Bombay High Court
Mumbai Metropolitan Region … vs Mumbai Metro One Private Limited on 10 June, 2025
2025:BHC-OS:8471
IAL-3642-2024 Final.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INTERIM APPLICATION NO. 3642 OF 2024
WITH
INTERIM APPLICATION NO. 22009 OF 2024
IN
COMMERCIAL ARBITRATION PETITION NO.427 OF 2024
Mumbai Metropolitan Region Development
Authority ...Applicant/Petitioner
Versus
Mumbai Metro One Private Limited ...Respondent
Mr. J.P. Sen, Senior Advocate a/w Kunal Vaishnav, Prachi Garg, Prerna
Verma, Sayalee Dolas, Manav Jain, i/b DSK Legal, for the
Applicant/Appellant/Petitioner.
Mr. Prateek Seksaria, Senior Advocate a/w. Ms. Anjali Chandurkar, Mr.
Dhishan Kukreja, Ms.Vidhi Shah, Mr.Rohit Agarwal, Mr.D.J.Kakalia and
Mr. Kartik Hede i/b. Mulla & Mulla and CBC, Advocates for Respondent.
CORAM: SOMASEKHAR SUNDARESAN, J.
RESERVED ON: May 6, 2025
PRONOUNCED ON: June 10, 2025
Digitally
signed by
AARTI
AARTI GAJANAN
GAJANAN PALKAR
PALKAR Date:
2025.06.10
18:08:09
+0530
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JUDGEMENT:
Context and Background:
1. Interim Application No. 3642 of 2024 (“Stay Application”) is an
application seeking stay of the effect and operation of an arbitral award dated
August 29, 2023 read with a corrected arbitral award dated February 26,
2024 (collectively, “Impugned Award”). The Stay Application is filed in
Commercial Arbitration Petition No. 427 of 2024 (” Section 34 Petition”)
which is filed under Section 34 of the Arbitration and Conciliation Act, 1996
(“the Act”) praying for the Impugned Award to be quashed and set aside.
2. The disputes and differences between the parties relate to the
development, design, engineering, financing, procurement, construction,
operation and maintenance of mass rapid transit system i.e. metro rail along
the Versova-Andheri-Ghatkopar corridor under a Concession Agreement
dated March 7, 2007 (“Concession Agreement”). The Respondent, Mumbai
Metro One Private Limited (“MMOPL”) raised claims in the arbitration
proceedings which led to the Impugned Award. The Petitioner, Mumbai
Metropolitan Region Development Authority (“MMRDA”) is a 26% equity
shareholder in MMOPL. The metro rail project started with a delay of over
two years. MMOPL claimed that the project costs increased from Rs. 2,356
crores to Rs. 4,321 crores. This is hotly contested by MMRDA.
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3. The Impugned Award is a majority award passed by two of the three
arbitrators, the third having written a dissent. The Impugned Award has
quantified claims under various heads including awards of amounts withheld
in the course of paying tranches of ‘Viability Gap Funding’ (” VGF”) along
with interest thereon; interest on delay in disbursement of VGF tranches;
compensation for additional costs incurred on account of payment of rent for
land along with the cost of funds on such payments; compensation for having
to construct a steel bridge instead of a concrete bridge; amounts towards
operations and maintenance and life cycle costs; amounts towards cost
escalation; pendente lite interest; future interest and costs.
4. It is the MMRDA’s contention that the Impugned Award is patently
illegal, perverse, and calls for intervention under Section 34 of the Act. The
MMRDA commends the dissent award for acceptance. While these facets of
the matter would be considered during the final hearing of the Section 34
Petition, the immediate consideration that is sought by the parties is to the
Stay Application – the MMRDA strenuously urging that no deposit should be
directed for grant of stay, and the MMOPL contending that the conventional
approach of a full deposit must follow should there be any stay on execution.
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5. I have heard at length, Learned Senior Counsel on behalf of the parties
– Mr. J.P. Sen on behalf of the MMRDA and Mr. Prateek Seksaria on behalf
of MMOPL. Each side has made submissions almost as if this were a stage of
final hearing of the matter, and has presented copious notes on submissions
and other materials from the record to impress upon the Court, the merits of
their respective positions.
Core Issue:
6. The core issue to be answered in this case is whether a case is made out
for ordering that no deposit whatsoever is warranted for a stay of execution of
the Impugned Award. Towards this end, it is necessary to examine the
contentions on behalf of MMRDA to consider whether an unconditional stay
without deposit of any amount is warranted in the facts of the case.
