The Bombay High Court recently addressed a petition filed by the Mumbai Metro Rail Corporation Limited (MMRCL) seeking an unconditional stay on the execution of an arbitral award amounting to approximately ₹250.82 crore. The award had been passed in favor of L&T-STEC JV concerning a contract for the design and construction of tunnels and stations in the Mumbai Metro Rail project. Justice Somasekhar Sundaresan, presiding over the matter, held that MMRCL had failed to demonstrate any ex facie perversity in the arbitral award that would justify granting an unconditional stay.
The dispute arose from a contract awarded to L&T-STEC JV in May 2015, prior to the introduction of the Goods and Services Tax (GST). The arbitral tribunal, in its majority decision, directed MMRCL to reimburse approximately ₹229.56 crore towards GST for the period between July 2017 and September 2022. Additionally, the tribunal awarded ₹21.26 crore for extra works allegedly carried out beyond the original scope of the contract. A dissenting arbitrator, appointed by MMRCL, limited the GST reimbursement to ₹134.42 crore and found that ₹27 lakh was refundable by the contractor to MMRCL.
In challenging the award, Advocate General Birendra Saraf, representing MMRCL, argued that the tribunal had committed serious factual and legal errors. He contended that the tribunal failed to examine how much of the lump-sum contract price represented indirect taxes, leading to an unjustified grant of GST-related compensation. Furthermore, Saraf claimed 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. He also alleged that the tribunal had disregarded 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 for a stay. He maintained that the contract was based on a fixed lump-sum price, making it impractical to break down individual tax components. Nankani further 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. Regarding the engineer-in-charge’s evidence, Nankani clarified that the tribunal had not excluded his testimony but had reasonably treated his expert inferences with caution, given that he was not an independent witness.
Justice Sundaresan observed that the arbitral award was in the nature of a money decree and that an unconditional stay could only be granted if the award was so perverse that no reasonable tribunal could have reached such conclusions. The Court noted that the objections raised by MMRCL merely reflected interpretational differences on fiscal notifications and technical matters. Consequently, the Court directed that the award would remain stayed only if MMRCL deposits the entire awarded sum, along with interest, within eight weeks. The Court emphasized that the objections did not warrant an ex facie finding of abject perversity that would justify an unconditional stay.
This ruling underscores the judiciary's approach to upholding arbitral awards and the stringent conditions under which stays may be granted. It highlights the importance of demonstrating clear and substantial grounds to challenge such awards, particularly when they are in the nature of money decrees.
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