The Bombay High Court on Tuesday quashed a notice issued by the Mumbai Metropolitan Region Development Authority (MMRDA) last month, terminating the contract awarded to Systra MVA Consulting (India) Pvt Ltd. The company was providing general and design consultancy services for three Metro lines in the city.
A bench of Chief Justice Alok Aradhe and Justice Arif S Doctor, in its judgment, directed MMRDA to take a fresh decision on whether to discontinue the contract awarded to the French-origin consulting and engineering firm. The bench asked MMRDA to pass a reasoned order after hearing the company which has a 70 per cent stake in Systra-SMCIPL Consortium.
The MMRDA, in February 2020, invited bids for appointing a general consultant for design, assistance in procurement, construction, and management supervision for Mumbai Metro Lines-5 (Thane-Bahiwandi-Kalyan), 7A [Andheri (East)-CSIA] and 9 (Mira Bhayander).
The petitioner, Systra Consortium, had submitted a bid of Rs. 90.76 crore in June 2020 and was appointed General Consultant for system works for part of the three Mumbai Metro Lines in May 2021.
While the initial term of appointment of the petitioner was for 42 months till November 2024, it was, later, extended up to December 2026.
However, on January 3, the MMRDA issued notice to the petitioner firm informing that it had decided to discontinue Systra’s service.
Senior advocate Venkatesh Dhond for Systra argued that the notice was not issued as per the terms of the agreement signed in 2021 and the MMRDA had not set out any reasons for discontinuation of petitioner’s services and failed to act reasonably and fairly.
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Senior advocate Birendra Saraf, who is also Advocate General for Maharashtra, representing MMRDA, submitted that the plea was ‘misconceived’ and was based on the erroneous argument that the notice was beyond the purview of contractual terms.
Saraf submitted that notice was issued as per general conditions of the contract that enable MMRDA to terminate the same without assigning reasons.
However, the bench found that one of the general conditions of contract “cannot be read to mean that the MMRDA has a licence to act unfairly, arbitrarily or unreasonably in the contractual field without assigning reasons.
“We find that the action of the MMRDA in discontinuation of the terms of the contract, which was extended up to December 31, 2026, without assigning any reasons, is arbitrary, unfair, and unreasonable,” it observed
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The High Court noted that it was unnecessary to examine the nature of the contract as it had already concluded that MMRDA’s action was arbitrary. It however refused to grant relief of specific performance (remedy to fulfil obligations in contract) of agreement to Systra in the present plea.
“The contention that since the MMRDA has acted in exercise of rights available to it under the contract and therefore the petitioner should be relegated to the remedy of arbitration, does not deserve acceptance, as we find that the action of the MMRDA in discontinuing the consultancy services provided to the petitioner is arbitrary and unfair,” the court held and allowed Systra’s plea.