7. Section 36 of the Act is clear in its terms. This Court has the discretion
to impose such conditions as it deems appropriate to grant a stay of the
operation of the arbitral award for reasons to be recorded in writing. The
conditions on which the Court must stay the award unconditionally would be
met if the Court is satisfied that the contract or agreement which is the basis
of the award, or the marking of the award was induced by fraud or
corruption. In the matter at hand, there is not a whisper of an inducement by
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fraud or corruption in either the execution of the agreement in question or
the arbitral award. Therefore, one has to see if the discretion of this Court is
required to be exercised in the manner sought by MMRDA – an
unconditional stay of the operation of the award.
MMRDA’s Contentions:
8. Mr. Sen would contend that the Impugned Award is completely
arbitrary, perverse and a product of such non-application of mind that the
award could have never been passed by any reasonable person. Towards this
end, the contentions made on behalf of MMRDA may be summarised thus:
a) The recovery or withholding of amounts from VGF payable by
MMRDA to MMOPL was by way of recovery of rent. Adjudication
of the quantum of rent is not arbitrable at all in law and fall within
the jurisdiction of the Small Causes Court established under The
Presidency Small Causes Court Act, 1881. The specific license
agreements do not contain an arbitration clause and therefore the
issue falls outside the scope of arbitration. Therefore, the award of
Rs. 35 crores is said to be untenable;
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b) Recovery of costs incurred towards the casting yard awarded in the
sum of Rs. 13.16 crores is based on no evidence of actual cost
incurred on the additional rent liability;
c) The award of Rs. 30.48 crores towards additional costs along with
cost of funds and interest at the rate of 10% per annum for one year
is without proper appreciation of the technical proposal, and a mis-
reading that there is a change in scope;
d) A declaration that MMOPL is entitled to operations and
management costs and life cycle costs is without proper
appreciation of evidence;
e) Overall, the amount of Rs.~411.70 crores awarded towards losses
suffered has been made without documentary evidence to
substantiate alleged payments made to sub-contractors and third
parties and without any proof of losses being suffered due to delay
in providing right of way. There was mutual consent for extension
of time for grant of right of way and access to the site, and these
were ignored; and
f) A number of grounds in the Stay Application relate to appreciation
of evidence by the Learned Arbitral Tribunal and how it erroneously
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appreciated contentions and submissions, how its findings are
conjectural, and the like. According to the MMRDA, amounts have
been awarded without proper basis being available for award of
such sums.
9. As a result, Mr. Sen would contend, a strong case has been made out
for determining prima facie, that the Impugned Award is perverse and
patently illegal. It would be convenient not to direct a deposit of the amounts
awarded and directing a deposit in the backdrop of the weak prima facie case
in MMOPL’s favour would cause grave and irreparable harm to MMRDA.
10. This being the foundation of the findings, Mr. Sen would contend that
the Impugned Award suffers from the vice of giving an actual assessment of
damages a go-by and treating financial statements as the sole basis of
determining increase in costs. The assessment of role and attribution of
delays to the respective parties is vital, he would submit and contend that
such an approach is perverse.
11. Mr. Sen would contend that simply comparing the original project cost
with the increased project cost cannot be the basis of ascertaining increase in
costs to be awarded in the arbitration. To compute damages the causal nexus
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between the breaches and the losses suffered by MMOPL needs to be
assessed and one cannot award damages without role attribution to the
causation of the losses. Mr. Sen would contend that the confirmation of costs
overruns at the Board Meetings cannot bind MMRDA. Even otherwise, he
would contend, the costs attributed to foreign exchange currency losses have
not been proven and have been awarded simply on the basis of excel files
presented by MMOPL.
12. Mr. Sen would rely on the following judgements to buttress the point
that the Court need not impose a condition of a deposit when considering a
stay of execution of the arbitral award:
a) Ecopack India Paper Cup Pvt. Ltd. Vs. Sphere International – 2018
SCC OnLine Bom 540;
b) CFM Asset Reconstruction Pvt. Ltd. & Anr. Vs. SAR Parivahan Pvt.
Ltd. – 2024 SCC OnLine Bom 1659;
c) Alkem Laboratories Limited vs. Issar Pharmaceuticals Pvt. Ltd. – IA
No. 377/2024 in CARBP No. 389/2023;
d) Ramesh Sumermal Shah vs. Bharat Kishoremal Shah – IA(L)
13398/2023 in CARBP (L) No. 10500/2023; and
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e) Aurum Ventures Pvt. Ltd. Vs. HT Media Ltd. And Ors – 2024 SCC
OnLine Del 4061
MMOPL’s Contentions:
13. In sharp contrast Mr. Seksaria, on behalf of MMOPL would point out
that audited financial statements of MMOPL cannot be treated as financial
statements of just one party to the dispute – MMRDA was not only
represented on the Board of Directors of MMOPL but also its nominee
director chaired the Audit Committee. The Learned Arbitral Tribunal was
entirely correct, he would contend, in taking note of the true and fair view of
the factual position, as stated and certified by the Board of Directors and
Audit Committee of MMOPL, which included MMRDA’s own nominees.
