Mumbai Metro Directed to Deposit Full Award Amount to Secure Stay, L&T Allowed to Withdraw Against Bank Guarantee
Mumbai, October 10, 2025: The Bombay High Court has declined to grant an unconditional stay on a hefty arbitral award of approximately ₹250 crore in favour of a contractor for the Mumbai Metro Rail project. The court, however, has stayed the execution of the award on the condition that the Mumbai Metro Rail Corporation Limited (MMRCL) deposits the entire amount with the court’s registry within eight weeks.
Justice Somasekhar Sundaresan, in an oral judgment, ruled that the MMRCL had failed to establish that the arbitral award was so “patently perverse” or “facially untenable” as to warrant a stay without any financial security.
Background of the Dispute
The legal tussle stems from a contract awarded to L&T-STEC JV for the design and construction of specific stations and tunnels for the Mumbai Metro. The dispute revolved around two primary claims:
- GST Impact: The contract was bid on a lump-sum basis before the introduction of the Goods and Services Tax (GST) in 2017. The contractor claimed compensation for the additional tax burden under the “Change in Law” clause of the contract, arguing that the subsumption of previous tax exemptions into GST increased their costs.
- Additional Work: The contractor also claimed costs for what it termed “additional work,” specifically the implementation of a higher “one strut failure” safety standard for tunnelling near heritage structures, which it argued was not part of the original contract scope.
A majority arbitral tribunal in its award dated June 16, 2025, awarded ₹229.56 crores for the GST impact and ₹21.26 crores for the additional work, totalling ₹250.82 crores. The arbitrator nominated by MMRCL gave a dissenting opinion, particularly on the GST amount, suggesting it should be around ₹134 crores.
The High Court’s Analysis and Ruling
The MMRCL, represented by Advocate General Dr. Birendra Saraf, argued for an unconditional stay, contending the award was “ex facie perverse.” He argued that the tribunal failed to “vivisect” the lump-sum contract price to ascertain the exact tax component and made errors in applying tax exemptions.
L&T’s counsel, Senior Advocate Mr. Vikram Nankani, defended the award, stating the tribunal, comprised of engineers, was technically qualified to appreciate the evidence. He emphasized that the methodology for calculating the GST impact had already been scrutinized by a chartered accountant and a Dispute Adjudication Board (DAB), and the tribunal’s award was largely in line with the DAB’s findings.
After reviewing the arguments, Justice Sundaresan made key observations:
- On GST Issue: The court found that the dispute involved “finely nuanced points” on the interpretation of tax circulars, which are fit for a final hearing but do not scream of “abject perversity” needed for an unconditional stay. The award was reasoned and aligned with the prior DAB process.
- On Additional Work: The court held that the tribunal’s decision on what constituted additional work was a matter of “appreciation of evidence” by a technical tribunal, and its view was not prima facie perverse.
- On Witness Treatment: The court rejected MMRCL’s claim that its key witness, the Engineer-in-Charge, was “shut out,” noting that his testimony was considered but his expert opinions were rightly treated with scepticism as he was not an independent witness.
Conclusion and Directives
Dismissing the plea for an unconditional stay, the court laid down the following conditions for staying the award’s execution:
- MMRCL must deposit the entire awarded amount of approximately ₹250 crore, along with interest, with the High Court registry within eight weeks.
- Upon such deposit, L&T will be permitted to withdraw the funds, provided it furnishes an unconditional bank guarantee for the withdrawn amount.
The court clarified that its observations were only for deciding the stay application and would not influence the final hearing of MMRCL’s main petition challenging the award under Section 34 of the Arbitration Act.
The ruling underscores the high threshold for setting aside arbitral awards and reinforces the principle that challenging an award typically requires the award-holder’s money to be secured, not stayed unconditionally.
Case Title:
Mumbai Metro Rail Corporation Limited vs. L&T-STEC JV Mumbai
Case Numbers:
- Interim Application (L) No. 28857 of 2025
- In Commercial Arbitration Petition (L) No. 28855 of 2025
For Petitioner: Mr. Birendra Saraf, Advocate General, Senior Advocate, along with Advocates Simil Purohit, Ameya Gokhale, Kriti Kalyani, Siddhant Marathe, and Ansh Kumar, instructed by Shardul Amarchand Mangaldas & Co.
For Respondent:Mr. Vikram Nankani, Senior Advocate, along with Advocates Indranil Deshmukh, Saloni Kapadia, and Karan Ghandhi, instructed by Cyril Amarchand Mangaldas.
