In a significant development for infrastructure arbitration in India, the Bombay High Court has declined to grant an unconditional stay on the execution of a ₹250.82 crore arbitral award in favour of the L&T–STEC Joint Venture against Mumbai Metro Rail Corporation Limited (MMRCL). The matter stems from long-standing disputes regarding GST-related cost reimbursements and alleged compensation for additional construction work in the Mumbai Metro project.
The judgment, delivered orally on October 10, 2025, by Justice Somasekhar Sundaresan, underscores judicial restraint in interfering with reasoned arbitral findings and reiterates that allegations of "perversity" in arbitral awards must meet an exceptionally high threshold.
Background
The conflict originates from a 2015 contract between MMRCL and L&T–STEC JV for the design and construction of metro stations and tunnels in Mumbai. When the contract was signed, India's Goods and Services Tax (GST) had not yet been implemented. The contractor’s bid was based on pre-GST tax structures, with a clause allowing for adjustments in case of "Change in Law."
However, after GST came into force in July 2017, the contractor claimed reimbursement for the additional tax burden. The Arbitral Tribunal, by majority, awarded nearly ₹229.56 crore for GST impact and ₹21.26 crore for additional works. The total award thus reached around ₹250.82 crore.
The dissenting arbitrator, however, believed the GST reimbursement should have been closer to ₹134 crore and even suggested re-assessment by a chartered accountant, highlighting sharp divisions within the tribunal itself.
Court's Observations
Justice Sundaresan, hearing MMRCL's plea for a stay, refused to accept the argument that the arbitral award was ex facie perverse - meaning, obviously unreasonable or absurd on its face.
"To interfere by way of an unconditional stay,' the judge observed, "it would be necessary to establish such perversity that the findings cannot at all be countenanced.'
The Court noted that both sides had relied on detailed reports - including one by a chartered accountant and another by a Dispute Adjudication Board (DAB) - to determine the tax component in the contract price. Since the Arbitral Tribunal’s conclusions closely followed the DAB’s methodology, the Court found no reason to label them arbitrary.
Justice Sundaresan also remarked that tax circulars and fiscal interpretations could legitimately differ among experts and should be debated during the final hearing of MMRCL’s challenge under Section 34 of the Arbitration Act, rather than forming grounds for a blanket stay.
One of MMRCL’s major grievances was that the Tribunal had allegedly ignored the testimony of its Engineer-in-Charge, who served as a key witness. The corporation argued that this amounted to a violation of natural justice.
Rejecting this claim, the Court clarified that the witness was neither “shut out” nor disqualified. The Tribunal had merely discounted parts of his opinion where he projected himself as an independent expert.
“The witness was examined and cross-examined,” the Court noted, “and the Tribunal rightly treated his probative opinions with circumspection since he was not independent.”
Justice Sundaresan added that arbitration panels composed of engineers need not use “lawyerly precision” in their language, and minor deviations in phrasing should not be exaggerated as process violations.
The other major issue involved the “one strut failure” safety standard adopted during tunnelling operations. MMRCL argued that L&T had failed to prove that this change constituted additional work warranting extra payment, as no evidence was provided to show increased material usage.
The Court, however, refused to second-guess the technical findings of the arbitral panel. It emphasized that arbitral tribunals are the “masters of evidence” in construction disputes and their judgments, if reasoned, must be respected unless shown to be shockingly irrational.
Decision
After an exhaustive review, the High Court concluded that no prima facie case of perversity or miscarriage of justice was made out to justify an unconditional stay.
The Court ordered that MMRCL may secure a conditional stay by depositing the full awarded amount with accrued interest in the court registry within eight weeks. The contractor, L&T–STEC JV, will be entitled to withdraw the funds against an unconditional bank guarantee, in accordance with court procedures.
In closing, Justice Sundaresan remarked:
“The contentions do not lend themselves to serious interference into a reasoned outcome in the arbitral proceedings.”
With this, the Court effectively reinforced the principle that arbitral awards, particularly in complex commercial contracts, should not be lightly disturbed.
Case Title:- Mumbai Metro Rail Corporation Ltd. vs L&T–STEC JV