Delhi High Court
Airports Authority Of India vs Delhi International Airport Limited & … on 7 March, 2025
Author: Dinesh Kumar Sharma
Bench: Dinesh Kumar Sharma
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
RESERVED ON - 23.01.2025
% PRONOUNCED ON -07.03.2025
+ O.M.P. (COMM) 186/2024
AIRPORTS AUTHORITY OF INDIA .....Petitioner
Through: 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
versus
DELHI INTERNATIONAL AIRPORT
LIMITED & ANR. .....Respondents
Through: 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.
CORAM:
HON'BLE MR. JUSTICE DINESH KUMAR SHARMA
JUDGMENT
S. No Particulars Page Nos. A. Preface 2 B. Factual Matrix 3-17 C. Submissions on behalf of 17-32 Petitioner D. Submissions on behalf of the 32-44 DIAL E. Finding and Analysis 45-86 O.M.P. (COMM) 186/2024 Page 1 of 86 Signature Not Verified Signed By:NIDHI Signing Date:07.03.2025 18:39:50 DINESH KUMAR SHARMA, J.: A. PREFACE
1. The present petition has been filed under Section 34 of the Arbitration
and Conciliation Act, 1996, (hereinafter referred to as ‗Act’)
challenging the impugned arbitral award dated 21.12.2023 as corrected
under Section 33 of the Act vide order dated 16.01.2024.
2. Airports Authority of India (hereinafter referred to ‗the Petitioner’
and/or ‗AAI’), is a statutory authority established under the Airports
Authority of India Act, 1994, responsible for maintaining and
managing civil aviation infrastructure in India.
3. Delhi International Airport Ltd. (hereinafter referred to as ‗Respondent
No. 1′ and/or ‗DIAL’), is a joint venture entity entrusted with the
operation, management, and development of Indira Gandhi
International Airport, Mumbai (‘IGIA’) under an Operation,
Management and Development Agreement (hereinafter referred to as
‗OMDA’) dated 04.04.2006 executed between AAI and DIAL.
4. ICICI Bank limited (hereinafter referred to as ‘ICICI’ or ‘Respondent
No.2’) is a private sector bank and the designated escrow agent under
the Escrow Agreement executed as part of the financial arrangement
governing the OMDA. ICICI has been arrayed as a pro forma party in
these proceedings
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B. FACTUAL MATRIX
5. Briefly stated the facts of the case as mentioned in the petition are that
in March 2020, upon the outbreak of the COVID-19 pandemic and
subsequent governmental restrictions aviation operations were severely
disrupted. Consequently, DIAL sought relief under Article 16 of the
OMDA, citing Force Majeure vide email dated March 19, 2020 and
requested AAI to refrain from instructing the escrow bank regarding
the Monthly Annual Fee (‗MAF’) for April 2020, contending that the
existing business plan was no longer applicable. DIAL committed to
submitting a provisional business plan for FY 2020-21 by March 31,
2020, taking into account the economic impact of the pandemic. The
said request was acknowledged by AAI on March 23, 2020.
Consequently, DIAL submitted an interim business plan for April 2020
on March 27, 2020, and sought a three-month waiver upto June, 2020
on MAF payments due to the nationwide lockdown.
6. Thereafter, on March 31, 2020, DIAL formally invoked Force Majeure,
asserting that the outbreak of COVID-19 constituted an unforeseeable
event under Article 16 of the OMDA, significantly impacting business
operations and revenue. DIAL sought a waiver of MAF for April to
June 2020 and indicated that its Business Plan for FY 2020-21 would
only be finalized after obtaining Board approval by June or mid-July
2020. In response, AAI, through an email dated April 2, 2020,
requested a board resolution confirming the invocation of Force
Majeure. DIAL, on April 3, 2020, informed AAI that it was in the
process of securing Board approval and requested permission for the
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Escrow Bank to retain funds equivalent to MAF for April in the AAI
Fee Account until approval was obtained.
7. Despite disputing DIAL’s entitlement to invoke Force Majeure under
Article 16.1.1, AAI, acting in good faith, accepted DIAL’s request and
granted a three-month deferral of MAF payments from April to June
2020 on a “without prejudice” basis. Under this arrangement, DIAL
was required to pay the cumulative MAF for April, May, and June
2020, computed on actual revenues, by July 15, 2020, without
incurring interest under Article 11.1.2.2. Additionally, AAI extended
the submission deadline for the business plan for FY 2020-21 from
March 31, 2020 to June 30, 2020. However, DIAL did not provide the
required board resolution confirming the invocation of Force Majeure
and continued to pay the MAF for April, May, and June 2020.
8. Through a letter dated April 16, 2020, DIAL sought adjustments for an
alleged excess Annual Fee payment from the previous financial year. In
a response dated April 28, 2020, AAI informed that any adjustments
would be made as per the OMDA after verification by the Independent
Auditor. AAI also reminded DIAL that the Board resolution approving
the invocation of Force Majeure had not yet been submitted and that
DIAL, per its own proposal, was continuing MAF payments until such
approval was granted.
9. On May 1, 2020, DIAL reaffirmed its commitment to paying MAF and
proposed that the MAF for May 2020 be adjusted against the alleged
excess AF payments from the previous financial year. In response,
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AAI, via a letter dated May 18, 2020, reiterated that adjustments would
only be considered once DIAL’s statutory auditor and board approved
its accounts, which would then be submitted for independent
verification. Subsequently, on May 27, 2020, DIAL requested AAI to
permit MAF payments for FY 2020-21 to be based on cash receipts
rather than the accrual basis, citing the adverse impact of COVID-19
on its revenue and cash flow.
10. Building upon this, in an email dated June 11, 2020, DIAL informed
AAI of its intention to seek Board approval for the following: (i)
deferment of the preparation and approval of the Annual Operating
Plan (AOP) until business operations resumed to a reasonable level; (ii)
continued submission of monthly revenue projections until AOP
approval; (iii) a request for AAI to defer the payment of Revenue Share
to support DIAL’s cash flow; and (iv) an alternative arrangement
allowing MAF payments on a cash-received basis rather than advance
payments based on estimated revenues. DIAL sought this relief as a
one-time measure for the remainder of FY 2020-21.
11. The aforesaid proposals were approved by the Board of DIAL on June
17, 2020 and consequently on June 24, 2020, DIAL formally requested
deferment of MAF payments on a cash basis, submitting Board
meeting minutes and a document titled “Detailed Note on Relaxation in
Business Plan Submission and Payment of MAF.” This note referenced
various OMDA provisions and COVID-19’s impact, arguing for
special consideration under Article 20.3.1. AAI, in a response dated
June 25, 2020, rejected DIAL’s request and reiterated that MAF
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payments must continue as per the approved plan from July 2020
onwards and called upon DIAL to submit the Business plan for
financial year 2020- 2021 by 30.06.2020.
12. On June 30, 2020, DIAL submitted its projected financials for July
2020-March 2021 and requested an interest-free deferral of MAF
payments for Q2 (July-September 2020). AAI, in a letter dated August
7, 2020, rejected this request and directed DIAL to comply with its
OMDA obligations. Subsequently, DIAL formally sought to be
excused from MAF payments via a letter dated August 27, 2020,
submitting a Board resolution dated August 20, 2020, which permitted
DIAL to request AAI to apply Force Majeure from April 1, 2020, and
suspend MAF payments. Nonetheless, remittance of MAF continued as
per the usual practice by DIAL.
13. Subsequently, DIAL invoked Article 15.1.1 of the OMDA vide notice
on September 18, 2020, seeking resolution within 60 days, failing
which the notice stated that DIAL would initiate arbitration under
Clause 15.2. AAI rejected DIAL’s Force Majeure claim on November
23, 2020, stating that DIAL had accepted AAI’s position without
protest for months and had failed to demonstrate an inability to perform
its obligations.
14. Learned AT was constituted on 13.01.2021 and vide Procedural Order
dated 23.08.2021, the learned AT fixed the following Issues/Points for
Determination:
“(i)Whether the Claimant is entitled to the claims/reliefs raised in
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the present proceedings? (OPC)
(ii) Whether either/both Parties are entitled to interest on their
respective claims, and if so, for which period(s) and at what rate?
(Onus on parties)
(iii) Whether either/both Parties are entitled to costs on their
respective claims, and if so, for what sums?(Onus on parties)”
15. During the pendency of the arbitral proceedings, the Delhi High Court
partially allowed a petition filed by Mumbai International Airport
Authority (MIAL) under Section 9 of the Act and consequently, DIAL,
through a letter dated 02.12.2020, contended that the directions
contained in the aforementioned judgment constituted decisions in rem
and that the AAI was bound to apply these directions to DIAL as well.
16. On 05.12.2020, DIAL also filed an application under Section 9 of the
Act, OMP (I) (COMM.) No. 409 of 2020, seeking a declaration that,
pending the hearing and final disposal of the arbitration proceedings, as
well as the making and implementation of the arbitral award, its
obligation to pay the AF under the OMDA should be excused. On the
same day, AAI also filed an appeal, bearing FAO (OS) (COMM.)
168/2020, under Section 37 of the Act, challenging the order dated
27.11.2020 passed by the learned Single Judge in OMP (I) (COMM.)
174 of 2020 titled „Mumbai International Airport Limited v. Airports
Authority of India & Anr.‟ This appeal was disposed of by an order
dated 14.01.2021. The Division Bench of the Delhi High Court, while
deciding the appeal, issued directions that partially modified the
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directions issued by the learned Single Judge in its order dated
27.11.2020 in MIAL’s case.
17. Meanwhile, on 05.01.2021, in OMP (I) (COMM.) No. 409 of 2020, the
learned Single Judge of the Delhi High Court issued an order staying
the transfer of funds from the Proceeds Account to the AAI Fee
Account until further orders. The court also permitted DIAL to utilize
the amounts in the Proceeds Account for the operation of the IGI
Airport and related activities. Despite observing that there was
“effectively no distinction whatsoever between the present case and
MIAL’s case,” the learned Single Judge did not extend the same
protection to AAI’s share as had been granted in MIAL’s case.
Consequently, DIAL stopped making payments of the Annual Fee to
AAI from January 2021 onwards. On 05.02.2021, AAI filed an appeal,
FAO (OS) (COMM.) 22 of 2021, challenging the learned Single
Judge’s order dated 05.01.2021 in OMP (I) (COMM.) 409 of 2020
(DIAL’s Section 9 Petition).
18. While the matter rested thus, the parties entered into a Settlement
Agreement on 25.04.2022 governing the interim arrangement for the
payment of the AF. Without prejudice to their respective rights and
contentions, and subject to the final outcome of the arbitration, the
parties agreed that an AF/MAF at the rate of 45.99% of the projected
revenue of the DIAL for the financial year 2022-23 would be deposited
from the Proceeds Account into the AAI Fee Account, in accordance
with the OMDA and the Escrow Agreement. It was agreed that DIAL
would withdraw its application under Section 9 of the Act filed before
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the learned Single Judge of the Delhi High Court in OMP (I) (COMM.)
409 of 2020 and AAI would withdraw its appeal under Section 37 of
the Act filed before the Division Bench of the Delhi High Court. It was
also agreed that within five days of compliance with the above
provisions, DIAL would be liable to pay the Annual Fee for April
2022, with subsequent monthly payments to be made in accordance
with the OMDA and the Escrow Agreement. The Settlement
Agreement superseded the ad-interim order dated 05.01.2021, passed
by the Delhi High Court and pursuant to the same DIAL resumed MAF
payments from April 2022 onwards, and this arrangement has
continued since.
19. DIAL filed its Statement of Claim before the learned Arbitral Tribunal
(AT) on 25.03.2021. In response, AAI filed its Counterclaims along
with its Statement of Defence to DIAL’s claims on 01.07.2021.
Subsequently, on 31.07.2021, DIAL submitted its Statement of
Defence to AAI’s Counterclaims.
20. Final arguments were heard, and the learned AT reserved its Award on
21.03.2023. With the consent of both parties, the AT’s mandate was
extended for six months from 28.02.2023, setting its expiration date at
31.08.2023. Thereafter, the Court granted a further three-month
extension of the mandate, commencing from 01.09.2023, followed by
an additional three-month extension starting from 01.12.2023.
21. The Impugned Award was passed on 21.12.2023 by the learned AT,
which was pronounced on 06.01.2024 and on 16.01.2024, the learned
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AT, suo motu, passed an Order under Section 33 of the Act, correcting
“stenographical errors” in the Award dated 21.12.2023.
22. Learned AT granted the claims of DIAL, while rejecting all the
counter-claims of AAI. In the above background, AAI has sought to
assail the Impugned Arbitral Award on the grounds that it is patently
illegal and contrary to public policy, warranting its setting aside under
Section 34 of the Act. The grounds for challenge as stated in the
petition are as follows:
a. Learned AT ignored vital evidence on record, including but not
limited to relevant documentary and oral evidence particularly the
extensive evidence demonstrating DIAL’s ability to pay the AF,
relying on DIAL’s own documents and oral evidence. The learned
AT disregarded the entirety of this evidence, which forms no part
of the impugned award.
b. Learned AT has not only rewritten the contract, but has also
rendered certain contractual provisions ineffective. The impugned
award nullifies Articles 16.1.1 and 16.1.2(e) of the OMDA by
removing the requirement of demonstrating ‗inability to perform
obligations’ to claim the benefit of Force Majeure. Furthermore,
learned AT has not only failed to examine whether the notice was
issued in compliance with the provisions of OMDA, but instead
has altogether deleted the requirement of a notice under Article
16.1.5(a) of the OMDA. The award effectively deletes this
provision by treating the occurrence of a pandemic andO.M.P. (COMM) 186/2024 Page 10 of 86
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government recognition of the same as co-equal to the issuance of
a notice by DIAL under Article 16.1.5(a) of the OMDA.
c. The interpretation of the contract contained in the impugned
Award is not even a possible view of the contractual terms, which
are explicit, unambiguous and irreconcilable. Learned AT rejected
the submission of AAI that since AF is calculated as a percentage
of revenue, it remains proportionate to revenue and is always
capable of being paid and held that that it would be too simplistic
to require DIAL to pay 45.99% of its earnings without considering
its obligation to ensure smooth airport operations. It has been
stated that the said interpretation of AAI was based on the plain
and literal reading of Articles 11 and 16 of the OMDA and the
decision of the learned AT is in the teeth of contractual provisions.
