Keep public infra assets out of disputes


GoI has proposed amendments to the Metro Railways (Operation and Maintenance) Act 2002 to prevent the takeover of Metro properties in the event of any dispute. This is intended as a pre- emptive legal measure to avoid the seizure of Metro properties following the May 2017 arbitration award asking Delhi Metro Rail Corporation (DMRC) to pay Delhi Airport Metro Express Pvt Ltd (DAMEPL) Rs 4,663 crore. It appears reasonable that large and working public infrastructure assets, often commissioned at a significant cost to the taxpayer, should not be imperilled because of contractual disputes. Making these assets collateral for contractual penalties that will lay waste to public goods should be the last recourse, not the default option.

The nearly 400 km Delhi Metro is the lifeline of the capital, ferrying 5.5 million passengers a day. Its functioning should not be negotiable given the disruption it would cause. However, this public good consideration against asset seizure must be balanced with legally sound and enforceable alternative recourse for private parties in contractual disputes with the state. For instance, arbitration could be enforced by allowing the award to be adjusted against tax liability, or permitted as a loss available for set-off against profits.

Specific measures saw India rise rapidly in the discontinued World Bank‘s ease of doing business ranking. But the country figured very low on the ‘enforcing contracts’ metric, a significant pain point for investors. That needs greater attention. GoI must revisit the Arbitration and Conciliation Act 1996 that is totally out of sync with international developments in mediated settlements. This should also include review of Section 34, which limits judicial review of arbitration awards even if there are doubts about the integrity of the arbitration process. Notably, a Delhi High Court division bench had set aside the arbitration award, saying it suffered from ‘perversity, irrationality, and patent illegality’. The Supreme Court restored it citing Section 34. A comprehensive review and update will engender greater confidence in the arbitration process and make it the preferred mode of settling business disputes. India would require a huge amount of public and private investment to achieve its goal to become developed by 2047. A supportive and just investment framework is urgently needed.



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