No HC relief for MMRCL in contractual dispute with HCC

The Bombay High Court dismissed MMRCL's plea to refer its dispute with HCC to arbitration, affirming a prior settlement of ₹9 crore without an arbitration clause.

MUMBAI: The Bombay High Court on Thursday dismissed a plea filed by the Mumbai Metro Rail Corporation Limited (MMRCL), seeking to refer its dispute with its contractor for the Versova-Andheri-Ghatkopar metro line, Hindustan Construction Company (HCC), to arbitration, a year after settling the dispute by offering ₹9 crore to the company as full and final settlement. The settlement agreement between MMRCL and HCC was a separate agreement which did not contain any arbitration clause, the court said.

No HC relief for MMRCL in contractual dispute with HCC

MMRCL had appointed HCC as contractor for executing various works on Metro line 1 and an agreement to that effect was signed between them in August 2010. After execution of the works, a dispute arose between them over performance bank guarantees submitted by HCC to MMRCL, and the former approached the high court.

The parties, however, amicably settled the matter and MMRCL subsequently returned the bank guarantees to HCC, issued a final take-over certificate and agreed to pay ₹9 crore to the contractor towards full and final settlement. As MMRCL was reeling under financial stress, the payment of the settlement amount was delayed, after which HCC again approached the high court.

MMRCL had filed a plea in the suit, seeking to refer the dispute to arbitration, contending that the agreement under which three work orders were issued to HCC for Metro line 1 contained an arbitration clause; hence, the dispute was required to be resolved through arbitration, it said.

A single judge bench of justice Abhay Ahuja found substance in the arguments advanced on behalf of HCC and held that the settlement agreement had overridden the contract.

“The settlement agreement makes it abundantly clear that it is a full and final settlement irrespective of whatever claims were raised under the contract and work order. Therefore if all the claims are dealt with and settled, no issues under the contract are left to be adjudicated upon in arbitration,” the judge said.

The court also took into consideration that MMRCL had, in fact, acted upon the settlement agreement and accordingly handed over the performance bank guarantees and the final take over certificate to HCC.

“The applicant (MMRCL) has thus recognised that the settlement agreement is binding between the parties but has failed to repay the settlement amounts within the stipulated timeline,” the court said and rejected MMRCL’s plea.