Further, the learned AT’s finding that the occurrence of a Force
Majeure event is indisputable contradicts the express terms of the
contract and disregards AAI’s contention that the Covid-19
pandemic alone does not justify relief for DIAL unless all
requirements under Chapter XVI are met. It has been stated that
while the pandemic qualifies as a physical event under Article
16.1.3(vii), it can only constitute Force Majeure if it satisfies the
conditions set forth in Articles 16.1.1 and 16.1.2. DIAL failed to
demonstrate its inability to perform a specific obligation, a key
requirement under these provisions. By ignoring these contractual
conditions and treating the pandemic itself as Force Majeure, the
learned AT arrived at a conclusion that no fair or reasonable
person could have reached.
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d. Learned AT has violated the letter and spirit of Section 28(3) of
the Act and effectively rewritten Article 11 which required DIAL
to pay 45.99% of its ‗Revenue’ to AAI. The definition of
‗Revenue’ and the language of Article 11 is clear and
unambiguous and provides that payment of AF was not contingent
on whether DIAL generated profits or incurred losses. Learned
AT has erroneously converted the revenue-sharing mechanism
contemplated under the OMDA into a profit-sharing contract by
holding that, during the Force Majeure period, revenue receipts
would first be used for running the airport, and only the surplus, if
any, would be shared between DIAL and AAI in the contractual
ratio
e. Learned AT has rewritten Chapters XVI and XVIII of the OMDA
by allowing an extension of the OMDA term for a period
commensurate to 19.03.2020 till 28.02.2022. Even assuming, on a
demurrer, that DIAL was entitled to the benefit of the Force
Majeure clause, the relief of extension of the contract term finds
no mention in the Force Majeure clause itself. There is no
contractual basis whatsoever for extending the concession period,
and the award provides no reasoning for granting such an
extension.
f. The Impugned Award contravenes Section 31(3) of the Act as it
fails to provide reasoning for its findings and leaves key issues
unresolved. A crucial question–whether DIAL was genuinely
unable to pay the AF–remains unaddressed. Furthermore, the
learned AT failed to determine whether each instalment of the AF
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is a separate and distinct obligation, which, if unpaid on time,
would attract interest under Article 11.1.2.2. The learned AT also
did not assess whether all conditions under Article 16.1.2 were
met at the time each instalment became due. Additionally, the
impugned arbitral award provides no rationale for excusing rather
than suspending DIAL’s obligation to pay the AF, despite
explicitly raising the question in the award itself. Another core
issue left unresolved is what constitutes pre-Covid levels of
activity. It has been stated that while the learned AT rejected
DIAL’s argument that Air Traffic Movement (‗ATM’) and
Passenger Traffic Movement (‗PTM’) should define pre-Covid
levels of activity, it failed to provide a clear alternative standard.
Factors such as government-imposed Covid-19 restrictions and
DIAL’s alleged negative cash flow are discussed but not linked to
determining pre-Covid activity levels. Learned AT arbitrarily set
28.02.2022 as the end date for relief based on the Supreme
Court’s order extending limitation under general and special laws.
g. The impugned arbitral award has altered the very basis on which
bids were invited inasmuch as it alters the ‗key features of the
transaction‖’ as recorded in the Judgment of the Supreme Court in
‘Reliance Airport Developers (P) Ltd. v Airports Authority of
India & Ors.‘, (2006) 10 SCC 1 by allowing DIAL to be
completely excused from making payment of AF for the period
19.03.2020 to 28.02.2022.
h. The impugned arbitral award altered the waterfall mechanism
established in the Escrow Account Agreement dated 28.04.2006.
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Under the Escrow Account Agreement, the Escrow Bank was
required to prioritize deposits as follows: first, statutory dues;
second, the monthly AAI Fee; and third, any remaining balance
into the Surplus Account. This structure clearly established that
DIAL’s obligation to pay the MAF to AAI took precedence over
its operational expenses, except for statutory dues. Learned AT,
however, held that during the Force Majeure period, revenue
receipts should first be used for airport operations, with only any
surplus to be shared between DIAL and AAI, thereby overturning
the agreed-upon financial structure.
i. Learned AT rendered that since force majeure steps in only upon
the occurrence of an unforeseen event caused by a superior or
irresistible force, an act of God, or an event entirely beyond
human control (as opposed to a third-party event) and thus cannot
be covered under Section 32 contradicts the public policy of India
as the said interpretation conflicts with settled law, as established
in ‘Associate Builders v. DDA‘, (2015) 3 SCC 49 and reaffirmed
in ‘Ssangyong Engg. & Construction Co. Ltd. v. NHAI‘, (2019)
15 SCC 131. It has been stated that learned AT disregarded the
binding judicial precedents–despite being made aware of them
j. Learned AT has granted DIAL relief in excess of what it sought in
its letters 19.03.2020 and 31.03.2020. DIAL only sought certain
waivers such as adjustments against past payments, payment on
cash basis etc. under Article 20.3.1 of the OMDA but learned AT
granted complete excusal from making payment of AF for the
period 19.03.2020 to 28.02.2022 and also extended the term of the
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OMDA. Learned AT failed to address AAI’s objection that
suspension or excusal of obligations applied only to those arising
during the Force Majeure event which DIAL itself claimed ended
on 17.03.2021, and that only the time for performing such
obligations can be extended. Article 16.1.5(c) does not determine
the right to excusal or suspension of obligations, which is
governed by Articles 16.1.1 to 16.1.3, nor does it prescribe what
relief can be granted under Chapter XVI. It has been stated that
Article 16.1.5(c) applies only when obligations are suspended–
not excused entirely as evident from the plain and ordinary
meaning of the contract’s terms, and any other view contradicts its
clear and unambiguous language.
k. The allocation of costs to DIAL is patently illegal and lacks
justification under Indian law. The award on interest is also
unreasoned, patently illegal, and against the fundamental policy of
Indian law.
l. The finding that AAI admitted the occurrence of Force Majeure in
its letter dated 04.04.2020 is false, patently erroneous and contrary
to the record. The letter, issued under Article 16.1.5(d) of the
OMDA, explicitly disputed DIAL’s claim that no AF was payable
due to Force Majeure. It has been stated that while AAI, acting in
good faith, granted DIAL an extension until 30.06.2020 to submit
its annual business planned and deferred the time for payment of
MAF till 15.07.2020 without interest, to align with the revised
timeline given the difficulties cited due to the lockdown and. This
was purely a procedural accommodation, not an acknowledgment
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of Force Majeure. The letter expressly rejected DIAL’s
entitlement under Chapter XVI of the OMDA, and learned AT’s
conclusion that it amounted to an admission is legally untenable
and a patently erroneous finding that no fair-minded arbitrator
could have reached.
23. It has been stated in the petition that the impugned arbitral award
warrants interference on two more counts. First, the learned AT’s
reliance on AAI granting relief to its own concessionaires to justify
relief for DIAL is patently illegal and has no contractual basis under
the OMDA. It has further been stated that the learned AT ignored key
evidence that DIAL itself did not extend revenue share relief to its own
concessionaires at Delhi Airport. Furthermore, AAI’s argument that
DIAL’s claim was not contractual but premised on public law grounds
beyond the jurisdiction was not even considered. Learned AT
erroneously equated DIAL, an airport operator, with small retail
concessionaires (such as cafés) at AAI-run airports, despite the
fundamental difference in their roles. DIAL holds an exclusive right to
operate Delhi airport, with its primary financial obligation being the
payment of the AF, whereas AAI’s concessionaires operate individual
shops without comparable obligations. It has been stated that AAI
never excused or suspended revenue share payments for its own
concessionaires, making the learned AT’s conclusion factually and
legally flawed. Additionally, it has been stated the impugned arbitral
award’s reasoning is extra-contractual, relying on AAI’s treatment of
other agreements rather than the specific terms of the OMDA,
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rendering it liable for setting aside under Section 34(2)(A) of the Act. It
has also been stated that the learned AT also wrongly asserted that AAI
ignored the term “excuse,” despite AAI’s written submissions
addressing this distinction extensively. Furthermore, the finding that
the contract would have become void “but for” the Force Majeure
clause is entirely unsupported by evidence and overlooks the necessity
of proving an actual inability to perform.
C. SUBMISSIONS ON BEHALF OF THE PETITIONER
24. Sh. Tushar Mehta, learned Solicitor General submitted that the
impugned award is liable to be set aside as it is perverse, contrary to
law, and fundamentally alters the contractual framework between the
parties. It was submitted that an arbitral award is liable to be set aside,
if the arbitrator construes the contract in a manner that no fair-minded
or reasonable person would, and the arbitrator’s view is not even a
possible view, or if the award wanders outside the contract. It has been
submitted that the contract, which is the culmination of the parties’
agency, is to be given full effect, and no provision thereof can be
frustrated or rendered otiose. It has been submitted that an arbitral
award can also be set aside if the award is (i) unreasoned, in
contravention of Section 31(3) of the Act; (ii) perverse and, hence,
patently illegal; (iii) contrary to the fundamental policy of Indian law,
inter alia for the reason that it disregards judgments/orders passed by
superior courts. Reliance has been placed on Ssangyong Engg. &
Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 to emphasize that
if an arbitrator gives no reason for an award, it contravenes Section
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31(3) of the Act that would certainly amount to patent illegality on the
face of the award. It was submitted that though perversity may no
longer be a ground for challenge ―under public policy of India‖ it
would certainly amount to patent illegality appearing on the face of the
award.
25. Learned SG has also relied on the judgment in DMRC Ltd. v. Delhi
Airport Metro Express Pvt. Ltd., 2024 INSC 292 to emphasize that in
a similar case involving public funds, the Apex Court approved the
exercise of power under Section 34 to set aside an Award holding it to
be perverse and resulting in a miscarriage of justice, on the ground that
the tribunal adopted an ―unreasonable‖ and ―uncalled for
interpretation‖ of the contract which frustrated the relevant contractual
provision(s). Learned SG submitted that in DMRC Ltd. v. Delhi
Airport Metro Express Pvt. Ltd.,(Supra) reliance was placed upon
‘Ssangyong Engg. & Construction Co. Ltd. v. NHAI’, (Supra)
wherein it was inter alia held that though construction of the terms of a
contract is primarily for an arbitrator to decide. However, if the
arbitrator construed a contract in a manner that no fair minded or
reasonable person would or that the arbitrator’s view is not even a
possible view to take or if the arbitrator wanders outside the contract
and deals with the matter not allotted to him, the arbitrator commits an
error of jurisdiction. Learned SG submitted that this ground of
challenge now falls within the new ground added under Section
34(2)(A) of the Act. It was submitted that a finding based on no
evidence at all or an award which ignores vital evidence in arriving at
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its decision would be ―perverse‖ and liable to be set aside on the
ground of ―Patent Illegality‖.
26. Learned SG has relied upon Energy Watchdog v. CERC, (2017) 14
SCC 80 in which reliance was placed upon Alopi Parshad & Sons Ltd.
v. Union of India, (1960) 2 SCR 793: AIR 1960 SC 588 wherein it was
inter alia held that the performance of a contract is never discharged
merely because it may become onerous to one of the parties. In Energy
Watchdog (Supra) reliance was also placed upon Naihati Jute Mills
Ltd. v. Khyaliram Jagannath, (1968) 1 SCR 821, wherein it was inter
alia held that a contract is not frustrated merely because the
circumstances in which it was made are altered. It was further inter alia
held that the courts have no general power to absolve a party from the
performance of its part of the contract merely because its performance
has become onerous on account of an unforeseen turn of events.
27. Similarly, in Energy Watchdog (Supra) reliance was also placed upon
Tsakiroglou & Co. Ltd. v. Noblee Thorl GmbH (1961) 2 WLR 633
wherein the House of Lords inter alia held that even though the
contract had become more onerous to perform, it was not
fundamentally altered. It was further inter alia held that where
performance is otherwise possible, a mere rise in freight price would
not allow one of the parties to say that the contract was discharged by
impossibility of performance.
28. Learned SG has also placed reliance upon NTPC Limited v Jindal ITF
Limited & Anr.2025 SCC OnLine Del 511 wherein it was inter alia
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held that despite the minimum judicial interference, the Court would
not mechanically uphold the award of the learned Arbitral Tribunal
without examining the same on the anvil of the settled judicial
principles and principles of natural justice. In this case, it was inter alia
held that the legislature may have circumscribed the jurisdiction of the
Court but still it has bestowed a duty upon the Court to examine the
same within a limited sphere
29. Learned SG has submitted that the Force Majeure clause in the OMDA,
i.e., Chapter XVI is a self-contained code governing ‗Force Majeure’
which provides conditions that must be satisfied for an event to qualify
as an event of ‗Force Majeure’ within the meaning of the OMDA for
the benefit of suspension/excusal to be availed. Learned SG has taken
this court through the scheme of Chapter XVI of the OMDA and
submitted that Article 16 of the OMDA requires that the party claiming
the benefit of the Force Majeure provision can seek suspension/excusal
of the relevant contractual obligation ―to the extent that‖ it is ―unable to
render such performance‖. It was submitted that in any case ―Force
Majeure‖ is not an admitted position, while the pandemic is covered as
one of the physical events set out in Clause 16.1.3, however, as per the
same clause, it is evident that the pandemic would qualify as Force
Majeure only ―to the extent that they, or their consequences satisfy the
requirements set forth in Article 16.1.1 and Article 16.1.2‖, i.e.,
inability is a sine qua non for an event described in Article 16.1.3 to
constitute ―Force Majeure‖ under the OMDA and thereby avail the
benefit of Chapter XVI.
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30. Learned SG submitted that in the present case, DIAL has not been able
to prove that it was ―unable‖ to pay the AF from 13.03.2020 onwards.
It has been submitted that DIAL had substantially discharged its
obligation to pay AF to AAI during the subsistence of the alleged Force
Majeure event, i.e., between 19.03.2020 to17.03.2021. DIAL was,
admittedly, able to pay AF at least for the period March 2020 to
December 2020, evident from the fact that it actually paid Rs.465.77
Crores during this period, discharging its liability to pay Annual Fee
for this period in full. It was also submitted that on 17.03.2021
immediately prior to the expiry of 365 days from the date it allegedly
sought relief, i.e., 19.03.2020, DIAL issued a letter declaring the end of
Force Majeure.
