Delhi High Court Holds Breach of Settlement Not Contempt In Siemens‑DAMEPL Arbitration

The Delhi High Court has held that contempt proceedings cannot be initiated if the judgment debtor defaults, when there is a settlement agreement between parties specifying the consequences of non-payment.

A Bench of Justice Sachin Datta were hearing a case between Siemens Limited and Siemens Aktiengesellschaft (“Siemens”), the decree holders, and Delhi Airport Metro Express Private Limited (“DAMEPL”), the judgment debtor, arising from an arbitral award which partly allowed Siemens' claims.

The Bench observed:

“the Settlement Agreement itself contains provisions to the effect that in case the requisite payments are not made by DAMEPL, the agreement would become 'null and void,' and the parties would be free to pursue their rights and remedies as available to them in law”, non-payment would not result in contempt proceedings.

The matter originally arose from Siemens' claims for dues and payments under contracts related to the Delhi Airport Metro Express project. An arbitral tribunal partly allowed Siemens' claims in an award dated 27 May2020. Aggrieved, DAMEPL challenged the Award under Section 34 of the Arbitration and Conciliation Act (ACA), while Siemens filed Section 9 petitions seeking interim relief to secure its dues.

The parties eventually resolved all matters through a Settlement Agreement approved by the Court on 18 February 2022. Under the Agreement, DAMEPL was required to make certain payments to Siemens, and the parties withdrew their pending petitions. However, DAMEPL failed to honour the payment obligations under the Settlement Agreement.

Upon default, Siemens filed applications to revive the Section 9 petitions and enforce the Award. DAMEPL also sought restoration of its Section 34 petition. The Court, by order dated 11 July.2024, granted Siemens liberty to initiate enforcement proceedings and seek necessary interim orders. It directed DAMEPL to show cause why contempt proceedings should not be initiated for failing to comply with the Settlement Agreement.

DAMEPL contended that Clause 3.9 of the Settlement Agreement made the agreement “null and void” in case of non-payment, allowing the parties to pursue legal remedies, and argued that Axis Bank's control over its escrow account had prevented the release of funds.

Siemens countered that DAMEPL had undertaken an unconditional obligation to pay, and the failure to deposit the award amount constituted a willful violation.

The Court accepted DAMEPL's contention that the non-release of funds was attributable to Axis Bank, which controlled the escrow account. It further observed that the Settlement Agreement itself prescribed the consequences of non-payment, and the prior order dated 18 February 2022 did not create any independent obligations beyond the Settlement Agreement. While the Court noted that DAMEPL's conduct was not commendable, it held that it did not amount to contempt of court.

Accordingly, it discharged the contempt notice and granted Siemens liberty to pursue enforcement of the arbitral Award.