Bombay High Court Denies Unconditional Stay on Arbitral Award in Mumbai Metro Dispute

Court mandates Mumbai Metro Rail Corporation to deposit award amount in dispute with L&T-STEC JV over GST and contract modifications.

In a significant development, the Bombay High Court has denied an unconditional stay on the execution of an arbitral award that favored L&T-STEC JV Mumbai against the Mumbai Metro Rail Corporation Limited (MMRCL). The dispute arose over claims related to the impact of the Goods and Services Tax (GST) on a contract price and alleged additional works in the Mumbai Metro Rail Project.

The court, presided over by Justice Somasekhar Sundaresan, directed MMRCL to deposit the awarded amount with interest into the Court Registry within eight weeks, allowing for a stay on execution proceedings pending a final hearing. This decision comes amidst MMRCL's claims that the arbitral award was perverse and legally flawed, warranting an unconditional stay without depositing any amount.

The arbitration dispute centered on two main issues: the impact of GST on the lump sum contract price and the claim for additional works involving a "one strut failure" standard. While MMRCL argued that the arbitral tribunal failed to adequately consider the tax implications and the additional work component, the court found that these concerns were not indicative of any abject perversity in the arbitral award.

The arbitral tribunal, comprising engineers, had awarded a total of Rs. 250.82 crores to L&T-STEC JV, attributing Rs. 229.56 crores to the GST impact and Rs. 21.26 crores to additional work. MMRCL contested this, emphasizing a need for a detailed examination of the contract's tax components, which they claimed the tribunal overlooked.

Justice Sundaresan, in his oral judgment, highlighted the comprehensive pre-arbitral process and reasoned decision-making by the tribunal, thereby lending it higher credibility. He noted that the tribunal's decision was largely in line with the Dispute Adjudication Board's report and did not present itself as being patently illegal or perverse.

The court also addressed MMRCL's contention regarding the alleged exclusion of a crucial witness's evidence by the tribunal, stating that the tribunal had considered the factual inputs but discounted expert opinions due to perceived bias.

Ultimately, the court concluded that the issues raised were matters for the final hearing and did not justify an unconditional stay. The decision underscores the importance of respecting detailed arbitral processes and awards, especially in complex commercial disputes involving significant infrastructure projects.

Bottom Line:

Arbitration - Unconditional stay on execution of arbitral award denied - Detailed pre-arbitral process and reasoned arbitral award given higher credibility - Contentions raised by the Corporation deemed to be matters for final hearing and not indicative of abject perversity.

Statutory provision(s): Arbitration and Conciliation Act, 1996 Section 34

Mumbai Metro Rail Corporation Limited v. L&T-STEC JV Mumbai, (Bombay) : Law Finder Doc Id # 2796446