31. Learned SG submitted that despite being able to pay the AF, DIAL, in
its Statement of Claim, sought excusal from payment of the AF from
March 13, 2020, till such time period it achieves the level of activity
prevailing before occurrence of Force Majeure. Additionally, DIAL
sought an extension of the term of the OMDA. Significantly, these
reliefs were sought without a single pleading in the Statement of Claim
asserting that DIAL was ―unable‖ to pay the AF, as required under
Chapter XVI of the OMDA.
32. Learned SG submitted that even DIAL itself candidly admitted that it
had been ―constantly making‖ payments of the AF. DIAL contended
that it was not required to demonstrate such inability to claim the
benefit of Chapter XVI–an argument that directly contradicts the
requirement under Article 16.1.1 to demonstrate an inability to perform
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the obligation in question. Learned SG emphasized that when a party
has in fact been able to perform its obligations, it cannot claim an
inability to do so or seek an excuse from performance.
33. Learned SG further submitted via email dated 19.03.2020, DIAL
informed AAI of an alleged decline in its revenues due to reduced
traffic volumes caused by the COVID-19 pandemic. DIAL stated that it
would submit a provisional Business Plan for FY 2020-21 before
31.03.2020, incorporating the effects of the pandemic, based on which
it would determine its MAF payment for April 2020. Subsequently, on
27.03.2020, while submitting its interim business plan for April 2020,
DIAL took the position that it would not be in a situation to discharge
its obligation to pay the monthly AF to AAI for at least the next three
months, up to June 2020. Following this, via an email dated
31.03.2020, DIAL made a request under Article 16 of the OMDA,
stating that the outbreak of COVID-19 constituted a Force Majeure
event under Article 16 of the OMDA, which had significantly impacted
its business and severely affected its revenues. Accordingly, DIAL
sought a waiver not a suspension or excusal of the MAF payments for
the period up to June 2020. However, it has been submitted that none
of these communications satisfied the requirements of Article 16.1.5(a),
primarily because they did not explicitly claim an inability to fulfill the
obligation to pay AF, as required under Chapter XVI of the OMDA.
Moreover, none of these communications asserted any right or relief
concerning an extension of the term of the OMDA, either under
Chapter XVI or otherwise. It was further submitted that, despite raising
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concerns about its financial position, DIAL did not avail itself of the
one-time, without-prejudice deferral offered by AAI (which was
initially requested by DIAL itself). Instead, DIAL continued making
regular and complete payments of the Annual Fee throughout the peak
of the pandemic, from March 2020 to December 2020.
34. Learned SG has submitted that in addition, the impugned arbitral
award not only holds that DIAL is excused from making any payment
of the Annual Fee to AAI during the period 19.03.2020 to 28.02.2022,
but it also holds that DIAL is entitled to an extension of the very term
of the OMDA despite the fact that, no clause in the OMDA, including
the Force Majeure clause, contemplates such relief and, further that no
such relief was sought at the relevant time by DIAL while purportedly
invoking Article 16 of the OMDA. It has been submitted that DIAL has
been granted a ―double dip‖ of both excusal of its obligation to pay the
AF and also an extension of the term of the OMDA and has been
unjustly enriched at the cost of public monies.
35. Learned SG submitted that the learned AT has rewritten the contract
between the parties and rendered otiose certain key provisions thereof.
It has been submitted that DIAL’s case was that Article 16 of the
OMDA provided for suspension/excusal of DIAL’s obligation to pay
the AF to AAI under Article 11 in the event the revenues received by
DIAL during the corresponding period were insufficient to operate and
manage the Airport. It has been submitted that nothing in the language
of either Article 16 or Article 11 contains such a stipulation. It has been
submitted that without explicitly giving expression to the term it was
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implying in the OMDA, the learned AT concludes that during the so-
called force majeure period, revenue receipts would have to be used
firstly for running the Airport, and in the event that there is a surplus
thereafter, the surplus would have to be shared. It has been submitted
that this stipulation finds no place in the OMDA, but has been written
into the contract by the Award.
36. Learned SG submitted that an essential contractual precondition, i.e.,
that a party must be unable to perform a particular contractual
obligation in order to claim the benefit of the force majeure provision,
has been written out of existence by the learned AT. It has been
submitted that since DIAL actually paid the AF during the worst of
pandemic, DIAL cannot possibly be said to be ―unable‖ to perform its
obligation under Chapter XI of the OMDA. Therefore, the decision to
order a refund of amounts paid over by DIAL to AAI is a patently
illegal conclusion.
37. Learned SG submitted that learned AT has also inserted a provision on
extension of the term of the OMDA. It has been submitted that no
provision of the contract, either in Chapter XVI or XVIII or otherwise,
contemplates the extension of the term of the OMDA on account of
force majeure events. It has been submitted that in its letter dated
March 31, 2020, DIAL did not seek such an extension, and during the
arbitration proceedings, in the course of its oral submission, DIAL
expressly admitted that there was no contractual basis for this relief,
instead relied on the principles of business efficacy for seeking the
relief of such extension. It has been submitted that the impugned
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arbitral award does not examine or address these fundamental
arguments, nor does it engage with the admission. It has been
submitted that learned AT ignored this contention of AAI. It has further
been submitted that the learned AT summarily granted the relief of
extension in a single paragraph, without substantive reasoning or
contractual justification, thereby effectively rewriting the contract by
altering the term of the OMDA (Chapter XVIII), expanding the relief
under the force majeure clause beyond what is permitted (Chapter
XVI) and changing the basis on which bids were invited. It has been
submitted that the learned AT erroneously inserted a provision for
extension that does not exist in the contract.
38. Learned SG submitted that learned AT’s justification, as set out in of
the impugned arbitral award, is legally ‗unsustainable’ and
‗unreasoned’, as it asserts that in several contracts where the tenure
spans a long term, alleviation/relief is accommodated by extending the
tenure of the contract without citing any legal authority, contractual
provision, or factual basis. Further, it was submitted that learned AT
misinterpreted Article 16.1.5(c), which does not contemplate an
extension of the term and erroneously relied on AAI’s letter dated
March 30, 2020. It has been submitted that there is no letter dated
30.03.2020 in the record of the present case and even otherwise, if
AAI’s letter dated 04.04.2020, which speaks of Article 16.1.5(c) is
taken into consideration, it only provides that AAI would be willing to
have recourse to the said Article to in respect of payment of MAF for
the months of April, May and June 2020.
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39. Learned SG submitted that learned AT has converted the OMDA into a
Profit-Sharing Contract. It has been submitted that under the OMDA,
DIAL shares 45.99% of its Revenue with AAI, and the said obligation
to pay the Annual Fee is not contingent on DIAL being able to meet its
operational costs or establishing that DIAL is encountering negative
cash flow. Learned SG has submitted that the conversion of revenue-
based model into profit-based model essentially rewrites the OMDA
and also has an effect of rewriting the Priority Cash-flow Application
provided in clause 3.2(B) of the Escrow Account Agreement, wherein
payment of AAI Fee is given precedence over meeting of DIAL’s
operational and other expenditure.
40. Learned SG submitted that the impugned arbitral award is unreasoned
and perverse on multiple key issues. Learned AT stated that the
transpiration of a force majeure event is beyond cavil or disputation,
thereby rendering otiose any notice as envisaged in Article 16.1.5 of
the OMDA. It has been submitted that this observation by the learned
AT effectively negates the contractual requirement of demonstrating an
inability to perform obligations before invoking Force Majeure, thereby
bypassing a fundamental prerequisite under the contract. It has been
submitted that the learned AT fails to undertake any analysis of
whether DIAL was actually unable to pay the AF which is a critical
issue for determining the validity of its claim under Chapter XVI of the
OMDA. Further, it has been submitted that the learned AT also held
that it was unnecessary for it to return an opinion on the question
whether OMDA envisions either revenue sharing or profit sharing,
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despite AAI specifically arguing that acceptance of DIAL’s claims
would fundamentally alter the contractual framework. Learned SG
submitted that this failure to engage with AAI’s argument undermines
the reasoning of the impugned arbitral award. Additionally, it has been
submitted that the impugned arbitral award is plainly perverse and
internally contradictory as on one hand the learned AT recorded that
DIAL conceded that all conditions under Article 16.1.2 must be
satisfied in order to claim relief under Chapter XVI, yet on the other
hand, it has recorded the submission of DIAL that Chapter XVI does
not require proof of inability to pay. Learned SG submitted that this
contradiction further underscores the perverse nature of the impugned
arbitral award, as it fails to provide a consistent and reasoned approach
to the interpretation of the contractual provisions.
41. Learned SG submitted that the impugned award is contrary to the
public policy as the learned AT held that Section 32 of the Indian
Contract Act would only be attracted if the contingency of the outbreak
of COVID or any other closely similar contagion had specifically been
postulated and dealt with in the contract. However, it has been
submitted that this statement disregards the binding effect of Energy
Watchdog v. CERC, (2017) 14 SCC 80, which clearly holds that
Section 32 of the Indian Contract Act applies when a contract contains
a force majeure clause, whereas Section 56 applies when there is no
such provision.
42. Learned SG submitted that the fact that DIAL’s revenues are said to
have dropped during the relevant period is not sufficient to avail the
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benefit of Chapter XVI. To avail the benefit of Chapter XVI, all
conditions of Article 16.1.2 have to be satisfied. This is evident from
the plain language of Article 16.1.2 as has also been held in the
impugned arbitral award. This is also in accord with Article 16.1.3
which specifies that a physical event only constitutes ―Force Majeure‖
if it also satisfies the requirements of Articles 16.1.1 and 16.1.2.
Learned SG submitted that the alleged temporary negative cash flow of
DIAL only satisfies the requirement of Article 16.1.2(a) but not the
requirement of Article 16.1.2(e) and Article 16.1.1, i.e., the
requirement to prove inability. It has been submitted notwithstanding
above and assuming that DIAL suffered a temporary negative cash
flow and that such temporary negative cashflow ‘materially and
adversely affects the performance of an obligation’, even in that case
this in itself is not sufficient to claim the benefit of Chapter XVI
without DIAL also proving that it was ―unable to render such
performance by an event of Force Majeure‖. In view of the decision of
Supreme Court in Energy Watchdog v. CERC, (2017) 14 SCC 80, it
has been submitted that a party is not discharged from its contractual
obligations even if performance of the same has become more onerous.
43. Learned SG submitted that it is not sufficient for DIAL to say that if its
revenues drop, the provisions of Chapter XVI automatically trigger.
The test is inability or impossibility to perform the obligation, i.e.,
inability to pay AAI its share of the Revenue and, it has been submitted
that this test is not satisfied. On the contrary, DIAL has in fact
discharged its obligation by paying over AAI’s share of Revenue while
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continuing to operate and maintain the Delhi Airport. Thus, it has been
submitted that the impugned arbitral award has substituted the contract
between the parties with one of its own making inter alia by writing
Clauses 16.1.1 and 16.1.2(e) out of existence, in an attempt to provide
some basis for the grant of relief to DIAL.
44. Learned SG submitted that the grant of relief until 28.02.2022 is
unreasoned. It has been submitted that DIAL’s reliance on Article
16.1.5(c) of the OMDA is misplaced and contrary to the meaning of the
said provision. It has been submitted that a bare peruse of Article
16.1.5(c) makes it clear that the provision allows for the ―the time for
performance‖ to be ―extended by the period during which such Force
Majeure continues and by such additional period thereafter as is
necessary to enable the affected Party to achieve the level of activity
prevailing before the event of Force Majeure.‖ Therefore, Article
16.1.5(c) only provides for the period that a suspension could operate.
Such a stipulation, it has been submitted, is not relevant to a
whatsoever to ―excusal‖, which is the relief that has been granted. If an
obligation has been excused, there is no question of extending the time
for performance of the same. Further, learned SG submitted that
without prejudice to the above, and assuming without conceding that
the said Article has any relevance in this context, it has been submitted
that Article 16.1.5(c) only allows for a time extension to perform those
obligations that were affected during force majeure. It does not wipe
out contractual obligations that arose for the very first time after the
period of force majeure ceased to exist. It has been submitted that even
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according to DIAL itself, the force majeure event ceased to exist on
17.03.2021, thus, no obligation that arose after 17.03.2021 could have
been suspended by having recourse to Article 16.1.5(c). Be that as it
may, it has been submitted that the learned AT has erred in not
determining what is the ―additional period thereafter as is necessary to
enable the affected Party to achieve the level of activity prevailing
before the event of Force Majeure‖. It has been submitted that the sole
basis on which DIAL has been granted relief till 28.02.2022 is the
Supreme Court’s Order extending limitation. However, it has been
submitted that DIAL did not even attempt to justify this reasoning or
even suggest that the Order of the Supreme Court extending the
statutory period of limitation under several laws has any relevance to
the purely contractual issue of relief being claimed under a Force
Majeure clause.
45. Learned SG submitted that the Supreme Court’s Order extending
limitation has nothing to do with contractual force majeure generally or
specifically under OMDA. It has submitted that the same has no
relevance to the conditions stipulated in Chapter XVI which an affected
party must satisfy in order to claim relief under the said Chapter.
Therefore, it has been submitted that the impugned arbitral award is
clearly based on guesswork and irrelevant considerations, which
contradict the clear and unambiguous terms of the contract.
46. Learned SG submitted that the submission of DIAL that Article
16.1.5(c) also provides for extension of the term of the OMDA is
incorrect and contrary to the plain language of the contract. It has been
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submitted that Article 16.1.5(c) only allows for the time for
performance of an obligation affected by force majeure to be extended
for a specified period within the term. It does not allow a party to
extend the term of the Contract itself. It has been submitted that Article
16.1.5(c) only entails the ―Procedure for Force Majeure‖ and only
defines the period of suspension of performance of an obligation
affected by Force Majeure under Article 16.1.1 and has no application
to the enjoyment of rights granted to DIAL under the OMDA. If it were
the intention of the parties that the force majeure clause would operate
to extend the Term of the OMDA, the contract would have said as
much. It conspicuously does not do so. It has been submitted that
Article 16.1.5(c) does not provide a basis for claiming a relief over and
above those contemplated under Article 16.1.1, namely suspension or
excuse of DIAL’s obligations under the OMDA. In any case, it has
submitted that DIAL’s submission that Article 16.1.5(c) permits the
extension of ―any right affected‖ by Force Majeure and therefore the
grant itself is to be extended cannot be accepted for the simple reason
that no such reasoning exists in the Award. It has been submitted that
the fact that DIAL is relying on reasoning that forms no part of the
impugned arbitral award to support the conclusions arrived at therein is
sufficient proof that the impugned arbitral award is incapable of being
defended. Therefore, it has been submitted that the Tribunal has
granted reliefs that find no mention in Chapter XVI or anywhere else in
the contract, thereby impermissibly rewriting the very Term of the
OMDA under Article 18.1(e).
