MUMBAI: Describing MMRDA‘s actions as arbitrary and unfair, Bombay HC Tuesday set aside a Jan 3 notice by which it terminated the services of French engineering firm Systra’s Indian subsidiary as a consultant for three Metro lines in the Mumbai region. Even in a contract with a private party, said the judges, the state and its agencies are “under obligation to act fairly.”
“We find that the action of MMRDA in discontinuation of the terms of the contract, which was extended up to Dec 31, 2026, without assigning any reasons, is arbitrary, unfair, and unreasonable,” said chief justice Alok Aradhe and justice Arif Doctor. They directed MMRDA “to take a fresh decision with regard to either discontinuation or otherwise of the contract awarded to the petitioner afresh after hearing it, by way of a speaking order (with reasons).”
The petition was filed by Systra MVA Consulting (India) Pvt Ltd, which challenged the validity of the Jan 3 notice to discontinue its services for metro lines 5 (Thane-Bhiwandi-Kalyan), 7A (Andheri (E)-international airport), and 9 (Dahisar-Mira-Bhayandar).
Senior advocate Venkatesh Dhond argued that the notice was issued outside the terms of the agreement and doesn’t set out the reasons for the discontinuation of Systra MVA’s services.
Senior advocate Birendra Saraf, for the MMRDA, said the petition is “misconceived” and proceeds on an erroneous basis that the notice of discontinuance is outside the contract. He said a clause in the general conditions of the contract enables it to terminate the contract without assigning any reasons.
In Feb 2020, the MMRDA invited bids for the appointment of a general consultant for design, assistance in procurement, construction, and management supervision of Mumbai Metro lines 5 (Thane-Bhiwandi-Kalyan), 7A (Andheri (E)-CSIA), and 9 (Dahisar-Mira-Bhayandar). The Systra-SMCIPL consortium, of which Systra MVA is a part and has a 70% stake, submitted its Rs 90.7 crore bid.
The MMRDA accepted the bid. On May 31, 2021, it issued a letter of acceptance (LOA) to the petitioner and appointed it as the general consultant for system works “for a part of the corridor of” the three Metro lines. Thereafter, on Dec 28, 2021, the parties entered into an agreement. The initial contract was for 42 months from May 31, 2021, the date of the LOA, up to November 30, 2024. On the consultant’s request, on Oct 4, 2024, the MMRDA extended the contract until Dec 2026. The Jan 3 notice informed it that its services were discontinued “with effect from the 46th day of issuance of notice.”
The judges referred to the Jan 3 notice, adding: “…it is evident that the MMRDA has not assigned any reasons for discontinuation of services of the petitioner.” Also, the clause “cannot be read to mean that the MMRDA has a licence to act unfairly, arbitrarily, or unreasonably in the contractual field without assigning reasons.”
Agreeing with Dhond who cited Supreme Court decisions, they said, “The State or its instrumentality even while acting in the contractual field is under an obligation to act fairly or cannot act arbitrarily or unreasonably.” Saraf had argued that the petitioner cannot seek to eschew its contractual commitments by seeking to invoke public law principles of reasonableness and fairness in a matter within the domain of private law contracts. “In the instant case, the nature of controversy involves a public law element and therefore this Court in exercise of power of judicial review can examine whether the action of the instrumentality or agency of the State is fair, just, and equitable,” the judges said.
They also said in view of their conclusion, that the MMRDA’s action of termination of the contract was arbitrary and unfair, “it is not necessary for us to examine the nature of the contract.” For the very same reason, they also refused to accept Saraf’s contention to relegate the petitioner to arbitration.
Mumbai: Describing MMRDA’s actions as arbitrary and unfair, Bombay HC Tuesday set aside a Jan 3 notice by which it terminated the services of French engineering firm Systra’s Indian subsidiary as a consultant for three Metro lines in the Mumbai region. Even in a contract with a private party, said the judges, the state and its agencies are “under obligation to act fairly.”
“We find that the action of MMRDA in discontinuation of the terms of the contract, which was extended up to Dec 31, 2026, without assigning any reasons, is arbitrary, unfair, and unreasonable,” said chief justice Alok Aradhe and justice Arif Doctor. They directed MMRDA “to take a fresh decision with regard to either discontinuation or otherwise of the contract awarded to the petitioner afresh after hearing it, by way of a speaking order (with reasons).”
The petition was filed by Systra MVA Consulting (India) Pvt Ltd, which challenged the validity of the Jan 3 notice to discontinue its services for metro lines 5 (Thane-Bhiwandi-Kalyan), 7A (Andheri (E)-international airport), and 9 (Dahisar-Mira-Bhayandar).
Senior advocate Venkatesh Dhond argued that the notice was issued outside the terms of the agreement and doesn’t set out the reasons for the discontinuation of Systra MVA’s services.
Senior advocate Birendra Saraf, for the MMRDA, said the petition is “misconceived” and proceeds on an erroneous basis that the notice of discontinuance is outside the contract. He said a clause in the general conditions of the contract enables it to terminate the contract without assigning any reasons.
In Feb 2020, the MMRDA invited bids for the appointment of a general consultant for design, assistance in procurement, construction, and management supervision of Mumbai Metro lines 5 (Thane-Bhiwandi-Kalyan), 7A (Andheri (E)-CSIA), and 9 (Dahisar-Mira-Bhayandar). The Systra-SMCIPL consortium, of which Systra MVA is a part and has a 70% stake, submitted its Rs 90.7 crore bid.
The MMRDA accepted the bid. On May 31, 2021, it issued a letter of acceptance (LOA) to the petitioner and appointed it as the general consultant for system works “for a part of the corridor of” the three Metro lines. Thereafter, on Dec 28, 2021, the parties entered into an agreement. The initial contract was for 42 months from May 31, 2021, the date of the LOA, up to November 30, 2024. On the consultant’s request, on Oct 4, 2024, the MMRDA extended the contract until Dec 2026. The Jan 3 notice informed it that its services were discontinued “with effect from the 46th day of issuance of notice.”
The judges referred to the Jan 3 notice, adding: “…it is evident that the MMRDA has not assigned any reasons for discontinuation of services of the petitioner.” Also, the clause “cannot be read to mean that the MMRDA has a licence to act unfairly, arbitrarily, or unreasonably in the contractual field without assigning reasons.”
Agreeing with Dhond who cited Supreme Court decisions, they said, “The State or its instrumentality even while acting in the contractual field is under an obligation to act fairly or cannot act arbitrarily or unreasonably.” Saraf had argued that the petitioner cannot seek to eschew its contractual commitments by seeking to invoke public law principles of reasonableness and fairness in a matter within the domain of private law contracts. “In the instant case, the nature of controversy involves a public law element and therefore this Court in exercise of power of judicial review can examine whether the action of the instrumentality or agency of the State is fair, just, and equitable,” the judges said.
They also said in view of their conclusion, that the MMRDA’s action of termination of the contract was arbitrary and unfair, “it is not necessary for us to examine the nature of the contract.” For the very same reason, they also refused to accept Saraf’s contention to relegate the petitioner to arbitration.