Bombay High Court: The present writ petition was filed against the impugned notice dated 3-1-2025 by which the respondent, the Mumbai Metropolitan Region Development Authority (‘MMRDA’) terminated the contract executed between the petitioner and MMRDA. The Division Bench of Alok Aradhe, C.J., and Arif S. Doctor, J., opined that MMRDA’s action in discontinuation of the terms of the contract with the petitioner, Systra MVA Consulting (India) Pvt. Ltd., which was extended upto 31-12-2026, without assigning any reasons, was arbitrary, unfair, and unreasonable. The Court quashed and set aside the impugned notice dated 3-1-2025 and directed MMRDA to take a fresh decision regarding either discontinuation or otherwise of the contract awarded to the petitioner afresh after hearing it, by way of a speaking order.
Background
The petitioner was a company incorporated in India having 70% stake in Systra-SMCIPL Consortium and MMRDA was a statutory body engaged in long term planning, promotion of new growth centres, implementation of strategic projects and financing infrastructure development.
MMRDA published a tender notice on 11-2-2020 inviting bids for appointment of General Consultant for the purposes of design, assistance in procurement, construction, management supervision for Mumbai Metro Lines-5 (Thane-Bhiwandi-Kalyan), 7A [Andheri (East)-CSIA] and 9 (Mira Bhayander). The petitioner’s bid was accepted by MMRDA and a Letter of Acceptance (‘LOA’) dated 31-5-2021 was issued to the petitioner by which it was appointed as General Consultant for system works for part of Mumbai Metro Lines.
The parties entered into an agreement and the initial term of appointment of the petitioner was 42 months from the date on which LOA was awarded to the petitioner, till 30-11-2024. On 18-7-2024, the petitioner sought an extension of the term of contract which was granted on 4-10-2024 and by which the term of appointment of the petitioner was extended upto 31-12-2026. Thereafter, MMRDA issued notice dated 3-1-2025 by which the petitioner was informed that MMRDA had decided to discontinue the petitioner’s service with effect from 46th day of issuance of the impugned notice. Thus, the petitioner filed the present petition.
Analysis, Law, Decision
The Court relied on M.P. Power Management Co. Ltd. v. Sky Power Southeast Solar India (P) Ltd., (2023) 2 SCC 703 and Subodh Kumar Singh Rathour v. Kolkata Metropolitan Development Authority, 2024 SCC OnLine SC 1682, and opined that the State or its instrumentality even while acting in contractual field was under an obligation to act fairly or cannot act arbitrarily or unreasonably. The Court opined that in the present case, the nature of controversy involved public law element and therefore this Court in exercise of power of judicial review could examine whether the action of the instrumentality or agency of the State was fair, just, and equitable.
The Court referred to the impugned notice of discontinuation of services dated 3-1-2025 and opined that MMRDA had not assigned any reasons for discontinuation of services of the petitioner.
The Court stated that Clause 2.8.1(f) of the General Conditions of Contract, which enabled MMRDA to terminate the contract without assigning any reasons, could not be read to mean that MMRDA had a licence to act unfairly, arbitrarily, or unreasonably in the contractual field without assigning reasons. The power under Clause 2.8.1(f) of the Contract must be exercised in consonance with the principles of fairness, reasonableness, and non-arbitrariness. Thus, the Court opined that the action of the MMRDA in discontinuation of the terms of the contract, which was extended upto 31-12-2026, without assigning any reasons, was arbitrary, unfair, and unreasonable.
The Court held that the action of the MMRDA in revoking the contract without assigning any reasons was arbitrary and unfair, and therefore it was not necessary for this Court to examine the nature of contract and whether it was determinable in nature. The Court stated that the contention that since MMRDA had acted in exercise of rights available to it under the contract and therefore the petitioner should be relegated to the remedy of arbitration, could not be accepted, as the action of MMRDA in discontinuing the consultancy services provided to the petitioner was arbitrary and unfair.
The Court quashed and set aside the impugned notice dated 3-1-2025 and directed MMRDA to take a fresh decision regarding either discontinuation or otherwise of the contract awarded to the petitioner afresh after hearing it, by way of a speaking order.
[Systra MVA Consulting (India) Pvt. Ltd. v. MMRDA, Writ Petition (L) No. 2889 of 2025, decided on 25-2-2025]
*Judgment authored by: Chief Justice Alok Aradhe
Advocates who appeared in this case :
For the Petitioner: Venkatesh Dhond, Senior Advocate, along with Ameya Gohale, Kunal Singh, Ranjith Nair, Chintan Ghandhi and Arush Kumar, instructed by Shardul Amarchand Mangaldas & Co., for Petitioner.
For the Respondent: Birendra Saraf, Senior Advocate, along with Jatin Pore, Suddhasattwa Roy along with Jay Sanklecha, instructed by DSK Legal, for Respondent.