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47. Learned SG submitted that DIAL’s reliance on the letter dated
04.04.2020 to contend that occurrence of force majeure was an
admitted position between the parties is misplaced. It has been
submitted that in the letter dated 04.04.2020 sent by AAI , AAI has
never admitted to the occurrence of force majeure. However, on a
without prejudice basis, AAI had offered a three month deferral to
DIAL as requested by it. Further, it has been submitted that DIAL has
failed to explain how this ‗without prejudice’ communication which is
issued specifically under Article 16.1.5(d) constitute admission of force
majeure.
D. SUBMISSION ON BEHALF OF THE DIAL
48. Per Contra, Mr. Parag Tripathi and Mr. Raj Shekhar Rao, learned
senior counsels submitted that the impugned award is unanimous, well-
reasoned, and based on a correct interpretation of OMDA, as well as
the pleadings, documents, and evidence presented during the arbitral
proceedings. It has been submitted that the findings of learned AT are
supported by a detailed evaluation of material evidence, legal
precedents, and established contractual principles, thereby leaving no
room for judicial interference under Section 34 of the Act.
49. Learned senior counsels submitted that it is trite that an arbitral
tribunal’s decision cannot be interfered with by the Court exercising its
jurisdiction under Section 34 of the Act if its interpretation of a
contract represents a plausible view of the matter. It was submitted that
the arbitrator is the final Arbiter of facts, and courts while exercising
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their power under Section 34 must defer to their findings unless they
are perverse or contravene fundamental policy. Reliance has been
placed on UHL Power Company Ltd. v. State of Himachal Pradesh
(2022) 4 SCC 116, Parsa Kente Collieries Ltd. v. Rajasthan Rajya
Vidyut Utpadan Nigam Ltd. (2019) 7 SCC 236 and Hindustan
Construction Co. Ltd. v. NHAI (2024) 2 SCC 613, to submit that the
courts should not act as appellate forums over arbitration awards.
Further, learned senior counsels also submitted that the grounds for
challenge of an award under Section 34 are well settled and well
defined and in the present case, none of the grounds of challenge are
available.
50. Learned senior counsels submitted that the interpretation rendered by
the learned AT regarding Chapter XVI of OMDA–the primary clause
under scrutiny–is the only possible and legally sound interpretation.
This is particularly true as critical facts, events, and material evidence
are undisputed. It was submitted that the findings of fact have not even
been challenged in the present petition. Learned senior counsels
submitted that the testimony of DIAL’s witness (CW-2) on crucial
facts stood unrebutted throughout the proceedings, further
strengthening DIAL’s position. It was submitted that in fact it is the
AAI that is seeking to read words into the clause and rewrite the said
clause, which would render the word ‗excuse’ otiose. It was submitted
that the learned AT’s interpretation is based purely on the clause’s
wording and is both reasonable and prudent. Moreover, it was
submitted that even if an alternative interpretation were possible, the
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settled principle of arbitration law dictates that so long as the tribunal’s
view is plausible, it cannot be interfered with under Section 34 and the
award cannot be set aside merely on the ground that there is another
possible interpretation.
51. Learned senior counsels submitted that Article 16.1.2 of OMDA
enumerates five specific conditions that must be satisfied for an event
to be constituted as a Force Majeure Event. It was submitted that the
learned AT meticulously examined the record and determined that in
the present facts and circumstances all the five conditions were
satisfied. It was submitted that the said finding of the learned AT is
based on an exhaustive analysis of the unrequited evidence. Learned
Senior Counsels pointed out that AAI’s primary contention revolves
around learned AT’s supposed failure to consider conditions under
Article 16.1.2(a) and (e), particularly regarding DIAL’s purported
‗inability’ to pay AF. However, it was submitted that the learned AT,
upon careful evaluation, held that Covid-19 had materially impaired
DIAL’s ability to perform and discharge its obligations under
OMDA. Firstly, it was submitted that there cannot be any doubt that
the Covid-19 pandemic was a force majeure event, and its ramifications
on contractual performance had to be assessed accordingly. It was
submitted that DIAL invoked Article 16 through a series of letters and
emails addressed to AAI, outlining the severe impact of the pandemic,
including an unprecedented revenue shortfall and its direct
consequence was the inability to meet even mandatory obligations. It
was submitted that in view of various notifications and circulars issued
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by the Government of India, even though the aircraft and passenger
movement had reduced drastically, DIAL was incurring significant
operational and maintenance costs, rendering its financial position
untenable. It was submitted that the entirety of these correspondences
were presented before learned AT and duly proved by DIAL’s
witnesses including CW-2, that deposed to the effect that the pandemic
had severely affected DIAL’s financial performance, compelling the
company to withdraw a working capital facility of Rs. 307.52 crores.
Additionally, it was submitted that the financial statements of DIAL
were also presented as evidence before the learned AT which
conclusively demonstrated that airport revenues were insufficient to
cover operational expenses and substantiated DIAL’s inability to meet
its financial obligations under OMDA. Learned senior counsels
submitted that the AAI neither challenged nor questioned these
financial statements during cross-examination. Furthermore, learned
senior counsels submitted that the DIAL’s revenue generation is
directly tied to aeronautical and non-aeronautical services, which in
turn rely on ATM and PTM. It was submitted that the government-
mandated restrictions and suspensions of air travel resulted in a drastic
reduction in both ATM and PTM and the data sourced from AAI’s
official website and its annual reports corroborated this decline, both of
which were presented and thoroughly analyzed before learned AT. It
was submitted that the learned AT, upon reviewing this evidence,
rightly concluded that DIAL’s ability to generate revenue was severely
and acutely affected from the last week of March 2020 onward. The
learned AT further observed that Covid-19’s impact on airport
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operations was such that operational expenses exceeded total revenue.
Consequently, learned senior counsels submitted that that the finding
qua ‗inability’ is a finding of fact based on the relevant and uncontested
material before the learned AT making judicial interference
unwarranted under Section 34 of the Act. It was submitted that the
learned AT had painstakingly examined the entire contractual
framework and the factual matrix. In fact, the view taken by the learned
AT was not only plausible but the only correct view.
52. Learned senior counsels submitted that Article 16.1.1 explicitly entitles
parties to either ‗suspend’ or ‗excuse’ performance of their obligations
and the learned AT correctly held that these terms could be interpreted
synonymously, as once force majeure conditions ceased to exist, the
status quo ante would be restored. It was submitted that AAI’s
interpretation attempted to impose a restrictive reading that disregarded
the word ‗excuse’ and the same was not supported by the contractual
text. It was submitted that learned AT rightly rejected such an
approach. Further, DIAL had no option to suspend airport operations
during the pandemic, as it was legally bound to maintain the airport’s
functioning. Consequently, requiring payment of the AF despite DIAL
incurring substantial losses would have been commercially
unreasonable. It was submitted that force majeure principles dictate
that no party should be unduly burdened with losses beyond its control.
The learned AT, upon examining the evidence, found that Covid-19
had materially and adversely impacted DIAL’s ability to operate the
airport, creating a situation where expenses exceeded revenue. It was
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submitted that the learned AT, rather than disregarding the phrase ‗to
the extent,’ correctly applied it by considering financial evidence
demonstrating DIAL’s negative cash flow, which impaired its ability to
perform its obligations under OMDA. It was submitted that
recognizing the available reliefs–namely, ‗suspend’ or ‗excuse’–
learned AT rightly concluded that, since DIAL was mandated to
continue operating the airport and was compelled by law to incur all
associated costs, it was entitled to excusal from the AF payment. It was
submitted that as Article 16.1.1 itself envisages the relief of excusal,
and the learned AT has rendered a reasoned finding based on evidence
and interpretation, no interference is warranted. Any other
interpretation would undermine the objective of OMDA by placing
DIAL in a position where it could not fulfill its primary obligation to
operate the airport, leading to a failure of the contract’s fundamental
purpose.
53. Learned senior counsels submitted that the financial impact of the
pandemic resulted in DIAL’s expenses exceeding its revenue, making
the payment of the Annual Fee infeasible. The assertion that DIAL
could pay simply because some revenue was being generated is both
misleading and legally untenable. It was submitted that learned AT
correctly observed that it would be too simplistic to require DIAL to
pay 45.99% of its earnings without considering its obligation to ensure
the smooth functioning of the airport. Learned senior counsel submitted
that accepting AAI’s argument would effectively nullify the Force
Majeure clause and undermine the fundamental structure of OMDA as
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the said interpretation suggests that contractual obligations must remain
unchanged even during a force majeure event. It was submitted that
such a position is flawed, as it would render Article XVI of OMDA
meaningless. Learned senior counsel submits that, given DIAL’s legal
obligation to keep the airport operational despite significant financial
distress, excusal from the AF payment was the only reasonable
outcome under Article 16.1.1 and the learned AT’s interpretation
upholds the principle of business efficacy, ensuring that contractual
provisions remain commercially viable even in extraordinary
circumstances such as a global pandemic.
54. Learned senior counsels submitted that AAI has objected that that
learned AT ignored its evidence regarding ‗inability’. However, it was
submitted that AAI did not produce any factual witnesses, instead
relied solely on an expert witness (RW-1), whose testimony was
fundamentally flawed. It was submitted that RW-1 failed to adhere to
forensic accounting principles and did not consider the utilization of
DIAL’s funds, and overlooked key financial indicators.
55. Learned senior counsels submitted that AAI contended that learned AT
ignored Article 16.1.5(a). However, it was submitted that the
Government of India had itself recognized Covid-19 as a Force
Majeure Event through its office memorandum dated 19.02.2020,
thereby rendering the requirement of notice under Article 16.1.5
redundant. Additionally, it was submitted that AAI’s letter dated
04.04.2020 implicitly acknowledged the occurrence of a Force Majeure
event. Learned AT concurred with this view and held that AAI’s
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argument–that DIAL had not validly invoked Force Majeure under
Article 16.1.5(a)–was misconceived. It has been submitted that AAI’s
assertion that the letter dated 04.04.2020 did not amount to an
admission of force majeure is both incorrect and an afterthought. The
letter clearly recorded AAI’s acknowledgment of the Force Majeure
Event and confirmed that the Monthly Annual Fee payment was
deferred on that basis. It was submitted that AAI, in the letter dated
04.04.2020 specifically noted DIAL’s invocation of force majeure
under OMDA and proceeded in accordance with the procedural
framework outlined in the agreement. AAI had also indicated its
willingness to extend the time for payment of the MAF for a specified
period, thereby recognizing the impact of the pandemic. It was
submitted that the Learned AT, after considering this letter, concluded
that AAI had made a tacit admission of force majeure and had, in view
of the prevailing circumstances, deferred certain obligations. The
Learned AT further observed that AAI’s subsequent denial of the force
majeure event was disingenuous, particularly given the governmental
directives, Supreme Court rulings, and AAI’s own actions in granting
relief to other concessionaires.
56. Learned senior counsels submitted that regarding the Pre-Force
Majeure level of activity and the duration of the relief, Learned AT
justifiably determined 28.02.2022 as the appropriate date until which
relief could be granted, based on material on record. This inter alia
included the financial statement of DIAL for FY 2021-22, which
reflected a loss of INR 293.22 crores, the order dated 30.07.2021
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suspending international commercial flights until 31.08.2021, and the
widely known impact of the Second Covid Wave. It was submitted that
learned AT was fully conscious that the precise date for the resumption
of Pre-Force Majeure activity levels could not be definitively
ascertained. Accordingly, it left this issue open for determination in a
separate proceeding. However, until 28.02.2022, it was submitted that
learned AT had sufficient evidence available particularly the financial
statement of DIAL which demonstrated that pre-COVID activity levels
had not been restored. This finding, based on evidence on record and a
correct interpretation of Article 16.1.1 read with Article 16.1.5(c), is
not open to challenge under Section 34 of the Act. Consequently, it was
submitted that the argument advanced by AAI–that relief could not
have been granted beyond 17.03.2021 or that the end date of
28.02.2022 was speculative and arbitrary. Thus, untenable and liable to
be rejected.
57. Learned senior counsels further submitted that AAI contends that the
obligation to pay the Annual Fee always remains capable of
performance since it is calculated as a percentage of revenue.
According to AAI, the relief of ‗excuse’ effectively rewrites the terms
of the OMDA. However, it was submitted that this argument is
misplaced. In fact, the same argument was raised before learned AT,
which held that it was an oversimplification to assert that DIAL must
pay 45.99% of its earnings without considering its obligation to ensure
the smooth functioning of the airport. Learned AT’s interpretation of
Article 16.1.1 and the consequent relief of ‗excuse’ were based on a
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sound understanding of Force Majeure and aligned with the business
efficacy of the contract. It was submitted that it is a well-established
principle that commercial contracts should be interpreted in a manner
that upholds business efficacy and commercial prudence. Therefore,
the learned senior counsels submit that learned AT, in holding that
DIAL was ‗excused’ from paying the AF, merely interpreted the terms
of the agreement in a way that preserved business efficacy. This does
not constitute a rewriting of the contract. On the contrary, it was
submitted that it is AAI that seeks to rewrite the contract by
introducing the term ‗deferral’ into Article 16.1.1, a term that is not
present in the said Article. Furthermore, when viewed in context,
AAI’s argument–that learned AT altered the OMDA from a revenue-
sharing to a profit-sharing model–fails, as learned AT simply applied
Chapter XVI and excused DIAL’s obligation to pay the Annual Fee
under Chapter XI.
58. Learned senior counsels submitted that AAI has also argued that the
learned AT’s finding that revenue receipts were to be utilized first for
operating the airport, and any surplus thereafter was to be shared
between DIAL and AAI in the agreed contractual ratio amounts to a
rewriting of the waterfall mechanism under the Escrow Agreement.
However, learned senior counsels submit that this argument is
misplaced, as it overlooks the fact that the finding pertains to a Force
Majeure event, the consequences of which are governed by Article 16
of the OMDA. Additionally, it was submitted that AAI’s contention
disregards learned AT’s explicit finding that the opposition to payment
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of the AF during the relevant period is not based on the DIAL having
incurred losses–since it is correct that the OMDA does not guarantee
profits to the DIAL–but rather due to the occurrence of Force Majeure
circumstances arising from the Covid-19 pandemic. It was submitted
that this does not, in any manner, amount to rewriting the Escrow
Agreement.
