Bombay High Court Declines Unconditional Stay on ₹250 Crore Arbitral Award Against Mumbai Metro

The Bombay High Court has declined to grant an unconditional stay on the enforcement of an arbitral award worth around ₹250.82 crore in favour of L&T–STEC JV against the Mumbai Metro Rail Corporation Limited (MMRCL).

Justice Somasekhar Sundaresan, while hearing the plea filed by MMRCL, ruled that the corporation failed to prove that the arbitral award was “perverse” enough to justify a complete stay without depositing the awarded amount.

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

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

The case arose from a contract for the design and construction of tunnels and stations under the Mumbai Metro Rail project. The contract, awarded in May 2015, was executed before the introduction of the Goods and Services Tax (GST).

A three-member arbitral tribunal, by a majority, directed MMRCL to pay ₹229.56 crore as GST reimbursement for the period between July 2017 and September 2022, and ₹21.26 crore for additional works done beyond the contract’s original scope.

However, the arbitrator appointed by MMRCL dissented, limiting the GST reimbursement to ₹134.42 crore and noting that ₹27 lakh was actually refundable to MMRCL.

Following this, MMRCL challenged the award before the Bombay High Court and sought a stay on its execution.

Advocate General Birendra Saraf, appearing for MMRCL, argued that the tribunal had made serious factual and legal errors. He contended that the arbitrators failed to assess how much of the lump-sum contract price included indirect taxes and granted GST-related compensation without a proper analysis of the actual impact of the change in law.

Saraf also submitted that the tribunal wrongly extended pre-GST exemptions to unrelated construction activities and that the findings on additional work lacked evidence to show extra material usage. He further alleged that the tribunal ignored the testimony of MMRCL’s engineer-in-charge, who supervised the project and could have clarified key issues.

Senior Advocate Vikram Nankani, representing L&T–STEC, opposed the plea, arguing that the contract was based on a fixed lump-sum price that could not be broken into tax components. He pointed out that both the engineer-in-charge and the Dispute Adjudication Board (DAB) had already reviewed and agreed upon the GST assessment method, which the tribunal had followed.

Nankani added that the tribunal had not excluded the engineer’s evidence but had reasonably treated his conclusions with caution since he was not an independent witness.

Justice Sundaresan held that the arbitral award was essentially a money decree and could only be stayed unconditionally if it was manifestly unreasonable or legally flawed. The Court noted that the tribunal’s findings aligned with the DAB’s report and that MMRCL’s objections reflected differing interpretations of tax and technical issues rather than patent illegality.

“The witness was not shut out by the tribunal. He 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,” the Court clarified.

The judge also observed that arbitral tribunals comprising engineers might not express themselves with “lawyerly precision,” but their reasoning made it evident that the testimony was not disregarded.

Concluding that the award was neither arbitrary nor illegal, the Court refused to grant an unconditional stay and directed MMRCL to deposit the full awarded amount with interest within eight weeks. L&T–STEC can withdraw the amount upon furnishing an unconditional bank guarantee for the same value.

The case was argued by Advocate General Birendra Saraf assisted by Simil Purohit, Ameya Gokhale, Kriti Kalyani, Siddhant Marathe, and Ansh Kumar from Shardul Amarchand Mangaldas. Senior Advocate Vikram Nankani was assisted by Indranil Deshmukh, Saloni Kapadia, and Karan Gandhi from Cyril Amarchand Mangaldas.