent.
Issue (ii): Whether the arbitral finding that DMRC committed a DMRC Event of Default, failed to cure the defects within the contractual period, and that the CMRS sanction did not cure the defects could be sustained.
Analysis: The challenge turned on the interaction between the cure notice, the termination notice, the contractual definition of material adverse effect, and the statutory safety regime under the Metro Railways framework. The Court held that the award was internally contradictory on the effective date of termination, ignored the statutory effect of the CMRS sanction permitting reopening for public carriage, and failed to give legal weight to the post-repair certification and prolonged safe operation of the line. The reasoning was found perverse and irrational because the award did not satisfactorily explain how the defects remained uncured in the face of statutory clearance and operational continuity.
Conclusion: The finding of DMRC Event of Default and the validity of termination on that basis were set aside and were in favour of the appellant.
Issue (iii): Whether Rs. 611.95 crores could be treated as equity for computing adjusted equity and termination payment under the Concession Agreement.
Analysis: The definition of equity, adjusted equity, subordinated debt, and debt due in the contract was examined against the books, balance sheets, and board resolution showing conversion of share application money into subordinated debt. The award was held to have ignored the contractual definitions and the documentary record, and instead relied on an unsustainable assumption about the project's debt-equity structure. The treatment of the amount as equity was found to be unsupported by the material on record and contrary to the contract.
Conclusion: The inclusion of Rs. 611.95 crores as equity and the consequent termination payment computation were set aside and were in favour of the appellant.
Issue (iv): Whether the award of interest on termination payment under the contract could stand.
Analysis: The contract drew a distinction between termination payment and other monetary claims, and also contained a specific clause governing interest on delayed termination payment. The Court accepted the contractual interpretation in principle, but since the termination-payment foundation itself was set aside, the interest direction linked to that foundation could not survive independently in the award as upheld portions were not severable on the facts found.
Conclusion: The interest direction on termination payment did not survive and was in favour of the appellant.
Final Conclusion: The award was substantially interfered with because the core findings on termination, default, and computation of termination payment were unsustainable, while the finding on waiver was left undisturbed. The appeal was therefore allowed only to the extent necessary to set aside the award on the principal monetary and default-related issues, with liberty for fresh adjudication and restitution proceedings.
Ratio Decidendi: An arbitral award may be set aside for patent illegality, perversity, and irrationality where it ignores binding contractual definitions, disregards material documentary evidence, or fails to account for a statutory certification that directly bears on the contractual breach in issue.
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