59. Learned senior counsels in respect of relief of an extension of the
OMDA term granted by learned AT, it was submitted that the said
relief was granted after considering trade usage and the terms of the
OMDA. It was submitted that learned AT adopted a practical and
commercial approach aligned with the efficient business practices
applicable to long-term concession agreements such as OMDA.
Therefore, the relief granted by learned AT remains within the
contractual framework and does not constitute a rewriting of the
contract. Learned senior counsel submitted that Clause 16.1.5(c) of
OMDA contemplates that in a force majeure event, the time for the
exercise of any right available to DIAL would be extended. It was
submitted that the grant of the concession under Article 2 of OMDA
constitutes such a right, and the consequential extension of OMDA, as
directed by learned AT, was correctly granted. Furthermore, it was
submitted that applying Clause 16.1.5(c), DIAL specifically sought an
extension of the concession period from 13.03.2020 until such time as
ATM and PTM returned to pre-Covid levels. Learned AT, after
examining the evidence, granted relief for the period from 19.03.2020
to 28.02.2022, noting that, based on the material on record, ATM and
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PTM levels had not reached pre-Covid levels by 28.02.2022. Learned
senior counsel submits that the interpretation of Clause 16.1.5(c) by
learned AT was a plausible interpretation, and such a finding ought not
to be interfered with under the limited scope of review available in a
petition under Section 34 of the Act.
60. Learned senior counsel also submitted that DIAL’s payment of the AF
for the period from March 2020 to December 2020 does not negate the
fact that DIAL, due to the Force Majeure event, was unable to fulfill its
obligations under OMDA. It was submitted that the AF for the said
period was wrongfully appropriated by AAI, despite being fully aware
of DIAL’s financial situation and despite receiving a notice of the
occurrence of Force Majeure. It was submitted that AAI not only
insisted on but also continued issuing instructions to the Escrow Bank
to transfer amounts equivalent to the monthly AF into its Fee Account.
As a result, DIAL made a specific claim for a refund, which learned
AT granted.
61. Learned senior counsels submitted that OMDA contemplates business
as usual on all days when revenue earned is to be shared, except in the
event of a force majeure, wherein the usual revenue-sharing obligation
stands excused. It was submitted that the findings of learned AT, as
expressly recorded by learned AT itself, were rendered in the context
of the force majeure event (Covid-19 pandemic), wherein DIAL was
compelled, by government mandate, to continue operating,
maintaining, and managing the airport despite a drastic reduction in
ATM & PTM. It was submitted that DIAL’s ability to generate revenue
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is inherently linked to aeronautical and non-aeronautical services, and
that, in the event of a substantial reduction in air traffic and passenger
traffic movement, DIAL’s capacity to collect requisite revenues was
materially and detrimentally impacted. The financial impact of Covid-
19 was duly established through the testimony of DIAL’s witness, who
proved the financial statements of DIAL, the significant drop in
revenue, and DIAL’s financial inability to pay the AF.
62. Learned senior counsels submitted that AAI has not challenged the
fundamental findings of learned AT, which have therefore attained
finality. It was submitted that learned AT, categorically noted that the
occurrence of a force majeure event due to Covid-19 was not in
dispute. Further, the learned AT found that the conditions under Article
16.1.2(b), (c), and (d) were satisfied, thereby conclusively establishing
force majeure. It was also submitted that learned AT, recognized that a
reduction in ATM and PTM had a detrimental impact on DIAL’s
revenue, while, it also determined that DIAL’s income for FY 2020-21
and 2021-22 was lower than its expenses. Moreover, the learned AT
acknowledged that DIAL had no option but to continue operating the
airport and that ceasing operations would have nullified the contract.
Additionally, it was submitted that Paragraph 129 of the award
established that DIAL’s financial statements for FY 2019-22
demonstrated its financial inability, a finding that AAI did not
challenge in cross-examination. Since AAI has failed to contest these
fundamental determinations, it was submitted that the Section 34
petition is liable to be dismissed.
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E. FINDING AND ANALYSIS
63. It is a settled proposition that the Arbitration and Conciliation Act,
1963, as amended up to date, prescribe minimum judicial interference.
The Court can interfere under Section 34 of the Act on the limited
grounds provided therein. The award can only be interfered with if the
Court reaches to the conclusion that the perversity of the award goes to
the root of the matter and there is no possibility of alternative
interpretation which may sustain the arbitral award. It is no longer res
integra that the Court while exercising the jurisdiction under Section
34 cannot clothe itself with the appellate jurisdiction. The Court is
bound to respect the finality of the arbitral award. The Act mandates
party autonomy to get their dispute adjudicated by an alternative forum
as provided under the law. The approach of interfering into the award
without there being any ground as prescribed under Section 34 would
actually frustrate the commercial wisdom behind opting for alternate
dispute resolution. It is also pertinent to mention here that the Court
cannot interfere into the award merely on the ground that an alternative
view is possible on the facts and interpretations of contract. It is also a
settled proposition that the Court should respect the view taken by an
Arbitral Tribunal even if the reasoning provided in the award is
implied. The award can only be interfered if it portrays perversity,
unpardonable under Section 34 of the Act. Reliance can be placed upon
Dyna Technologies Vs. Crompton Greaves Limited (2019) 20 SCC 1.
64. In Dyna Technologies Vs. Crompton Greaves Limited(Supra), it was
inter alia held that while considering the requirement of a reasoned
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order, three characteristics of a reasoned order can be fathomed i.e.;
that the order is (i) proper, (ii) intelligible and (iii) adequate. It was
further inter alia held that if the reasonings in the order are improper,
they reveal a flaw in the decision making process. The award is also
open to challenge on the ground of impropriety or perversity in the
reasoning. Similarly, if the award is based on no reasoning at all that
would be termed as unintelligible. However, if there is a challenge on
adequacy of reasons it was inter alia held in Dyna Technologies Vs.
Crompton Greaves Limited(Supra), that the Court while exercising
jurisdiction under Section 34 has to adjudicate the validity of such an
award based on the degree of particularity of reasoning required having
regard to the nature of issues falling for consideration. It was further
inter alia held that the degree of particularity cannot be stated in a
precise manner as the same would depend on the complexity of the
issue. The Apex Court inter alia held that even if the Court comes to a
conclusion that there were gaps in the reasoning for the conclusions
reached by the tribunal, the Court needs to have regard to the
documents submitted by the parties and the contentions raised before
the tribunal so that the awards with in adequate reasons are not set
aside in casual and cavalier manner. Thus, it was held that the Courts
have to be very careful while distinguishing between inadequacy of
reasons in an award and unintelligible awards.
65. Bare perusal of the above makes it clear that if the award provides no
reasoning at all then it falls in the category of unintelligible. Even
otherwise it would be hit by Section 31(3) of the Act which provides
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that the arbitral award must state the reasons upon which the award is
based except for the reasons given in the provision itself. It is also
pertinent to mention here that the Arbitration and Conciliation Act,
1996 does not provide any qualification for being appointed as an
arbitrator. In this regard, Section 11(1) only provides that a person of
any nationality may be an arbitrator unless, agreed by the parties. Thus,
it is not necessary that an arbitrator would be a person from a legal
background. Possibly for this reason, the legislature in its wisdom
under Section 31(3) of the Act has provided that generally the arbitrator
shall state reasons upon which it is based. However, a liberty was given
to the parties that they may agree that in the award no reasons are to be
given. The award may also not provide any reasons, if the parties have
reached on a settlement as provided under Section 30 of the Act. Thus,
it seems that for this reason the Apex Court has inter alia held that
while entertaining the challenges of an award on the ground of
inadequacy of reason the Courts may also consider the documents
submitted by the parties and contentions raised before the tribunal.
Thus, the Courts while exercising its jurisdiction under Section 34 of
the Act may not look only at the award but also look at the pleadings,
documents and submissions made by the parties.
66. The court, in exercising its jurisdiction under Section 34 of the Act to
set aside an award, must determine whether the award is so irrational
that no reasonable person could have reached the same conclusion. An
arbitral award shall into the aforesaid category if the findings are based
on no evidence; or an Arbitral Tribunal has taken into account
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something irrelevant to the decision or ignores vital evidence in
arriving at its decision. Reliance can be placed upon Associate Builders
v. DDA, (2015) 3 SCC 49.
67. In Excise And Taxation Officer-cum-Assessing Authority v. Gopi
Nath & Sons 1992 Supp (2) SCC 312 it was inter alia held that if a
finding of fact is arrived at by ignoring or excluding relevant material
or by taking into consideration irrelevant material or if the finding so
outrageously defies logic as to suffer from the vice of irrationality
incurring the blame of being perverse, then, the finding is rendered
infirm in law. Similarly, in Kuldeep Singh v. Commr. Of Police (1999)
2 SCC 10 it was inter alia held that if a decision is arrived at on no
evidence or evidence which is thoroughly unreliable that no reasonable
person would act upon it, the order would be perverse. However, if
there is some evidence on record which is acceptable and which could
be relied upon, howsoever compendious it may be, the conclusions
would not be treated as perverse and the findings would not be
interfered with.
68. Petitioner, in the present case has relied heavily upon the finding of
Energy Watchdog (Supra) case to submit that a contract cannot be
discharged merely because the same has become onerous. However,
this Court considers that the facts in the Energy Watchdog (Supra) are
respectfully distinguishable to the facts and circumstances of the case.
In the present case, it is not the case of either of the parties that
performance of the contract had become onerous. It was never an
option for the DIAL to close down the operation of the airport. It is a
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settled proposition that the force majeure clause will not generally be
invoked, if the contract provides for an alternative mode of
performance. Reliance can be placed upon Treitel on Frustration and
Force Majeure, 3rd Edition. The Court is of the considered view that ‗a
force majeure clause’ in a contract is generally an exception or an
eclipse provision, meaning thereby if a force majeure is enforced the
performance as mandated in the other terms of the contract will remain
eclipsed till the force majeure event persists. Whether the force majeure
has taken place or not or it exists or not or the time till when it exists is
a question of fact to be determined by the Arbitral Tribunal.
69. In Rashtriya Ispat Nigam Limited vs Dewan Chandram Saran (2012)
5SCC 306 it was inter-alia held that if the terms of a contract are
capable of two interpretations and the view taken by the arbitrator is a
possible if not a plausible one then it is not possible to say that the
arbitrator had travelled outside his jurisdiction, or that the view taken
by him was against the terms of contract. Reliance can also be placed
upon SAIL v. Gupta Brother Steel Tubes Ltd. (2009) 10 SCC 63. In
Sumitomo Heavy Industries Ltd. v. ONGC Ltd.(2010) 11 SCC 296 it
was inter alia held that if the umpire has considered the fact situation
and placed a construction on the clauses of the agreement which
according to him was the correct one, one may at the highest say that
one would have preferred another construction, but that cannot make
the award in any way perverse. It was further inter alia held that in such
a situation, the Court cannot substitute its own view in place of the
view taken by the arbitrator as it would amount to sitting in appeal.
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70. In Kwality Mfg. Corpn. v. Central Warehousing Corpn.(2009) 5 SCC
142 it was inter alia held that if the umpire is legitimately entitled to
take the view, which he holds to be the correct one after considering
the material before him and after interpreting the provisions of the
agreement, the same has to be accepted as final and binding.
71. The Court while deciding the petition under Section 34 of the Act and
particularly in the dispute arising out of the commercial contract must
bear in mind that the parties while entering into the contract,
voluntarily agreed to refer their matter for adjudication by an
adjudicator chosen and appointed by them. The parties at that stage
themselves have excluded their option of going to the Court of Law.
The basic genesis of the arbitration, particularly in the commercial
dispute is that the arbitrator while deciding such dispute may not clothe
himself with a very technical mindset and should decide the dispute
between the parties taking in view the commercial sense and the
business efficacy.
72. In Mumbai Metropolitan Region Development Authority v. Unity
Infraprojects Ltd. (2008) SCC OnLine Bom 190, it was inter-alia held
that a business like interpretation of contractual provisions must be
adopted in construing contracts entered into by persons of business to
govern business dealings. It was further inter alia held that the Court
must ensure that interpretation of law in commercial cases must not be
disjointed from the intent and object which those having business
dealings seek to sub-serve. It was noted that unless interpretation of
contracts effectuates a business meaning for persons of business, the
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law will not fulfill its purpose and object of being a facilitator for
business and providing a structure of ordered certainty to those who
carry on business here. It is necessary to note that the judicial
dispensation system cannot remain static and has to be dynamic and
required to innovate constantly itself to keep abreast with rapid changes
in business terms.
73. In the present case, the AAI which is a statutory authority established
under the Airport Authority of India Act, 1994 and DIAL entered into
contract for commercial purposes. It cannot be disputed that the
intentions of both parties were to earn revenue out of the joint venture.
The joint venture herein was of the development and maintenance of
the one of the most important and landmark airports of this country,
i.e., Delhi. This Court is of the firm view that the state cannot be denied
the commercial gains of profits merely because it has been termed as a
welfare state and certain fundamental responsibilities have been placed
upon it under the various statutes and the Directive Principles of State
Policies. The state would also need the money and the resources for
running various welfare projects, and therefore in the commercial
disputes, the adjudicator has to maintain the balance between the two.
However, the adjudicator must take into account the peculiar facts and
circumstances of every case and must assess the same in a very broad
horizon. The issue in the present case is that whether during the period
of the pandemic, the general provisions of the contract, which
mandates DIAL to pay an AF at a certain percentage will continue even
during the pandemic. It cannot be disputed that during the period of
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Covid the life had come to a standstill. The case of DIAL is that though
they continue to run the operation but their revenues had fallen down
so much that they were unable to meet even the expenses. On the
contrary the case of the AAI is that; firstly it cannot be said that the
DIAL were ―unable to pay‖ the fee as secondly, the conditions as
provided in Article 16 of the OMDA regarding the force majeure never
existed in entirety. Learned AT agreed with the contentions of DIAL
and passed an award against the AAI.
74. The question is whether the finding of the arbitrator in such a situation
can be considered to be perverse. It is a settled proposition that the
interpretation of the contract must be in sync with the test of business
efficacy and should be responsive to the facilitation of business. Any
interpretation which may generate any sense of uncertainty for the
parties, who choose arbitration as a mode of adjudication, should be
avoided.
