The Mumbai High Court on Tuesday canceled the decision of the Mumbai Metropolitan Development Authority (MMRDA) to terminate the contract with French companies to provide consulting services in the Mumbai metro project.
The judge composed of Chief Justice Alok Aradhe and Justice Arif Doctor ruled that the termination of services by Systra MVA Consulting (India) was arbitrary and lacked reasons. The court directed the MMRDA to make a new decision after a fair hearing.
“The MMRDA is instructed to give a new decision on the interruption or extension of the contract awarded to the petitioner,” the bench said.
The High Court also directed the MMRDA, the institution responsible for the planning and development of the metropolitan area of Mumbai, which, after hearing the company, owned a 70% stake in the Systra-Smcipl Alliance.
In February 2020, MMRDA invited bids to appoint General Consultant for Design, Procurement Assistance, Construction and Management Supervision of Mumbai Metro Line 5 (Thane-Bhiwandi-Kalyan), 7A (Andheri East-Csia) (Andheri East-Csia) and 9 (Mira Bayander).
The petitioner Systra consortium submitted a bid of Rs 9076 crore in June 2020 and was appointed as a consultant for system work on part of the three Mumbai metro lines in May 2021.
challenge
When MMRDA issued a termination notice on January 3, 2025, the dispute occurred after cessation of Systra MVA Consulting’s services within 46 days. The contract was initially awarded for a 42-month award in May 2021 and extended to December 2026. The petitioner believes that the termination was conducted without a reason for distribution, which violates the principle of fairness and non-tolerance stipulated in Article 14 of the Constitution.
Venkatesh Dhond, a senior advocate representing the petitioner, believes that the existence of the arbitration clause does not prevent the court from exercising judicial review. He stressed that as a public authority, MMRDA must act transparently and reasonably.
MMRDA’s Defense
MMRDA defends its decision, considering that the contract contains a clause that allows termination “at its sole discretion and for any reason.” It insisted that the termination was consistent with the contractual provisions and that the petitioner should seek arbitration rather than judicial intervention.
Advocate General Birendra Saraf appeared in the MMRDA, and he asserted that the principle of public law should not interfere with pure contractual disputes. He cited previous judgments that uphold the discretion of government agencies in commercial contracts. Saraf believes that the notice was issued under the general conditions of the contract, which allowed the MMRDA to terminate the agreement without the need for a reason to allocate.
Court observation
The judge ruled that although MMRDA has the contractual right to terminate the agreement, the power cannot be exercised arbitrarily. The judge pointed out that the termination notice lacked reasons, making it unfair and violated the principles of public law.
“The general conditions of a contract cannot be understood as permission for the MMRDA to act unfairly, arbitrarily or unreasonably in the field of contract without a reason to allocate,” the court said.
The bench further added: “The action of MMRDA to revoke a contract without assigning any reason is arbitrary and unfair. Therefore, we do not have to check the nature of the contract and whether it is certain.”
“If the court considers the action to terminate a contract to be arbitrary and unreasonable, it will not be the power to judicial review power based solely on alternative remedies,” the bench said.
