When SLP Dismissal Order Is Non-Speaking, Review U/S 17 Of Arbitration Act Permissible: Delhi High Court

Brief Facts

In the present case two applications have been filed against orders passed under section 17(2) of the Arbitration Act. The modification of the ad interim order passed on May 2, 2024 was sought. This order was passed during the enforcement of the orders passed by the arbitral tribunal on October 11, 2022 and May 10, 2023.

The dispute stemmed from a concession agreement executed between the parties on March 27, 2003 as per which the National Highway 47 had to be widened. A default was made by the respondent in paying the amount under agreement which led to the arbitration proceedings. An interim order was passed in which it was directed that escrow account has to be operated as per the agreement. However, the respondent continued breaching the terms of the agreement by making payment. The petitioner filed an application for the enforcement of the order so that funds could be secured. An order passed on May 2, 2024 directed the maintainance of a minimum balance in the escrow account and monthly payment to the NHAI was ordered to be paid. A related appeal was also dismissed by the Supreme Court on June 14, 2024.

Contentions

The respondent submitted that the order dated May 2, 2024 is required to be modified in which monthly payment was to be made and maintainance of atleast 100 crores rupees in the escrow account. It was further contended that such an order could not be passed considering insufficient revenue and other obligations of the respondent. It was further argued that two orders passed under by the arbitral tribunal did not order that minimum balance in the escrow account has to be maintained nor such a requirement emerge from the contractual obligation. It was further contended that order dated 11.10.2022 directed the investment of funds in the escrow account and not payment towards the negative grant. It was further submitted that non payment of negative grant results from the violation of contractual obligation by the petitioner.

Per contra, the petitioner submitted that an SLP filed against the impugned order was dismissed by the Supreme Court rendering it final and unmodifiable. It was further argued that applications for modification are effectively review petitions which cannot be entertained after the dismissal. It was further argued that non-speaking orders passed by the Supreme Court remains binding and carries equal weight therefore any contradictory claims cannot be accepted. They relied on the judgment of the Delhi High Court in Deepak Khosla v. Montreaux Resorts Pvt. Ltd. (2014). Based on this, it was submitted that request for modification of the impugned order is in contravention of the order of the Supreme Court therefore any arguments to this effect cannot be countenanced.

Court's Analysis

The court referred to the Supreme Court judgment in Khoday Distilleries Ltd. v. Sri Mahadeshwara Sahakara Sakkare Karkhane Ltd (2019) wherein it was held that non speaking order does not result into a doctrine of merger and not bind the parties. A review petition against such an order can be filed. It was held that an order refusing special leave to appeal may be a non-speaking order or a speaking one. In either case it does not attract the doctrine of merger. An order refusing special leave to appeal does not stand substituted in place of the order under challenge. All that it means is that the Court was not inclined to exercise its discretion so as to allow the appeal being filed.

The court further observed that since in the present case, the SLP was dismissed in limine without assigning any reasons, this court is entitled to modify or review the impugned order. Preliminary objections as to the maintainability were overruled.

The court further noted that the tribunal order did not disturb the mechanism already established under the concession and escrow agreement. They will continue to be operated as usual. The court further rejected the arguments of the respondent with respect to other obligations to be discharged and observed that priority has to be given to the negative grant to the petitioner under the agreements.

The court further observed that no evidence was presented through which it can be concluded that this mechanism needs any modifications. The court further noted that the terms of the agreements clearly stipulate a structure under which funds are to be allocated and no document was shown which suggests any alterations in the conditions. The court held that the debt obligations of the respondent is to be served (before the amounts towards negative grant is secured) is without any basis and cannot be a ground for modification of the order 02.05.2024. 41. There is nothing on record to show that the obligations under the CA or Escrow Agreement, i.e. the Waterfall Mechanism, have been disturbed, modified or varied. In fact, Clause 25.2.2 of the CA categorically states that the Concessionaire shall not modify the order of payment specified in Clause 25.2 without prior written approval of NHAI.

The court further noted that it is necessary to maintain a minimum balance amount of Rs. 100 crores in the escrow account to protect the financial interests of the petitioner. It does not affect much the operational and maintainance expenditures of the respondent.

Conclusion

The court concluded that since none of the parties have been able to dispute the waterfall mechanism existing with respect to disbursal of the amounts in the Escrow Account, it is clear that the debt service obligation is due only after the negative grant due to petitioner has been acceded to. For the reasons stated above, no ground is made out for the modification of the order dated 02.05.2024 at this stage. The applications are dismissed.

Case Title: National Highways Authority of India v. Guruvayoor Infrastructure Pvt. Ltd.

Case Reference: OMP (ENF.) (COMM.) 97/2024, EX.APPL.(OS) 703/2024, EX.APPL.(OS) 1176/2024, EX.APPL.(OS) 1184/2024, EX.APPL.(OS) 1265/2024, EX.APPL.(OS) 1419/2024

Court: Delhi High Court

Judgment Date: 16/10/2024

Click Here To Read/Download The Order