75. In UHL Power Company Ltd. (Supra) was inter alia held that the law
is not divorced from business realities nor can the vision of the Judge
who interprets the law be disjointed from the modem necessities to
make business sense to business dealings. In UHL Power Company
Ltd. (Supra) the Apex Court while relying upon the Hudson’s
elaboration in his seminal work on Engineering Contracts inter alia
held that the task of the Court is to ascertain the objective intention of
the contract as evidenced by the words used and not by the subjective
intentions of the parties. It was emphasized that the rule of evidence is
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that the whole of the contract should be examined before construing an
individual part.
76. It is pertinent to mention here that there cannot be any dispute to the
proposition as laid down in NTPC Limited v Jindal ITF Limited &
Anr.(Supra).This Court is fully conscious of the fact that if the award
suffers from patent illegality, the Court can certainly interfere to avoid
the miscarriage of justice. However, whether the award suffers from
‗patent illegality’ is a matter of fact which varies from case to case and
has to be determined after taking into account the peculiar facts and
circumstances of the case. While deciding a petition under Section 34
of the Act, Courts cannot adopt the approach of one-size-fit-for-all.
Courts can interfere into the award only if it shocks the conscience of
the Court and is prone to adversely affect the administration of justice.
77. In Parsa Kente Collieries Ltd. v. Rajasthan Rajya Vidyut Utpadan
Nigam Ltd.(Supra), the Apex Court after relying upon the catena of the
judgments inter alia held that an Arbitral Tribunal must decide in
accordance with the terms of the contract, and if an Arbitrator
construes a term of the contract in a reasonable manner, it will not
mean that the award can be set aside. It was inter alia held that
construction of the terms of a contract is primarily for an Arbitrator to
decide and the award can be set aside if the Arbitrator construes the
contract in such a way that it could be said to be something that no fair-
minded or reasonable person could do. It was further inter alia
observed that when a court is applying the ‗public policy’ test to an
arbitration award, it does not act as a court of appeal and consequently
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errors of fact cannot be corrected. It is pertinent to mention here that it
was inter alia held that a possible view by the Arbitrator on facts
necessarily has to pass muster as the Arbitrator is the ultimate master of
the quantity and quality of evidence to be relied upon when he delivers
his arbitral award. It is also inter alia held that an award based on little
evidence or on evidence which does not measure up in quality to a
trained legal mind would not be held to be invalid on this score.
78. Similarly, in Hindustan Construction Co. Ltd. Vs. NHAI(Supra), it
was inter alia held that by training, inclination and experience, Judges
tend to adopt a corrective lens; usually commended for appellate
review. However, it is this lens which is unavailable when exercising
jurisdiction under Section 34 of the Act. The Apex Court inter alia held
that the Courts cannot, through process of primary contract
interpretation, create pathways to the kind of review which is forbidden
under Section 34. In State of U.P. v. Allied Constructions, (2003) 7
SCC 396 the Apex Court went to the extent of inter alia holding that in
case of a speaking award even if it is wrong either in law or in fact, it
cannot be interfered. The only requirement is that the arbitrator must
have assigned sufficient and cogent reasons in support thereof. It is
pertinent to mention here that while interpreting the contract the duty of
the adjudicator is to give efficacy to the contract rather than to
invalidate.
79. The genesis of entire dispute between the parties is the interpretation of
Article 16 of the Operation Management and Development Agreement
(OMDA) executed between the parties. Before proceeding further, it is
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advantageous to look at some of the salient features of the OMDA. The
preface of the OMDA reads as under:-
WHEREAS:
(A) AAI is an authority established under the Airports Authority
of India Act, 1994 (the “AAI Act“), which is responsible for
the development, operation, management and maintenance
of airports in India.
(B) AAI, in the interest of the better m3nogement of the Airport
(as defined herein) and/or overall public interest is
desirous of granting some of its functions, being the
functions of operating, maintaining, developing, designing,
constructing, upgrading, modernising. financing and
managing the Airport to the JVC and for this purpose to
lease the premises constituting the Airport Site (as defined
herein), in accordance with the terms and conditions set
forth herein.
(C) JVC is a company established, inter-alia with the objectives
of operating, maintaining, developing, designing,
constructing, upgrading, modernising, financing and
managing the Airport (as defined herein).
(D) JVC is desirous and agreeable to undertake the function of
operating, maintaining, developing, designing,
constructing, upgrading, modernising, financing and
managing the Airport (as defined herein) on and subject to
the terms and conditions set forth herein.
80. The perusal of the preface makes it clear that the purpose of the OMDA
is the better management of the Airport in public interest. The OMDA
permitted the joint venture company (JVC) to undertake the function of
operating, maintaining, developing, designing, constructing, upgrading,
modernizing, financing and managing the Airport. Article 2.1.1 of
Chapter II is also important, which granted exclusive right and
authority to the JVC and the same reads as under:-
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“2.1.1. AAI hereby grants to the JVC, the exclusive right and
authority during the Term to undertake some of the functions of
the AAI being the functions of operation, maintenance,
development, design, construction, upgradation, modernization,
finance and management of the Airport and to perform services
and activities constituting Aeronautical Services, and Non-
Aeronautical Services (but excluding Reserved Activities) at the
Airport and the JVC hereby agrees to undertake the functions of
operation, maintenance, development, design, construction,
upgradation, modernization, finance and management of the
Airport and at all times keep in good repair and operating of
condition the Airport and to perform services and activities
constituting Aeronautical Services and Non-Aeronautical
Services (but excluding Reserved Activities) at the Airport, in
accordance with the terms and conditions of this Agreement
(the “Grant”).”
81. Chapter XI of the OMDA deals with the ―fees‖. Article 11.2.1 provides
that the DIAL shall pay 44.99% of the projected revenue for the said
year. Chapter XVI provides about the force majeure. Chapter XVI is
primarily the bone of contention between the parties. For ready
reference, chapter XVI ―force majeure‖ is reproduced as under:-
“16.1 Force Majeure
16.1.1 The JVC, or AAI, as the case may be, shall be entitled to
suspend or excuse performance of its respective obligations
under this Agreement to the extent that AAI or JVC, as the case
may be, is unable to render such performance by an event of
Force Majeure (a “Force Majeure”).
16.1.2 In this Agreement, “Force Majeure” means any event or
circumstance or a combination of events and circumstances,
which satisfies all the following conditions:
(a) materially and adversely affects the performance of an
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obligation;
(b) are beyond the reasonable control of the affected Party;
(c) such Party could not have prevented or reasonably
overcome with the exercise of Good Industry Practice or
reasonable skill and care;
(d) do not result from the negligence or misconduct of such
Party or the failure of such Party to perform its obligations
hereunder; and
(e) (or any consequence of which), have an effect described in
Article 16.1.1.
16.1.3 “Force Majeure” includes the following events and / or
circumstances to the extent that they, or their consequences
satisfy the requirements set forth in Article 16.1.1 and Article
16.1.2:
(i) war (whether declared or undeclared), invasion, armed
conflict or act of foreign enemy in each case involving or
directly affecting India;
(ii) revolution, riot, insurrection or other civil commotion, act
of terrorism or sabotage in each case within India;
(iii) nuclear explosion, radioactive or chemical contamination
or ionizing radiation directly affecting the Airport, unless the
source or cause of the explosion, contamination, radiation or
hazardous thing is brought to or near the Airport by the JVC or
any affiliate of the JVC or any contractor or sub-contractor of
the JVC or any such affiliate or any of their respective
employees, servants or agents;
(iv) strikes, working to rule, go-slows and/or lockouts which are
in each case widespread, nationwide or political;
(v) any effect of the natural elements, including lighting, fire,
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earthquake, unprecedented rains, tidal wave, flood, storm,
cyclone, typhoon or tornado, within India;
(vi) explosion (other than a nuclear explosion or an explosion
resulting from an act of war) within India;
(vii) epidemic or plague within India;
(viii) aircraft accident or breakdown;
(ix) Any period of step-in by AAI, under Article 14.l(d)
exceeding a period of three months; or
(x) any event or circumstances of a nature analogous to any
events set forth in paragraphs (i) to (viii) of this Article 16.1.3
above within India.
16.1.4 Notwithstanding anything contained herein, a strike by
General Employees at the Airport shall be an event of Force
Majeure.”
82. The contention of the AAI is that firstly the event of force majeure is
not admitted at all as the event of ―force majeure‖ as provided in
Article 16.1.2, can happen only if all the conditions from (a) to (e)
takes place jointly. The second predominant contention of AAI is that
under Article 16.1.1, the party can only claim ‘to suspend’ or ‘to excuse’
the obligation only ‘to the extent’ that the party ―is unable to render
such performance‖. Thus, the contention is that there can only be
―suspension‖ or ―excusal‖ to the extent that the party is unable to
render such performance. Another contention is that the procedure for
invoking the force majeure as provided under Article 16.1.5 has not
been followed by DIAL. As far as the happening of the epidemic i.e.
COVID-19 is concerned, that cannot be disputed. The question is
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whether merely happening of the COVID-19 or anyone epidemic
within India is sufficient to invoke force majeure. In this regard,
learned AT has accepted the reliance of DIAL on various Central
Government notifications, State Government notifications to hold that
outbreak of Covid-19 pandemic is a force majeure event. The finding
of learned AT in this regard as contained in para Nos. 49, 58, 73, 74,
87-94, 99 and 101-109 are relevant and the same are reproduced
hereinbelow:-
“49. As already noted, the aspect whether or not the outbreak
of COVID-19 pandemic is a force majeure event does not call
for consideration. In this regard, the Claimant has justifiably
placed reliance on various Central Government notifications,
State Government notifications, and the Orders passed by the
Hon‟ble Supreme Court. These notifications and circulars have
been placed on record in Convenience Volume B-2 filed by the
Parties.
58. Article 16.1.2 of the OMDA postulates five (5) conditions,
all of which are required to be fulfilled by an aggrieved Party in
order to claim the benefit of Chapter XVI / Force majeure. A
perusal of the various Circulars enumerated hereinabove, and
various other circulars, reports, placed on record by the
Claimant, and discussed hereinbefore, renders it beyond cavil
that the outbreak of Covid-19 which was an event not within the
reasonable control of the Claimant; the Claimant could not
have prevented or reasonably overcome with the exercise of
Good Industry Practice or reasonable skill and care; the event
of Covid-19 has not occurred from the negligence or
misconduct of the Claimant or the failure of the Claimant to
perform its obligations. Therefore, conditions encapsulated in
Article 16.1.2 (b), (c), and (d) are satisfied in the present case.
73. Further, on a conjoint reading of Articles 16.1.1 and 16.1.2
(a) and (e) the conundrum surrounding the use of the words
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„suspend‟ and „excuse‟ remains to be unravelled; as also
whether the Claimant was indeed „unable to render such
performance by an event of force majeure‟, and whether the
force majeure event or circumstances „materially and adversely
affects the performance of an obligation‟. For example, the
existence of force majeure circumstances did not render
performance of obligations or materially and adversely affect
the medical sector to mention only one example. Again, it is
disingenuous for Respondent No.1 to lay a challenge on this
aspect as has been reflected by the Tribunal elsewhere in these
presents.
74. This Tribunal is of the opinion that if the factum of the
Claimant earning profits is immaterial and irrelevant for the
doctrine of force majeure to be attracted in the present case,
then the argument of Respondent No.1 that the Claimant was
able to meet its expenses from its revenue collections is totally
self-contradictory and irrelevant. Alternately stated, if the
Tribunal is invited to undertake this enquiry by the Respondent
No.1, then it is otiose whether profits/ revenue came to be
earned and the extent thereof. The Tribunal is of the opinion
that the consequence of the occurrence of a force majeure event
is that a partial or complete cessation, as the circumstances
dictate, of the contractual obligations; all parties stand
insulated or alleviated from performance of their respective
deleterious or disadvantageous contractual obligations during
that period, thereby saving the compact from termination on the
ground of frustration/ impossibility of performance under
Section 56 of the Contract Act. In the case in hand the Parties
did not have the option to terminate the OMDA save in the
event, as postulated in Article 16.1.7, that force majeure
conditions continued for more than 365 days.
87. As noted above, the Claimant produced two Fact witnesses
and one Expert witness in support of its case. On the other
hand, Respondent No.1 produced only an Expert Witness in
support of its stand that the Claimant was not rendered
„incapable‟ of performing its obligations under Chapter XI of
the OMDA.
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88. CW-1 was produced by the Claimant to prove the various
correspondence exchanged between the Parties. CW-1 placed
reliance on the various government circulars and stated that in
view of the restrictions imposed by the Government, the
Claimant‟s operations had taken a severe hit. The Witness
stated that as per the circulars, office orders, notifications
issued by the GOI, the Force Majeure event was recognized to
prevail since February 2020; and due to the spread of Covid
19, various restrictions were imposed in India as well as
internationally, as a result of which the business of the Airport
Operators including the Claimant suffered heavily. The normal
business dwindled only to essential travel, thus, significantly
cutting-off the economic functioning of the IGI Airport. As a
result, the Claimant has suffered incapability to discharge
obligations under OMDA. He stated that the Claimant, vide
email dated 19.03.2020, brought to the attention of the
Respondent No. I that the entire aviation industry, more
particularly airports, are badly affected by Covid-19, therefore,
the AF/MAF as per the business plan for last Financial Year
2019-2020 will no more be applicable for Financial Year 2020-
2021 and the Claimant requested the Respondent No. 1 not to
send any communication to Respondent No. 2 for payment of
MAF for April, 2020 till further advice. He stated that the
Claimant, vide letter dated 27.03.2020, once again informed
Respondent No. 1 that the pandemic situation as well as the
current situation of nationwide lock-down and cessation of
scheduled flights for passenger movement, is already having a
significant impact on Claimant‟s revenue and that it would not
be in a position to discharge its obligation to pay AF /MAF
during the next three months up to June, 2020 at least (April
2020-June 2020). The witness then stated that the Claimant vide
its email dated 31.03.2020 had informed Respondent No. 1 that
consequent to the outbreak of the pandemic across the world, a
Force Majeure event has occurred in the contemplation of
OMDA. The Witness has also stated that Respondent No. 1 in
its Annual Report for 2019-2020 has categorically admitted the
impact of Covid- 19 pandemic and also the reports issued by
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various agencies which details the impact of the Covid-19
pandemic. He stated that due to the occurrence of the second
wave of this pandemic and the subsequent issuance of
government orders from April, 2021 air traffic was further
drastically impacted, leading to a sharp decline in the
Claimant’s revenue.