14. Mr. Seksaria would contend that it would not be open to MMRDA to
take one position of fact in the course of deliberations in the governance of
MMOPL and another when it comes to honouring the implications of the
factual position endorsed by MMOPL’s instruments of governance. He would
point to various heads of decisions in the governance of MMOPL where
without the affirmative consent of MMRDA no decisions can be taken –
thereby indicating that MMRDA was fully conscious and aware of various
facets of facts that were involved in ascertaining the cost overrun and it
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cannot be permitted to turn around and purport that proving admitted facts
must be commenced from scratch.
15. The very chairman of the Audit Committee who is an MMRDA
nominee director was also the witness who deposed on behalf of MMRDA, he
would point out, and contend that the Learned Arbitral Tribunal indeed
considered voluminous evidence and has returned a cogent and well-
reasoned award. More importantly, Mr. Seksaria would contend that not
only at this stage (when considering the Stay Application) but even at the
stage of the final hearing of the Section 34 Petition, it would not be open to
this Court to re-appreciate evidence and sit in appeal on the merits of
findings of fact. The jurisdiction of the Section 34 Court is not that of an
appellate review, he would contend, which is what MMRDA seeks from this
Court at this stage too. Mr. Seksaria would submit that the matter is being
re-argued on behalf of MMRDA, which is impermissible.
16. Mr. Seksaria would contend that it is now trite law that the fruits of
having won the arbitration should not be denied to the award-creditor and no
case has been made out for invoking the conditions on which deposit may be
waived by the Court applying the principles flowing from the provisions of
Order XLI, Rule 5 of the Code of Civil Procedure, 1908. In particular, if the
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award is in the nature of a money decree, he would submit, the Court must
direct a full deposit of the decretal amount. Mr. Seksaria would seek to rely
on, among others, the following judgements:-
a) ITD Cementation India Ltd. Vs. Urmi Trenchless Technology Pvt.
Ltd. – 2020 SCC OnLine Bom 10611;
b) Sepco Electric Power Construction Corporation vs. Power Mech
Projects Ltd. – 2022 SCC OnLine SC 1243;
c) Sarat Chatterjee and Co. (VSP) Pvt. Ltd. Vs. Sri Munisubrata Agri
International Ltd. & Anr. – 2023 SCC OnLine Cal 2548;
d) Anand Rathi Share & Stock Brokers Ltd. Vs. Anish Navnitlal Mehta
HUF – 2023 SCC OnLine Bom 2572;
e) Manish vs. Godawari Marathwada Irrigation Development
Corporation – SLP (C) No. 11760-11761/2018;
f) Toyo Engineering Corporation & Anr. vs. Indian Oil Corporation
Ltd. – Civil Appeal nos 4549-4550/2021;
g) Balmer Lawrie & Co. Ltd. Vs. Shilpi Engineering Pvt. Ltd. – 2024
SCC OnLine Bom 758; and
h) State of Maharashtra vs. Patel Engineering – 2021 SCC OnLine Bom
12596;
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Analysis and Findings:
17. I have given my anxious consideration to the respective contentions of
the parties. Each side has argued the matter extensively as if this were the
stage of a final hearing. It is trite law that the jurisdiction of this Court under
Section 36 of the Act is a discretionary one, which would depend on the facts
and circumstances of the case. Each side has copiously reproduced from case
law to buttress the positions canvassed as if there would be a ratio to be
discerned and applied as a matter of course. In my opinion, there can be no
quarrel about the principles of law enunciated in each of the judgements –
the net takeaway from the case law cited by both sides is that there can be no
straightjacket formula that can be applied. The Court’s discretion should be
informed by the facts of the case, the nature of the award under challenge and
the circumstances obtaining in the context of the challenge.
18. I have heard the Learned Senior Counsel for the parties and with their
assistance and the notes tendered by them, reviewed the record from the
limited perspective of whether an unconditional stay without any deposit is
warranted. A few specific points would be noteworthy in determining the
decision on the Stay Application. The Impugned Award is truly in the nature
of a money decree. I find that MMOPL is a joint venture in which MMRDA
itself is a 26% equity shareholder. The decisions taken in the Impugned
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Award relies on the project cost being discussed at the meeting of the Board
of Directors of MMOPL and at the Audit Committee of the MMOPL Board (a
statutory sub-committee of the Board of Directors). It is a finding of the
Learned Arbitral Tribunal that the increase in costs were recognized at the
meetings of these forums which entailed active participation by nominee
directors of MMRDA.
