Section 34 challenge by AAI to an arbitral award excusing DIAL from paying Annual Fee under the OMDA's Force Majeure clause for 19.03.2020 to 28.02.2022 due to Covid-19, and extending the OMDA term. The court upheld the award as a plausible interpretation based on evidence.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
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* 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
J U D G M E N T
| S. No | Particulars | Page Nos. |
|---|---|---|
| A. | Preface | 2 |
| B. | Factual Matrix | 3-17 |
| C. | Submissions on behalf of Petitioner |
17-32 |
| D. | Submissions on behalf of the DIAL |
32-44 |
| E. | Finding and Analysis | 45-86 |
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DINESH KUMAR SHARMA , J.:
A. PREFACE
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B. FACTUAL MATRIX
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Escrow Bank to retain funds equivalent to MAF for April in the AAI Fee Account until approval was obtained.
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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.
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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.
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the present proceedings? (OPC)
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directions issued by the learned Single Judge in its order dated 27.11.2020 in MIAL‘s case.
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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.
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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.
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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.
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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.
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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
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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.
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its decision would be ―perverse‖ and liable to be set aside on the ground of ―Patent Illegality‖.
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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
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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.
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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.
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implying in the OMDA, the learned AT concludes that during the socalled 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.
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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.
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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.
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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.
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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.
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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.
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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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D. SUBMISSION ON BEHALF OF THE DIAL
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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.
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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.
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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 governmentmandated 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.
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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.
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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.
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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.
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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.
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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 revenuesharing 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.
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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.
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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.
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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 Covid19 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.
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E. FINDING AND ANALYSIS
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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.
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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.
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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.
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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.
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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.
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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.
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that the whole of the contract should be examined before construing an individual part.
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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.
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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:
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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 NonAeronautical 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”).”
“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.”
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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 20202021 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 degrowth 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 20232024, 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 NonAeronautical 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 passengers (both international and domestic) couples with a
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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 Category |
Airports | % Reduction in FY 2020-21 as Compared to FY 2019-20 |
% Reduction for the period April to November of FY 2021-22 compared to FY 2019-20 |
|---|---|---|---|
| Aircraft Movements |
All Airports |
-53.74% | -36.05% |
| AAI Airports |
-52.31% | -38.59% | |
| Passenger Movements |
All Airports |
-66.17% | -51.46% |
| AAI Airports |
-63.10% | -53.85% |
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 impact
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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 Domestic
Total 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 Domestic
Total 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.”
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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.
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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.
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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.
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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.
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the Arbitrator can only be interfered if the findings are perverse.
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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.
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the occurrence of force majeure circumstances arising out of COVID19 pandemic.
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 .‖
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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]
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.
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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.‖
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DINESH KUMAR SHARMA, J
MARCH 7, 2025 N/SMG
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3 issues framed by the court
Whether the arbitral award excusing DIAL from paying Annual Fee during the Covid-19 period under Article XVI of the OMDA was perverse or liable to interference under Section 34?
Whether the tribunal erred in extending the term of the OMDA on account of the Force Majeure event?
Whether DIAL's payment of Annual Fee negated its plea of inability to pay under the Force Majeure clause?
Colour shows how this judgement treated each authority
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5 provisions across 3 enactments
Airports Authority of India
Delhi International Airport Limited
ICICI Bank Limited
Dinesh Kumar Sharma
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