89. Respondent No.1 has contended that the testimony of CW-1
does no more than reiterate portions of the SoC and prove
documents, the existence of most of which had already been
admitted, and that CW-1 has intentionally withheld testimony
on the letter dated 17.03.2021, written by him personally,
declaring the end of event of Force Majeure.
90. CW-2, Mr. G. Radha Krishna Babu, was produced by the
Claimant to prove its financial statements, the drop in revenue,
and its financial inability to pay the Annual Fee. The Witness
stated that the pandemic and the effect thereof severely
impacted the financial performance of the Claimant as the
funds available are not even enough to meet the airport
operation, maintenance and financial obligations of the
Claimant, but for the interim relief received pursuant to the
Order dated 05.01.2021 in O.M.P. (I) (COMM.) 409/2020. The
Claimant has withdrawn Working Capital Facility of Rs. 307.52
Crores (as on December, 2020) and outstanding as of March,
2021 was Rs. 264.75 Crores, which was repaid during FY
2021-22; that if the Claimant is not excused from making
payment of MAF/AF, then the business of the Claimant will be
completely impaired and Claimant will not have enough
resources to meet its obligations of operating, maintaining,
developing and financing the airport. The adverse impact of the
pandemic and the government orders continued even in Quarter
4 of FY 20-21. In Quarter 4 of FY 20-21 and Quarter 4 of FY
19-20 as compared to Quarter 4 of FY 18- 19, there was a de-
growth of 34% and 21 % respectively as given in the Table
below. He has stated that the Claimant is under obligation to
maintain IGI Airport as per the provisions of OMDA and keep
the Airport in running and operational condition, even though
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there was significant reduction in air traffic, passenger
movement and revenues, due to the outbreak of the pandemic
and the government orders. He (CW-2) has stated that the
Claimant has to incur expenses to maintain the IGI Airport and
always to keep the vital equipment properly maintained and in
running condition, despite the revenues earned by the Claimant
being insufficient to meet the said expenses. However,
correspondingly expenditure could not be reduced because
majority of it is fixed in nature.
91. Respondent No.1 has contended that CW-2‟s evidence is
also largely a reiteration of the SoC and Reply to Counterclaim,
and that CW-2 does not provide any independent analysis of the
figures, tables and charts mentioned in his Affidavit and merely
states that the revenue and traffic numbers have gone down as
compared to previous years. Respondent No.1 contends that the
Claimant did, in fact, pay Annual Fee from March 2020 till
December 2020 and managed to operate the Delhi Airport
through the said period. When asked whether the Claimant had
funds to operate and maintain the Airport and also pay Monthly
Annual Fee until December 2020, CW-2 replied that the
Claimant did not have the required funds as the limited funds
available were used for operating the Airport and the Claimant
started paying the revenue sharing after raising the money in
the form of working capital from the banks (Q.4). Respondent
No.1 further argues that DIAL seeks benefit of Article 16 not
because of any inability to pay but to secure windfall gains, and
the Claimant has never considered liquidating any of its assets
or sought to raise funds through investors (Q.10-12).
92. CW-3, Mr. Montek Mayal an Expert Witness on behalf of
the Claimant, claimed to specialize in accountancy
investigation and expert witness related work in commercial
disputes. He filed his Expert Report dated 11.07.2022 on the
following scope of work: (i) Basis the information and
documents provided, independently examine, assess, and
compute the expected revenue of DIAL, up to FY 2024 which
was expected to be achieved prior to outbreak of Covid-19
pandemic i.e., “Pre-Force Majeure Level activity”; (ii) Submit
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an Expert Report on the above-mentioned independent analysis
and computation and appear as an Expert Witness. In his
Expert Opinion, CW-3 has calculated the expected revenue of
the Claimant for the period from FY 2020-2021 to FY 2023-
2024, the details of which he provided in the following table:
93. Respondent No.1 has emphasised that CW-3‟s testimony has
failed to engage with the question of inability and that he has
admitted that he did not examine the financials of DIAL since it
was outside the scope of his instructions. (Q.10-15).
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94. Having considered the deposition of the Claimant‟s
witnesses it appears to the Tribunal that the veracity of their
respective testimonies deserve due consideration. It is also of
significance that Respondent No.1 has chosen not to produce
any fact witness.
99. As analysed previously, the Claimant‟s ability to earn
revenue is linked to performance of its obligations vis-à-vis
Aeronautical Services [Schedule 544]; and Non-Aeronautical
Services [Schedule 645]. The charges of Aeronautical and Non-
Aeronautical services are determined as per Chapter XII of the
OMDA46; these services are directly dependent on the Air
Traffic Movement and the Passenger Traffic Movement. It is
therefore, only logical that in the event of a decrease in the Air
Traffic Movement and the Passenger Traffic Movement, the
Claimant‟s ability to collect requisite revenues would get
impacted detrimentally.
101. We next proceed to examine the impact of Covid-19 on the
Airport operations. As per the Financial Statement of Claimant
for the year ended 31st March 202147, the total
income/receipts/collections/revenue from the sundry operations
of the Airport aggregated Rs.1669.31 Crores, whilst the total
expenses aggregated Rs.2567.10 Crores. Similarly, the
Standalone Financial Statement of the Claimant for the year
ended 31st March 202248 shows that the total income
/collections /receipts/ revenue from the Airport were less than
the expenses incurred for its operation. It will be advantageous
to reproduce the relevant extracts of the Annual Report of
Respondent No.1 itself, for the year 2020-2149:
“…The Covid-19 pandemic has substantially altered the global
economic landscape. A farreaching impact of the global crisis
on the aviation section was due to the imposition of travel
restrictions and a decimation in passenger demand. The shock
posed by Covid-19 disrupted the long spell of robust growth
enjoyed by the aviation section in the last few years. According
to ICAO, in 2021 there was an overall reduction of 50% in air
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40% reduction in seats offered by airlines as compared to 2019.
Moreover, the losses of global airlines in gross passenger
operating revenues have mounted to approximately USD 323 to
330 billion.50
…
Aircraft & Passenger Movement51
The overall impact of COVID-19 on Traffic Movement in FY
2020-21 as compared to FY 2019-20 and for the period April to
November of FY 2021-22 as compared to the same period of FY
2019-20 (Pre Covid-Period) is given below:
Traffic Airports % Reduction % Reduction
Category in FY 2020-21 for the period
as Compared April to
to FY 2019-20 November of
FY 2021-22
compared to FY
2019-20
Aircraft All -53.74% -36.05%
Movements Airports
AAI -52.31% -38.59%
Airports
Passenger All -66.17% -51.46%
Movements Airports
AAI -63.10% -53.85%
Airports
102. As per the details of Aircraft movement submitted by the
Claimant, (which in turn have been taken from the website of
Respondent No.1), for the period of 2019 to 2020, the impactO.M.P. (COMM) 186/2024 Page 66 of 86
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can be seen as under:
Aircraft Movement International
Aircraft Movement Domestic
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Total Aircraft Movements (International and Domestic)
103. Details of Aircraft movement submitted by the Claimant
(taken from the website of Respondent No.1) for the January of
2020 and 2021, the impact can be seen as under:
Aircraft Movement International
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Aircraft Movement DomesticTotal Aircraft Movements (International and Domestic)
104. As per the details of Passengers movement submitted by
the Claimant (taken from the website of Respondent No.1) for
the period of 2019 to 2020, the impact can be seen as under
Passengers Movement International
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Passengers Movement DomesticTotal Aircraft Movements (International and Domestic)
105. Details of Aircraft movement submitted by the Claimant
(taken from the website of Respondent No.1) for January of
2020 and 2021, the impact can be seen as under:
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Passengers Movement International
Passengers Movement Domestic
Total Aircraft Movements (International and Domestic)
106. A perusal of the above tables would show that the
international aircraft movement reduced from 9127 in March
2019 to 688 in April 2020; and domestic aircraft movement
reduced from 27,081 in March 2019 to 377 in April 2020.
Similarly international passengers numbers reduced from
15,91,291 in March 2019 to a dismal 19,514 in April 2020; and
domestic passengers reduced from 38,89,794 in March 2019 to
a dismal 1110 in April 2020.
107. These statistics show beyond disputation that the
capability of the Claimant to earn revenues was adversely and
acutely affected commencing from the last week of March 2020.
Although the figures placed on record refer to the monthly
aircraft and passenger movement, however, the restrictions
were imposed by the Government between 15th and 22nd
March 2020. Therefore, the impact of these restrictions was
eventually evident from April 2020 onwards. The impact, as is
seen from the aforesaid statistics, which are taken out from the
website of Respondent No.1, was acute/severe and therefore, we
are convinced that the outbreak of Covid-19 had materially and
adversely impacted the capability of the Claimant to operate the
Airport such that the expenses were greater than and exceeded
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the receipts.
108. It is relevant to mention that the Claimant was mandated
to ensure that Airport services continued to function as
theretofore for handling permitted flight operations/
transportation for essential goods/ fire, law and order and
emergency services, and hence, even though the aircraft and
passenger movement had drastically reduced, the Claimant was
compelled by law to defray all costs in the maintenance and
operation of the Airport. We have already recorded above that
Respondent No.1 had deferred the payment of Annual Fee till
June 2020, as per its understanding of the provisions contained
in Chapter XVI, viz. that the Claimant is only entitled to get a
suspension/deferment and not a complete excusal from paying
the Annual Fee. Therefore, we have no hesitation in holding
that clause (a) of Article 16.1.2 i.e., “materially and adversely
affects the performance of an obligation” had in fact
transpired. The OMDA defines “Material Adverse Effect” in the
following manner:
“”Material Adverse Effect” shall mean a material
adverse effect on the business, condition (financial
or otherwise), liabilities, assets, operations (or the
results of operations) or prospects of the JVC or the
Airport solely to the extent materially frustrating or
impairing either Party‟s ability to perform,
discharge, receive and/or assume the respective
obligations, undertakings, rights and benefits
ascribed to such Party pursuant to the express terms
under this Agreement.”
109. The outbreak of Covid-19 in our view undoubtedly had an
adverse effect on the Claimant‟s business, its financial
condition, operations (results of operations), which caused a
negative cash flow to the Claimant and materially impaired its
ability to perform and discharge its obligations under the
OMDA. The definition covers those events which affect the
Claimant‟s business operations and ultimately its ability to
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perform further obligations cast upon it under the OMDA.”
83. The perusal of the relevant paras of the impugned arbitral award makes
it clear that the learned AT has taken into account all the conditions as
contained in Article 16.1.2. Learned AT has also gone into the question
of the pleas of both the parties regarding interpretation of the words
―suspend‖ and ―excuse‖. Learned AT rejected the contention of AAI
that the learned AT cannot go into the question of earning of profit by
DIAL. It was inter alia held that the result of force majeure event is
that there would be partial or complete caseation of the contractual
obligations of the parties and the parties would be protected from
performing their respective contractual obligations during the period of
force majeure. Learned AT also noted that the parties did not have the
option to terminate the OMDA, same in the event as postulated in
Article 16.1.7.
84. The Court considers that no fault can be found with the finding of the
learned AT in this regard. It is also to be noted that the learned AT has
also rejected the conditions of AAI that Articles 16.1.1 and 16.1.5(c)
should be harmoniously construed on the ground that both works in the
different spheres. It is pertinent to mention that learned AT duly noted
that OMDA was entered into with the motive of earning profit with the
exception of contracted relief pertaining to force majeure
circumstances. Learned AT has rightly noted that endeavour of the
Adjudicator should be to neutralize profit/losses between the parties. It
is also pertinent to mention here that the learned AT has duly
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appreciated the evidence of the AAI. It was noted that CW-1
specifically stated that vide e-mail dated 19.03.2020, it was brought to
the attention of the AAI that the entire aviation industry, more
particularly, the Airports are badly affected by Covid-19. Therefore the
AF/MAF as per the business plans for the last financial year 2019-20
will no more be applicable for financial year 2020-21 and requested not
to send any communication for payment of MAF for April, 2020 till
further advise. This was followed by another e-mail dated 27.03.2020.
It was noted that the DIAL vide its e-mail dated 31.03.2020, had
informed AAI that consequent to the outbreak of the pandemic across
the world, a force majeure event has occurred. It was also noted that the
respondents had withdrawn working capital facility of Rs.307.52 crores
as on December, 2020 and outstanding as of March, 2021 was
Rs.264.75 crores, which was repaid during financial year 2021-22. The
witness had stated that if the DIAL was not excused from making
payment of AF/MAF then the business of the DIAL will be completely
impaired and DIAL will not have enough resources to meet its
obligations of operating, maintaining, developing and financing the
Airport.
85. Learned AT has duly discussed the evidence of CW-2 in detail as well.
It is pertinent to mention here that CW-2 stated that expenditure could
not be reduced because majority of it was fixed in nature. In respect of
the contention of the AAI that DIAL had funds to operate and maintain
the Airport and also to pay MAF until December, 2020, CW-2 stated
that the DIAL did not require the funds as the limited funds available
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were used for operating the Airport and DIAL started paying the
revenue sharing after raising the money in the form of working capital
from the banks.
86. Learned AT has also noted the testimony of CW-3 Montek Mile, an
expert witness. After due discussion, the learned AT has rightly
accepted the veracity of the testimony of the DIAL’s witnesses.
Learned AT has rightly noted that in the event of decrease in the ATM
& PTM, the DIAL’s ability to pay requisite revenue got adversely
impacted.
87. It is pertinent to mention here that learned AT noted that as per the
financial statement of DIAL for the year ending 31.03.2021, the total
income/receipt/collection/revenue from the sundry operations of the
Airport aggregated at Rs.1669.31, crores while the total expenses
aggregated at Rs.2567.10 crores. It was also noted that the standalone
financial statement of DIAL for the year ending 31.03.2022, the total
income/receipt/collection/revenue from the Airport were less than the
expenses incurred for its organization. The data as reproduced in the
impugned arbitral award, demonstrates the negative flow and shows
that there was reduction in international traffic movement and domestic
traffic movement as well as a reduction in the number of international
and domestic passengers. The Court considers that the evidence as
produced by the respondents demonstrates that there was an adverse
impact on its revenue w.e.f. March, 2020.
88. It has rightly been noted by the learned AT that DIAL was mandated to
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ensure that the Airport services continued to function for handling
permitted flight operations /transportation for essential goods/fire, law
and order and emergency services. Therefore, DIAL was compelled by
law to incur all the costs in the maintenance and operation of Airport.