19. The Learned Arbitral Tribunal has indeed examined the material on
record and given its reasons for arriving at the conclusions that it has arrived
at. It cannot be contended that ex facie, the Impugned Award is perverse,
palpably arbitrary and incapable of being countenanced. For example, one
cannot ignore the fact that the prime witness of MMRDA in the arbitration
proceedings was the nominee director deputed by MMRDA to the Board of
Directors of MMOPL, and such person chaired the Audit Committee of the
MMOPL Board. One cannot lose sight of the fact that MMRDA is not an
outsider and a third party or counter-party to MMOPL with no insight into
the functioning of MMOPL. Therefore, this is not a case that the audited
financial statements of one side is being blindly relied upon for purposes of
assessment and adjudication in the arbitration.
20. Needless to say, the manner of examination of such evidence by the
Learned Arbitral Tribunal and whether it falls foul of the standards now
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declared by the Supreme Court within the scope of Section 34 of the Act is a
matter that would still need to be gone into at the stage of final hearing of the
Section 34 Petition. However, at this stage, I am not convinced that reliance
on the audited financial position and the admitted positions emerging from
the proceedings of governance of MMOPL can prima facie be regarded as an
approach that is per se manifestly arbitrary. That apart, it is true that one
cannot arrive at some mathematical and clinical precision in assessment of
costs and damages and some play in the joints for “guesstimating” the impact
is available to the Learned Arbitral Tribunal. Whether the Learned Arbitral
Tribunal did so in a completely objective manner and whether there is
something perverse in how it approached the empirical evidence before it,
and whether that would bring to bear an element of patent illegality or
perversity is truly something that would be gone into at the stage of final
hearing. However, at this stage, the case sought to be made out by MMRDA
that the Impugned Award does not warrant any deposit does not appeal to
me.
21. It is equally trite law that merely because the award-debtor is an
agency of the State the principles to be applied would not stand diluted. That
apart, a deposit is still a deposit to be made in Court and not paid over to the
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award-creditor – should release of the deposit be sought, that would bring
with it imposition of appropriate safeguards and conditions.
22. I have also examined the reliance placed by MMRDA on the dissenting
award. It is indeed correct to state that Courts have even endorsed dissenting
awards where they have formulated the outcome appropriately and the
majority has not. However, all of that is not relevant at this stage when the
Stay Application is being considered. The Court must ensure that when
parties have agreed to submit themselves to arbitration and those
proceedings have culminated in an award, the money decree in the arbitral
award is not something written on water and irrelevant. There has to be
deference to the findings in the arbitral award in the exercise of discretion
under Section 36 of the Act, and unless the ingredients for deviation are
found i.e. inducement by fraud or corruption in the making of the underlying
agreement or the arbitral award, the Court must truly examine the record and
exercise its jurisdiction in a reasonable manner.
23. The Act has been amended to remove the position of an automatic stay
merely because an award has been challenged. Routinely granting a stay and
that too without any deposit would run counter to the explicit legislative
intervention that was made by Parliament to give teeth and relevance to
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arbitral awards. There is indeed no allegation or insinuation of inducement
by fraud or corruption in the execution of the contract and making the award.
In these circumstances, I am not inclined to accept the request made on
behalf of MMRDA to stay the Impugned Award without any deposit being
ordered.
24. I have also considered whether the facts and circumstances would
warrant any partial deposit and I find no empirical basis to easily split the
amounts awarded in the scale of acceptable of prima facie strength to make
any differentiation. On the contrary, in my opinion, it would be arbitrary to
simply pick a percentage fraction of the amount awarded for direction of a
deposit. Even assuming for the sake of argument that Mr. Sen’s attack on
each facet of the Impugned Award is to be weighed, I find that each of them
has an eminently plausible counter-view and these are facets that have to be
considered at the stage of final hearing on merits.
25. In these circumstances, I am of the view that no case is made out for an
unconditional stay of the Impugned Award. Therefore, it is directed that if
MMRDA were to fully deposit the entire amount awarded in the Impugned
Award along with interest as awarded (computed as of May 31, 2025), no
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later than July 15, 2025, execution of the Impugned Award shall remain
stayed pending hearing and final disposal of the Section 34 Petition.
26. The Stay Application is disposed of accordingly. Registry shall list the
Section 34 Petition under the caption ” Case Management Hearing” on June
17, 2025.
27. All actions required to be taken pursuant to this order, shall be taken
upon receipt of a downloaded copy as available on this Court’s website.
[SOMASEKHAR SUNDARESAN J.]
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