Bombay High Court allows partial relief to MMRDA in Mumbai Metro-1 dispute with MMOPL

The principle of guesswork cannot be applied in the present case, as the MMOPL has failed to produce evidence, Justice Sandeep V Marne noted.

“Guesswork cannot be a shortcut for the production of evidence. Guesswork can be undertaken only when it is impossible to compute the exact quantum of losses suffered by the injured party,” the court said on February 24.

The order added that if evidence of the sufferance of loss itself is not available, the arbitral tribunal cannot award damages of a lesser sum than the one by presuming that some loss must have been suffered.

The Bombay High Court said that the principle of guesswork cannot be applied in the present case as the MMOPL has failed to produce evidence, which it could have produced if it had really suffered any losses,” the court stated.

Delays and escalated project costs

• The dispute originated from the Concession Agreement (CA) executed in 2007 for the Metro-1 project.
• On 19 August 2004, the Maharashtra government sanctioned the implementation of rail-based MRTS along the Versova-Andheri-Ghatkopar Corridor (metro project), to be implemented on a build, own, operate, and transfer (BOOT) Model.
• Petitioner-Mumbai Metropolitan Region Development Authority (MMRDA) is a statutory corporation established under the Mumbai Metropolitan Regional Development Authority Act, 1974, and it was appointed as the project implementation agency for the metro project.
• Petitioner-MMRDA invited requests for proposals.
• On the incorporation of MMOPL, the petitioner, MMRDA, entered into a concession agreement dated 7 March 2007 with MMOPL, which contemplated a concession period of 35 years from 7 March 2007 till 6 March 2042, including a construction period not exceeding five years, unless otherwise extended.
• MMOPL alleged that MMRDA’s failure to provide an encumbrance-free Right of Way (ROW) within the stipulated 180 days led to a four-year delay in commercial operations and nearly doubled the project cost from Rs 2,356 crore to approximately Rs 4,026 crore.
• A three-member arbitral tribunal, comprising former Supreme Court judges, delivered a split verdict in August 2023.

• The majority award granted several of MMOPL’s claims, while the minority award by Justice B P Jeevan Reddy rejected them as “fabricated.”
• The majority Award has allowed claims of the MMOPL for about Rs 496.48 crores along with interest.
• The Award directed the petitioner to pay to the MMOPL Rs 35 crore towards deductions made in the tranches of Viability Gap Fund, along with interest.
• The Award directed the petitioner to pay to the Respondent the amount of Rs 13.16 crore towards compensation for additional cost incurred on account of payment of rent for the land at Wadala, together with interest, and all counterclaims of the Petitioner have been rejected in the majority award.
• The petitioner has challenged this majority award in the high court.

‘Guesswork can’t be shortcut for evidence production’

• It was the petitioner’s obligation to provide land at concessional rates for setting up a casting yard for the execution of the project.
• Since it has failed to provide the land, MMOPL was required to scout for alternate land and pay rent therefor.
• In such circumstances, the Arbitral Tribunal has upheld the claim of MMOPL in respect of 50 per cent rent actually paid by it for Wadala land.
• Such a direction in the award warrants no interference in the exercise of powers under Section 34 of the Arbitration Act.
• In the casting yard, the girders used for the construction of the overhead metro line were to be cast.
  Under Article 13.4 of the CA, MMRDA had a positive obligation to provide the ROW free from all encumbrances, including the diversion of utilities, within 180 days.
• The dissenting award rightly holds that a mere business plan submitted as part of the bid documents cannot be an acceptable basis for computing loss.
• The award of claim of Rs 23.47 crore under the heading ‘opportunity cost on loss of cash profit’ is clearly unsustainable and is liable to be set aside as being patently illegal.
• Even after going through the documents produced before the arbitral tribunal, we are unable to conclude that MMOPL produced any concrete or credible evidence of having incurred expenditure of Rs 369.51 crore towards additional interest or financial expenses.

• Senior advocate J J Bhatt has attempted to salvage the situation by contending that what is granted by the arbitral tribunal is only a conservative figure of Rs 125 crore, though MMOPL has actually incurred additional financial expenses and interest of Rs 369.51 crore.
• The arbitral tribunal can enter into the realm of guesswork only if it is impossible to arrive at the exact amount to be awarded as compensation due to the peculiar nature of the contract.
• The principle cannot be invoked in a case where there is a total absence of evidence of having incurred the actual expenditure.
• The arbitral tribunal has not clarified that it is awarding damages by adopting the principle of guesswork.
• The theory of guesswork is pressed into service by the Respondent to somehow save the claims from being set aside.

For Petitioner/MMRDA: Senior advocate  J P Sen with advocates Kunal Vaishnav, Prachi Garg, Prerna Verma, and Sayalee Dolas, instructed by DSK Legal.

For Respondent/MMOPL: Senior advocate J J Bhat with advocates Anjali Chandurkar, Dhishan Kukreja, D J Kakalia, Bhavna Singh Jaipuria, Paresh Patkar, Ayaan Zariwalla, and Bhakti Chandan, instructed by Mulla and Mulla and CBC.