MUMBAI: The Bombay High Court has refused to stay a June 2025 arbitral tribunal order directing the Mumbai Metro Rail Corporation Limited (MMRCL) to pay ₹250 crore to the L&T–STEC joint venture company which designed and constructed tunnels and stations for the metro rail network.
The arbitration award was neither “facially untenable”, nor “undermined by patent illegalities”, a single judge bench of Justice Somasekhar Sundaresan observed on October 10 and directed the MMRCL to deposit the amount within eight weeks. The court also allowed L&T–STEC to withdraw the amount along with accruals by providing an unconditional bank guarantee for the same amount.
The dispute between the two companies arose over a contract awarded to L&T–STEC to design and construct specific stations and tunnels. The contract was awarded in May 2015, before the enactment of the Goods and Services Tax (GST) Act in 2017. Subsequently, the companies agreed on a “change in law” clause to factor in the impact of GST introduction.
Since fiscal benefits and exemptions that could be availed via indirect taxes were subsumed into GST, the MMRCL pressed for reimbursement from the joint venture firm on two counts – impact of change in law and compensation for “additional work” undertaken to install stronger earth-retaining structures.
With L&T–STEC contesting the claim, the dispute was referred to arbitration. In June 2025, the three-member arbitral tribunal by majority ordered the MMRCL to pay ₹250.82 crore to the contracted firm, including ₹229.56 crore towards reimbursement for levy of GST introduction between July 1, 2017 and September 30, 2022, and ₹ 21.26 crore for undertaking additional work, outside the scope of the contract.
The arbitrator nominated by the MMRCL, however, dissented and held that L&T–STEC owed a refund of ₹27.09 lakh to MMRCL as the GST Act required it to pay only ₹134.42 crore as GST reimbursement. He suggested that a chartered accountant firm must make an assessment to compensate the contractor.
As its contentions were rejected by the majority, MMRCL approached the high court, pressing for an unconditional stay on the execution of the award. The tribunal had made an obvious blunder while deciding the amount, the company claimed.
Appearing for MMRCL, advocate general Dr Birendra Saraf submitted that the tribunal had failed to ascertain the precise impact of introduction of the GST regime on the contract price. The tribunal had also added certain tax exemptions to elements unconnected to construction, such as housekeeping and refurbishment, and ignored the MMRCL’s witness statement, choosing to rely selectively on the cross-examination of certain witnesses, the advocate general said.
A single judge bench of justice Sundaresan, however, held that the tribunal’s findings were not perverse or arbitrary as the award was in line with the dispute adjudication board’s (DAB) report and provided adequate reasons for the conclusions drawn. Considering that the award was in the nature of a money decree, an unconditional stay could have only been possible only if the award was unsustainably unreasonable, the court said.
“The Corporation may disagree with the DAB and indeed with the tribunal, but that would not mean that the award would automatically become perverse,” the court said. The issue raised by MMRCL was interpretational in nature and was influenced by the fiscal statute, it said and directed MMRCL to deposit the amount within eight weeks.