Mumbai: Bombay high court on Tuesday partly sustained and partly set aside an arbitral award passed in Aug 2023 in favour of Mumbai Metro One Pvt Ltd (MMOPL), which operates the Versova-Andheri-Ghatkopar Metro line 1, in an over Rs 1,000-crore dispute linked to construction, operation and maintenance.
The arbitrators had said MMRDA should pay MMOPL over Rs 990 crore, including Rs 497 crore for cost escalation due to delay, with interest, as well as Rs 1 crore as costs.
HC, on a challenge filed by MMRDA against the arbitrators' decision, upheld MMOPL's claims over the rise in cost due to delay but reduced the amount awarded for it to Rs 163 crore. It also found no merit in almost Rs 250 crore awarded by the panel to MMOPL and rejected its claims of Rs 100 crore as additional overhead expenses, Rs 125 crore as additional interest and financing expenditure, and Rs 23.5 crore towards loss of profit.
HC held that the arbitrators "awarded a huge sum of Rs 100 crore (damages due to delay) to MMOPL in the absence of a scrap of evidence".
Justice Sandeep Marne, who decided MMRDA's challenge to the arbitral award, accepted some of the state planning authority's contentions against MMOPL.
The dispute stemmed from a March 2007 agreement over Mumbai's first Metro line. MMRDA was the project implementing agency for the project and MMOPL was the special purpose vehicle, in which MMRDA held a 26% stake. A consortium of Anil Ambani-led Reliance Infrastructure Ltd and Veolia Transport SA was also a stakeholder.
In 2014, MMOPL claimed Rs 1,162 crore from MMRDA as cost escalation following litigation over certain land parcels; MMRDA objected. Both then got locked in a legal tussle.
In 2024, MMRDA challenged a majority decision of a three-member arbitral panel. The arbitrators upheld a claim made by MMOPL in 2014 of an increase in the project cost from Rs 2,356 crore to Rs 4,026 crore due to a delay, and held MMRDA responsible for delay in execution of work by failing to secure "right of way".
Not only did HC reduce the delay escalation amount over increase in "cost of systems work", with interest, it also slashed the costs payable by MMRDA from Rs 1 crore to Rs 50 lakh, even as it said it only upheld the award partially.
The arbitrators were former Supreme Court judges—Shivraj V Patil, B P Jeevan Reddy and Gyansudha Misra. MMRDA also made huge counter-claims. The arbitrators rejected MMRDA's counter-claims and by 2:1 majority, they partially allowed MMOPL's claims.
HC noted on Tuesday that the arbitrators, against a final difference of Rs 1,676 crore in project cost, awarded Rs 497 crore with interest to MMOPL and allowed only four of six claims. The costs also rose due to an increase in the cost of purchasing foreign exchange, it noted, finding "no perversity in the assessment of additional expenditure made by the tribunal".
"Can it be said that even if MMRDA is found responsible for delay in completion of project, MMOPL must bear the entire increase in the cost of project? The answer appears, to my mind, to be emphatic in the negative," Justice Marne said.
Justice Marne heard at length senior counsel J P Sen for MMRDA and senior counsel J J Bhatt for MMOPL. Sen argued that the award and the arbitrators' findings against MMRDA were inconsistent, perverse and patently illegal. Bhatt said the four claims that were allowed were backed with cogent reasons by the arbitrators and MMRDA's challenge and grounds raised were beyond the scope of Arbitration Act. MMOPL said the delay hiked the project cost from Rs 2,356 crore to Rs 4,026 crore.
Last June, when MMRDA sought a stay, HC granted a conditional stay after asking the authority to deposit "the entire award amount with interest up to May 31, 2025" (Rs 1,169 crore). MMRDA, aggrieved, approached Supreme Court, which in July reduced the deposit amount to 50% (Rs 560 crore) and allowed HC to hear and decide the challenge.
Justice Marne said after all calculations, "In the event the amount under the modified award is less than the amount deposited in the court together with accrued interest, after transfer of due amount to escrow account, balance amount shall be refunded to MMRDA", and if it exceeds, the HC registry shall transfer the entire deposited amount to the escrow account.