89. In view of the evidence as discussed above, the contention of AAI that
despite the negative cash flow or reduction in ATM & PTM, the DIAL
would be liable to pay the fee as per Article 11 of the OMDA has
rightly been rejected. The scheme of the OMDA clearly reveals that
after making the stipulation for payment of fee in Article 11, both the
parties agreed to incorporate Chapter XVI ―force majeure‖. There is no
stipulation in the contract that whatsoever may be the circumstances
that DIAL would be liable to pay the AF as provided under Article11.
It is correct that there is no stipulation to the contrary also but this
Article 11 of OMDA has rightly been interpreted in a manner which
encourages the business efficacy.
90. The contentions of AAI regarding the interpretation of Article 16, if
accepted, will be too hyper technical, while making the interpretation
of a commercial contract, the adjudicator has to interpret the same as a
facilitator and not as an obstructer.
91. The Court considers that the contention of AAI regarding ―inability‖ to
pay the fee has rightly been rejected. The payments were made by
DIAL of the AF initially in terms of the contractual obligations and
further, by virtue of orders of the court on the settlement. The question
here is not that whether it was made voluntarily or involuntarily, the
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question is that whether merely factum of payment of AF will negate
the plea of DIAL that in view of the reduction in the ATM & PTM,
they were unable to pay the fee in accordance with the Article 11.
DIAL was certainly at the receiving end, they had to run the operations
of the Airport as well as, as a commercial venture had to fulfill their
obligations. The Court does not find any fault with the finding of the
learned AT that merely because the payment was made, it cannot be
held that they were unable to make payment of the fee.
92. It is a matter of record that DIAL by way of repeated communications
invoked Article 16 and intimated the shortfall of revenue and having
not enough revenue to fulfill even its mandatory obligations. The
material on the record shows that the revenue from the Airport was less
than the expenses incurred for its operations. The various notifications
issued by the Government from time to time, restricting and suspending
air travel to curb the pandemic has also be taken into account. In this
regard, even the AAI annual report displayed the material adverse
effect of Covid-19 and the same was duly considered by the learned
AT.
93. It is no longer res integra that the Arbitrator is final Arbiter of the
disputed facts between the parties. The question of ―inability‖ is pre-
dominantly a question of fact, which has been determined by the
learned AT on the basis of the evidence produced by the parties and,
therefore, it would be difficult for this Court to interfere into such
findings within the domain of section 34 of the Arbitration &
Conciliation Act, 1996. The interpretation of terms of the contract by
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the Arbitrator can only be interfered if the findings are perverse.
94. The Court considers that there is no perversity in the order of the
learned Arbitral Tribunal. There is no finding which can be said to have
been rejected without any evidence, nor is there any material on record
to suggest that any extraneous material has been taken into account or
any relevant material has not been considered. The Court considers that
the purpose of the force majeure clause in any contract, is to prevent
the parties from suffering undue losses. The purpose is that the
business under the contract should continue and may not be put to an
end. The purpose is that before the party becomes totally drained out on
account of force majeure event, there should be some respite for
recovering or mitigating the losses. In a situation where the closure of
the Airport was not an option and the expenditure was more than the
revenue earned, the learned AT has rightly held that DIAL had to be
excused from the payment of AF.
95. AAI has vehemently argued that DIAL itself had admitted in their
communication dated 17.03.2021 that force majeure event per se had
ceased. It has been submitted that, therefore, in any case, no relief
could have been granted beyond 17.03.2021. In this regard, Article
16.1.5(c) acknowledges the concept of ―to achieve the level of activity
prevailing before the event of force majeure‖.
96. In the present circumstances, it has rightly been noted by the learned
AT that the precise date on which activities would return to the level of
activity prevailing before the force majeure event, could not be
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determined. Learned AT, therefore, took the cutoff date as 28.02.2022,
as determined by the Supreme Court in Suo Motu Writ Petition (Civil)
No.3 of 2020, „IN RE: Cognizance for Extension of Limitation‟.
Learned AT in this regard also took into account the financial statement
of DIAL. The finding of the learned AT in this regard was based on
material on record. It is correct that there is some guess work being
employed by the learned AT in this regard. The Court considers that in
absence of any better alternative, the learned AT has rightly taken a
cutoff date of 28.02.2022.
97. The petitioner has also raised a contention that the learned AT has re-
written the terms of the OMDA and rejected the argument of AAI that
obligation to pay AF always remains capable of performance as it is
payable as a percentage of revenue. The plea of AAI is that relief of
―excuse‖ amounts to re-writing the terms of the OMDA. The plea of
DIAL was that the interpretation of the terms of the contract falls
within the domain of the learned AT. It has been brought on the record
that the expenditure during this period was more than the revenue.
Learned AT has interpreted the contract taking into account the concept
of furthering the business efficacy of the contract.
98. The finding of learned AT is based on the interpretation of Chapter
XVI. It is pertinent to mention here that the learned AT in para 129 had
noted that even in the year when the claimant had incurred losses prior
to financial year 2019-20, the annual fee was duly paid. Learned AT
rejected the contention of AAI regarding payment of AF in the relevant
period not on the ground of DIAL having incurred losses but owing to
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the occurrence of force majeure circumstances arising out of COVID-
19 pandemic.
99. In regard to the extension of the terms of the contract, AAI has raised
the argument that the same was not even asked for and by granting the
extension, the learned AT has re-written the terms of the contract.
Learned AT had passed this direction after taking a holistic view of the
trade usage and the terms of the OMDA.
100. Learned Arbitral Tribunal has considered this issue in para -115 which
is reproduced herein below:
115. In several contracts where the tenure spans a long term,
alleviation/ relief is accommodated by extending the tenure of the
contract. Our attention was repeatedly drawn to the provisions of
Article 16.1.5(c) which contemplates this situation. This
prayer/claim has been pleaded in paragraphs 238 to 240 of the
SOC. It has been denied by Respondent No.1 in paragraph 85 of
the SOD, describing it as a “perverse and obtuse interpretation of
the OMDA.” Ironically, Respondent No.1, has itself adopted this
interpretation in its letter dated 30th March 2020 in these words:
Reference in this regard may be had to Clause 16.1.5 (c),
which stipulates that “the time for performance by the
affected Party of any obligation or compliance by the
affected Party with any time limit affected by Force majeure,
and for the exercise of any right affected thereby, shall be
extended by the period during which such Force majeure
continues and by such additional period thereafter as is
necessary to enable the affected party to achieve the level of
activity prevailing before the event of Force majeure”. AAI is
willing to have recourse to Clause 16.1.5 (c) to extend the
time for payment of MAF for the months of April, May and
June 2020 till 15.07.2020 without levy of interest under
Clause 11.1.2.2 for this period.‖O.M.P. (COMM) 186/2024 Page 80 of 86
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101. In regard to the force majeure, it is also advantageous to refer to Office
Memorandum dated 19.02.2020, which is reproduced hereinbelow:-
OFFICE MEMORANDUM
Subject: Force Majeure Clause (FMC)
Attention is invited to para 9.7.7 of the “Manual for Procurement
of Goods, 2017” issued by this Department, which is reproduced as
under
A Force Majeure (FM) means extraordinary events or
circumstance beyond human control such as an event described as
an act of God (like a natural calamity) or events such as a war,
strike, riots, crimes (but not including negligence or wrong-doing,
predictable/ seasonal rain and any other events specifically
excluded in the clause). An FM clause in the contract frees both
parties from contractual liability or obligation when prevented by
such events from fulfilling their obligations under the contract. An
FM clause does not excuse a party’s non-performance entirely, but
only suspends it for the duration of the FM. The firm has to give
notice of FM as soon as it occurs and it cannot be claimed ex-post
facto. There may be a FM situation affecting the purchase
organisation only. In such a situation, the purchase organisation is
to communicate with the supplier along similar lines as above for
further necessary action. If the performance in whole or in part or
any obligation under this contract is prevented or delayed by any
reason of FM for a period exceeding 90 (Ninety) days, either party
may at its option terminate the contract without any financial
repercussion on either side.
2. A doubt has arisen if the disruption of the supply chains due to
spread of corona virus in China or any other country will be
covered in the Force Majeure Clause (FMC). In this regard it is
clarified that it should be considered as a case of natural calamity
and FMC may be invoked, wherever considered appropriate,
following the due procedure as above.”
Sd/-
(Kolluru Narayana Reddy)
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Deputy Secretary to the Govt. of India
Tel. No. 24621305
Email: [email protected]
102. At this juncture, it is also prudent to refer to the letter dated 04.04.2020
of AAI. The relevant intact of the said letter is reproduced as under:-
“4.AAI has noted DIAL’s invocation of an event of Force
Majeure under Chapter XVI of the OMDA and is issuing the
present communication in terms of the procedure
contemplated in Clause 16.1.5(d) of the OMDA.
8. AAI is cognizant of the extraordinary nature of the events
that have transpired in the past weeks. Keeping these in
view, AAI is willing to grant consideration to deferral, as
requested, for a period of three (3) months of DIAL’s
obligation under Article 11.1.2.2 to make Monthly Annual
Fee payments against its Annual Fee obligation. In short,
AAI accepts DIAL’s proposal for deferral of its obligation to
pay MAF, on the stated ground that it “would not be in a
situation to discharge its obligation to pay Monthly Annual
Fee to AA/ during the next three months upto June, 2020”.
AAI is doing so in these extraordinary circumstances on a
without prejudice basis and notwithstanding DIAL’s failure
to produce any supporting docL1mentation on its available
cashflows, debt obligations or evidence of DIAL’s temporary
inability to pay MAF. However, as stated below, AAI’s
acceptance is conditional upon the Board of DIAL passing a
Resolution on this matter, and such Resolution being duly
communicated to AAI.
11. In view of the above, till such time DIAL submits the Board
resolution, AAI shall issue instructions to the Escrow Bank
to transfer funds equivalent to 45.99% of the Gross revenue
projected by DIAL in the spreadsheet included as an
attachment to DIAL’s email dated 03.04.2020 for the three
months (i.e. April, May and June 2020) from the Proceeds
Account to the AAI Fee account and thereafter to AAI’s bank
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account by the 7th of the month. This would, as you are
aware, be considerably less than monthly payment of
Rs.148.33 Cr. MAF as per the last Business Plan, which
would (as per past practice) have determined the MAF
payable until the new Business Plan for FY 2020-21 is
approved by DIAL’s Board of Directors.
12.In the event that DIAL is able to submit the Board Resolution
within the three months (i.e. April, May and June 2020, and
prior to 06.06.2020), then AAI would instruct the Escrow
bank to not transfer funds from the Proceeds Account to the
AAI Fee Account, for the remaining time within the said
three month period and, instead, transfer such amounts
directly to the Surplus account up to 06.06 2020. After
06.06.2020, the normal procedure would be followed in
respect of transfer of funds from the Proceeds Account to
AAI Fee Account as per Business Plan to be submitted by
DIAL.
15.We trust that the measures proposed above wuuld ensure
that adequate liquidity is available with DIAL to discharge
its dues, principally towards its employees and contract
labour and ensure that no hardship is caused to these
groups.”
103. The perusal of the OMDA makes it clear that the respondent was given
the task of operation, maintenance, development, design, construction,
upgradation, modernization, finance of the Airport. Such a task must
have involved huge investment. It is a matter of the fact that this world
had never expected the pandemic like COVID to happen. It may be
recalled in March, 2020 when it started, nobody knew its ramifications.
It was impossible to imagine its effects and the period during which it
will continue. Initially, everybody was under impression that it may
last for few days then few weeks then few weeks and then few months.
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But it is a matter of the record that after causing havoc in the first
wave, it returned back in 2021 with the second wave and caused
unimaginable damages in the terms of loss of human life and economy.
God forbids such an event happen again, the Court considers that the
learned Tribunal has rightly taken into account the commercial sense
and extended the terms of the contract.‖
104. This communication occurred when COVID-19 had just begun, and at
that time, the full scope of its impact was unknown. Even the best
scientists and economists were uncertain about the pandemic’s long-
term effects. The world was in the early stages of trying to manage the
situation, and it was unimaginable that its effects would last as long as
they did. At the time, AAI reasonably assumed that the impact would
be short-lived, likely continuing only until June 2020, and thus
accommodated the DIAL. However, it is now widely recognized that
the pandemic lasted far longer than anticipated.
105. It is a matter of common acknowledgement that during Covid, it had
materially and adversely effected the function of the business. The
learned AT taking into account the terms of the contract and the trade
and usages along with the commercial sense has taken a holistic view
in extending the tenure of the contract. The findings of the learned AT
are based on these facts, and the Court does not find any perversity in
them. It is also important to note that just because another view might
have been possible, the Court cannot substitute its own opinion.
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106. The facts and contentions of the parties as well as the finding in the
award as challenged in both O.M.P. (COMM) 186/2024 and O.M.P.
(COMM) 185/2024 are similar. The terms and conditions of the
OMDA dated 04.04.2006 are also identical. The entire case revolves
around the interpretation of Article XVI of the OMDA. The question
was that whether the force majeure event had taken place in terms of
Article XVI and further, whether the petitioner can be excused from
paying the AF as provided under Article 11 for the period till
19.03.2020 to 28.02.2022. Another major bone of contention was the
extension of the term of the OMDA for the period of two years. The
plea of the petitioner was the force majeure event had not taken place
and there was no question of excusal of the payment of fee in terms of
the OMDA and furthermore, there was no provision for the extension
of the contract. Per contra, the contention of the respondents was that
the learned AT has granted the relief in terms of the terms of contract.
It is a settled preposition that interpretation of the terms of the contract
falls within the domain of the Arbitrator. The entire dispute in both the
cases revolved around the interpretation of the terms of the contract.
The discussion made hereinabove makes it clear that the learned AT
had passed a speaking order after taking into account the material and
the evidence available on the record. The perusal of the award makes it
clear that it cannot be said that the view taken by the Arbitrator is not a
possible and plausible view. It is also a settled preposition that even if
the alternative view is available, the Court cannot substitute its own.
This Court did not find any material to say that there was perversity in
the award passed by the learned AT.
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107. In view of the above, the Court considers that there is no illegality or
perversity in the impugned award passed by learned AT. Hence, the
present petition along with pending applications, if any, stands
dismissed.
DINESH KUMAR SHARMA, J
MARCH 7, 2025
N/SMG
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