The State must act fairly and cannot terminate contracts arbitrarily without providing reasons, even in contractual matters.

JUDGMENT :

ALOK ARADHE, C.J.

1. Rule. With consent of the learned counsel for the parties, Rule is made returnable forthwith. With consent of learned counsel for respective parties, heard finally.

2. The instant writ petition takes an exception to the impugned notice dated 3^rd January, 2025 by which the Mumbai Metropolitan Region Development Authority (MMRDA) has terminated the contract executed between the petitioner and the MMRDA. In order to appreciate the grievance of the petitioner, relevant facts need mention which are stated supra.

I. FACTS :-

3. The facts leading to filing of this petition, in nutshell are, that the petitioner is a company incorporated in India having 70% stake in Systra-SMCIPL Consortium. The respondent MMRDA is a statutory body engaged in long term planning, promotion of new growth centres, implementation of strategic projects and financing infrastructure development.

4. MMRDA published a tender notice on 11^th February, 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 consortum, viz. Systra-SMCIPL of which the petitioner is a part, submitted its bid on 16^th June, 2020 of Rs.90,76,68,320/-.

5. The bid of the petitioner was accepted by MMRDA and a Letter of Acceptance (LOA) dated 31^st May, 2021 was issued to the petitioner by which the petitioner was appointed as General Consultant for system works for part of Mumbai Metro Lines – 5 (Thane-Bhiwandi-Kalyan), 7A [Andheri (East)-CSIA] and 9 (Mira Bhayander). The parties, thereafter, on 28^th December, 2021 entered into an agreement. The initial term of appointment of the petitioner was for a period of 42 months from the date on which LOA was awarded to the petitioner, i.e. 31^st May, 2021 till 30^th November, 2024.

6. The petitioner, on 18^th July, 2024, sought extension of term of contract which was granted on 4^th October, 2024 by which the term of appointment of the petitioner was extended upto 31^st December, 2026.

7. The MMRDA issued notice dated 3^rd January, 2025 by which the petitioner was informed that it has decided to discontinue the petitioner’s service with effect from 46^th day of issuance of the impugned notice. In the aforesaid factual background, this petition has been filed.

II. SUBMISSIONS OF PETITIONER :-

8. Learned Senior Counsel for the petitioner submitted that the impugned notice dated 3^rd January, 2025 has been issued de hors the terms of the agreement and does not set out any reasons for discontinuation of the services of the petitioner. It is contended that the MMRDA has not recorded any reasons while discontinuing the services of the petitioner and has failed to act reasonably and fairly and has violated the mandate of non-arbitrariness. It is further contended that the presence of arbitration clause in an agreement is no bar for exercise of jurisdiction under Article 226 of the Constitution of India. In support of the aforesaid submissions, reliance has been placed on the decisions of the Supreme Court in the following cases :

(a) Harbanslal Sahnia and another Vs. Indian Oil Corporation Ltd. and others,(2003) 2 SCC 107 – Para 7.

(b) Union of India and others Vs. Tantia Construction Private Limited, (2011) 5 SCC 697 – Paras 33 and 34.

(c) Unitech Limited and others Vs. Telangana State Industrial Infrastructure Corporation (TSIIC) and others, (2021) 16 SCC 35 – Paras 38 and 39.3 to 39.6.

(d) Uttar Pradesh Power Transmission Corporation Limited and another Vs. CG Power and Indus