Bombay High Court Upholds ₹496.48 Crore Metro One Award, Strikes Down ₹248 Crore For Lack Of Evidence

The Bombay High Court has partly upheld the Rs. 496.48 crore arbitral award in favour of Mumbai Metro One Private Limited arising from the Metro Line 1 project, but has set aside nearly Rs. 248 crore awarded under three heads of damages, finding that those components were not backed by evidence.

Justice Sandeep V. Marne underscored that courts are required to respect the finality of arbitral awards and cannot interfere lightly. At the same time, he made it clear that intervention is justified where findings are perverse, legally untenable, or unsupported by evidence.

The dispute arose from a March 2007 concession agreement between the Mumbai Metropolitan Region Development Authority and Mumbai Metro One Private Limited for development of the Versova–Andheri–Ghatkopar Metro corridor. The concessionaire alleged delay in handing over the right of way, changes in scope and escalation of project cost from about Rs. 2,356 crore to over Rs. 4,000 crore.

By a majority award dated 29 August 2023, a three-member tribunal directed MMRDA to pay Rs. 35 crore towards deductions from viability gap funding, Rs. 30.16 crore towards additional rent paid for Wadala land, Rs. 30.48 crore towards construction of a steel bridge at Andheri and Rs. 411.70 crore towards increase in project cost, along with interest. MMRDA's counterclaims were rejected.

Challenging the award, MMRDA argued that the tribunal had effectively rewritten the contract by granting monetary compensation where the agreement provided only for extension of the concession period. It further contended that the claims towards additional overheads, additional interest and opportunity cost were granted without primary documentary proof such as loan agreements, sanction letters and financial records.

The Court upheld the tribunal's findings on delay and sustained the awards relating to viability gap funding, Wadala land rent, the Andheri steel bridge and escalation in system costs. However, it set aside ₹100 crore awarded towards additional overheads, recording that there was “absolutely no evidence to award claim in the sum of Rs.100 crores towards additional overhead expenses.”

It also struck down Rs.125 crore awarded towards additional interest and financial expenses, holding that “The award of sum of Rs.125 crores towards a claim for additional interest and financial expenses cannot pass the muster of Section 34 of the Arbitration Act merely because same is significantly lower than what was claimed.”

On the Rs. 23.47 crore awarded towards opportunity cost, the Court agreed that projected business plans could not substitute proof of actual loss, observing that “mere business plan submitted as part of bid documents cannot be an acceptable basis for computing loss.”

Holding that the tribunal had awarded compensation without foundational proof of actual loss, the Court made it clear that estimation cannot replace evidence.

It observed, "Guesswork cannot be a short cut for production of evidence. Guesswork can be undertaken only when it is impossible to compute the exact quantum of losses suffered by the injured party. If evidence of sufferance of loss itself is not available, the Arbitral Tribunal cannot award damages of lesser sum than the one by presuming holding that some loss must have been suffered. When award of damages itself is not warranted due to absence of evidence, awarded claim cannot be sustained before Section 34 Court because the Tribunal awards far lesser sum or conservative sum than the one demanded."

The petition was partly allowed and the award stands modified to that extent. MMRDA's counterclaims continue to remain rejected.

For Petitioner (Mumbai Metropolitan Region Development Authority – MMRDA): Senior Advocate J.P. Sen with Advocates Kunal Vaishnav, Prachi Garg, Prerna Verma and Sayalee Dolas, instructed by DSK Legal.

For Respondent (Mumbai Metro One Private Limited – MMOPL): Senior Advocate J.J. Bhatt with Advocates Anjali Chandurkar, Dhishan Kukreja, D.J. Kakalia, Bhavna Singh Jaipuria, Paresh Patkar, Ayaan Zariwalla and Bhakti Chandan, instructed by Mulla & Mulla & CBC.

For Applicant/Intervenor (National Asset Reconstruction Company Ltd. – NARCL): Advocates Gathi Prakash, Nidhi Asher and Vidushi Trivedi, instructed by Cyril Amarchand Mangaldas.