Mumbai: Calling it “arbitrary, unfair, and unreasonable,” the Bombay High Court on Tuesday quashed the Mumbai Metropolitan Region Development Authority’s (MMRDA) January 3 notice terminating its consultancy contract with Systra MVA Consulting (India) Pvt. Ltd. for system works on part of the Mumbai Metro corridor.
A bench of Chief Justice Alok Aradhe and Justice Arif Doctor directed MMRDA to reconsider its decision after granting Systra MVA a hearing. “MMRDA is directed to take a fresh decision regarding the continuation or termination of the petitioner’s contract after hearing it, by way of a speaking order,” the court ruled.
Systra MVA, a 70% stakeholder in the Systra-SMCIPL Consortium, won the consultancy contract after MMRDA floated a tender in February 2020 for Mumbai Metro Lines 5 (Thane-Bhiwandi-Kalyan), 7A [Andheri (East)-CSIA], and 9 (Mira Bhayander). The consortium’s bid of ₹90.76 crore was accepted, and MMRDA issued a Letter of Acceptance (LOA) on May 31, 2021. The contract, initially for 42 months until November 30, 2024, was later extended until December 31, 2026.
On January 3, 2025, MMRDA issued a notice discontinuing Systra MVA’s services from the 46th day after issuance, citing Clause 2.8.1(f) of the General Conditions of Contract, which permits termination without assigning reasons.
Senior advocate Venkatesh Dhond, representing Systra MVA, challenged the termination, arguing that MMRDA acted arbitrarily without justification. He contended that while the contract allows termination, public authorities must act fairly and reasonably, as mandated by Article 14 (equality before the law) of the Constitution. He further asserted that the existence of an arbitration clause does not prevent the High Court from intervening when a public law element is involved.
MMRDA’s counsel, Birendra Saraf, defended the termination, stating it was in accordance with the contract, which explicitly allows discontinuation at the authority’s discretion. He argued that the petitioner had willingly agreed to these terms and could not now invoke fairness principles to challenge them. He also contended that the dispute was contractual and best resolved through arbitration, cautioning that judicial interference could delay a critical infrastructure project.
The High Court stressed that even in contractual matters, government agencies must act fairly and cannot exercise their powers arbitrarily. “It is evident that the State or its instrumentality, even while acting in the contractual field, is under an obligation to act fairly and cannot act arbitrarily or unreasonably,” it stated.
It noted that the termination notice lacked reasons, making MMRDA’s action “arbitrary, unfair, and unreasonable.” The court observed: “Clause 2.8.1(f) of the General Conditions of Contract cannot be read as granting MMRDA a license to act unfairly, arbitrarily, or unreasonably in the contractual field without assigning reasons.”
Rejecting MMRDA’s argument that the petitioner should be relegated to arbitration, the bench held that judicial review was justified given the state agency’s arbitrary action.
“We find that the MMRDA’s termination of the contract, which was extended until December 31, 2026, without assigning reasons, is arbitrary, unfair, and unreasonable,” the court emphasized. It directed MMRDA to reconsider the termination decision after granting Systra MVA a hearing and passing a reasoned order.
