Mumbai: The Bombay High Court has refused to grant an unconditional stay on the execution of an arbitral award of about Rs 250.82 crore passed in favour of L&T-STEC JV Mumbai against the Mumbai Metro Rail Corporation Limited (MMRCL), observing that the corporation failed to show that the award was tainted by “abject perversity.”
Court Directs Deposit for Conditional Stay
Justice Somasekhar Sundereshan, in his October 10 order, held that the arbitral award would remain stayed only if MMRCL deposits the entire amount—along with accrued interest—within eight weeks. The court noted that MMRCL had not made out a case that would justify staying execution of the award without such a deposit.
“They do not scream themselves aloud calling for an ex facie finding of abject perversity warranting an unconditional stay,” the court observed. “To interfere by way of an unconditional stay, it would be necessary to establish such perversity that the findings cannot at all be countenanced.”
Background of the Dispute
The order came in response to an application filed by MMRCL seeking an unconditional stay on execution of the arbitral award. The corporation has already filed a petition challenging the award under Section 34 of the Arbitration and Conciliation Act, 1996.
The dispute arose from a contract awarded in May 2015, before the introduction of the Goods and Services Tax (GST), for the design and construction of tunnels and stations under the Mumbai Metro project.
After GST came into effect in July 2017, disagreements emerged regarding reimbursement for GST and compensation for certain “additional works” allegedly executed beyond the contractual scope.
On June 16, a majority of a three-member arbitral tribunal ruled in favour of L&T-STEC JV, directing MMRCL to pay Rs 229.56 crore as GST reimbursement for the period between July 2017 and September 2022, and an additional Rs 21.26 crore for extra work.
The dissenting arbitrator—appointed by MMRCL—disagreed, limiting the GST reimbursement to Rs 134.42 crore and finding Rs 27 lakh refundable by the contractor.
Arguments from Both Sides
Before the High Court, Advocate General Birendra Saraf, appearing for MMRCL, argued that the tribunal failed to assess how much of the contract’s lump-sum price represented indirect taxes and therefore erred in awarding GST reimbursement without determining the true fiscal impact.
Opposing this, senior advocate Vikram Nankani, representing L&T-STEC JV, contended that the contract was on a fixed lump-sum basis and could not be dissected to isolate tax components. He said the methodology for assessing GST impact had already been reviewed by the engineer-in-charge and the Dispute Adjudication Board (DAB), and the tribunal’s findings were consistent with those assessments.
Court Observations on Arbitral Findings
Justice Somasekhar noted that an unconditional stay can only be granted if an arbitral award “was so perverse and with obvious blunders that no reasonable arbitral tribunal could reach such conclusions.” The findings in the present case, he said, were broadly in line with the DAB’s report and reflected mere interpretational differences on fiscal and technical aspects.
“Taking a holistic view of the matter and the relative strengths of the prima facie case canvassed by each side, I am not satisfied that a case for an unconditional stay is made out,” the judge concluded.
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Conditional Execution of Award
While declining the unconditional stay, the court directed MMRCL to deposit the full award amount within eight weeks. It further allowed L&T-STEC JV to withdraw the money upon furnishing an unconditional bank guarantee for the same sum.
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