Bombay High Court declines unconditional stay on ₹250 crore award against Mumbai Metro

The Bombay High Court has refused to grant an unconditional stay on the execution of an arbitral award of about ₹250.82 crore passed in favour of L&T-STEC JV against Mumbai Metro Rail Corporation Limited (MMRCL). (Mumbai Metro Rail Corporation Limited Vs L&T-STEC JV Mumbai)

Justice Somasekhar Sundaresan held that MMRCL could not make out a case of perversity in the arbitral award that would justify staying its execution without deposit.

The Court directed that the award would remain stayed only if MMRCL deposits the entire awarded sum along with interest within eight weeks.

“They do not scream themselves aloud calling for an ex facie finding of abject perversity warranting an unconditional stay,” the Court said.

The order was passed on October 10 in an application filed by MMRCL seeking stay on execution of the award which has been challenged before the Court under Section 34 challenge under the Arbitration and Conciliation Act, 1996.

The dispute arose out of a contract for design and construction of tunnels and stations in the Mumbai Metro Rail project. The contract was awarded in May 2015 prior to the introduction of the Goods and Services Tax (GST).

A three-member arbitral tribunal by majority had directed MMRCL to pay about ₹229.56 crore towards GST reimbursement for the period between July 2017 and September 2022 and ₹21.26 crore for additional works allegedly carried out beyond the contract scope.

The dissenting arbitrator—appointed by MMRCL—had limited the GST amount to ₹134.42 crore and found that ₹27 lakh was in fact refundable by the contractor to MMRCL.

This prompted MMRCL to move the Bombay High Court challenging the award.

Advocate General Birendra Saraf, appearing for MMRCL, argued that the award suffered from serious errors on both factual and legal fronts. He maintained that the tribunal failed to examine how much of the lump-sum contract price represented indirect taxes. Thus, the tribunal had proceeded to grant GST-related compensation without analysing the actual impact of the change in law, he contended.

He also submitted that the tribunal had incorrectly applied exemptions under the pre-GST regime to activities unrelated to metro construction, and that its findings on the additional works claim were unsupported by evidence showing the use of extra steel or materials.

Saraf further contended that the tribunal had acted unfairly by disregarding the testimony of MMRCL’s engineer-in-charge who had directly supervised the project and could have clarified key technical and contractual issues.

Senior Advocate Vikram Nankani, representing the contractor, opposed the plea and maintained that the contract was based on a fixed lump-sum price that could not be broken down to examine individual tax components.

He submitted that the methodology for assessing the GST impact had already been settled through earlier reviews by both the engineer-in-charge and the Dispute Adjudication Board (DAB), and that the tribunal’s conclusions were consistent with those assessments.

On the question of the engineer-in-charge’s evidence, Nankani clarified that the tribunal had not excluded the testimony but had reasonably treated his expert inferences with caution, given that he was not an independent witness.

Justice Sundaresan observed that the award was in the nature of a money decree and that an unconditional stay could be granted only if the award was so perverse that no reasonable tribunal could have reached such conclusions.

The Court noted that the arbitral tribunal’s conclusions were more or less in line with the DAB’s report and that the objections raised by MMRCL merely reflected interpretational differences on fiscal notifications and technical matters.

On MMRCL’s claim that its witness was shut out, the Court found that the tribunal had not excluded his evidence but had only discounted his expert opinions.

“It is apparent that the witness was not shut out by the Learned Arbitral Tribunal. The witness was examined and cross-examined. The tribunal merely indicated that it would discount his claims to expertise since he could not be treated as an independent expert,” Justice Sundaresan said.

The Court added that arbitral tribunals comprising engineers could not be expected to use “lawyerly precision” in their language, but their reasoning made it clear that the witness’s testimony was not ignored.

Hence, the court concluded that the award was neither facially untenable nor tainted by patent illegality and refused to grant an unconditional stay.

“When parties proceed to arbitration and that too after a detailed pre-arbitral process being contracted, there has to be a higher credibility and credence given to the arbitral award,” Justice Sundaresan said.

MMRCL was directed to deposit the entire awarded amount with interest within eight weeks.

L&T–STEC would be entitled to withdraw the amount upon furnishing an unconditional bank guarantee for the same sum.

Saraf was briefed by advocates Simil Purohit, Ameya Gokhale, Kriti Kalyani, Siddhant Marathe and Ansh Kumar, instructed by Shardul Amarchand Mangaldas.

Nankani was briefed by advocates Indranil Deshmukh (Partner - Head Disputes), Saloni Kapadia (Partner) and Karan Gandhi (Senior Associate) i/b. Cyril Amarchand Mangaldas

[Read Order]