The Bombay high court (HC) has given relief to the Slum Rehabilitation Authority (SRA) from paying Rs86.72 crore as damages to MM Project Consultants, who were hired as project consultants to redevelop Dharavi, Asia’s largest slum pocket spread across 151 hectares, after the consultancy’s service contract was terminated by the SRA.
Dharavi, which has 46,189 residences and 12,976 small and medium-sized business establishments, has been in the throes of a much-needed makeover.
A single bench of Bombay HC, comprising Justice GS Kulkarni, struck down the order of a three-member arbitral tribunal and held that its January 15, 2018, order ignored key evidence and was liable to be set aside.
The court, quoted a Supreme Court judgement between Ssangyong Engineering & Construction Co. Ltd vs. National Highways Authority of India (NHAI), and noted, “It’s held that a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.”
Earlier in 2004, the Maharashtra government had decided to redevelop Dharavi and SRA was appointed as the nodal authority for implementing the project.
On November 1, 2008, the authority signed the project management consultant agreement with MM Project Consultants.
Under the agreement, the project consultant was entitled to Rs56 crore, or 1% of the estimated project cost of Rs 5,600 crore, and 25% of the amount, or Rs14 crore, was to be paid for pre-tender activities and the balance 75%, or, Rs42 crore, for post-tender activities.
The firm was also entitled to 0.5% of the total premium received by SRA.
On August 4, 2012, SRA terminated the agreement, but the consultancy firm was already paid Rs14 crore for pre-tender activities.
The firm invoked the arbitration clause in the agreement and claimed damages for purported wrongful termination, loss of profit, etc.
The tribunal accepted the claim for loss of profit and quantified the damages at Rs86.72 crore.
The amount was ordered to be paid with interest at the rate of 9℅ per annum from the date of filing the compensation claim.
SRA moved the HC, where justice Kulkarni found the compensation claim unsustainable.
The judge said the tribunal ignored ample evidence on record that the Dharavi Redevelopment Project (DRP) had come to a standstill, as no bids were received by SRA despite inviting global tenders twice, and the agreement had come to its natural end, and as a result, the termination could not have been termed as invalid or wrongful.
The judge said the project consultant was completely aware of these developments, and it was wrong on part of the tribunal to hold that the project was an ongoing affair, in view of the advertisement issued by SRA in January 2016 inviting fresh bids for DRP (which again failed to invoke any response and after which Maharashtra Housing & Area Development Authority (MHADA) was appointed as the nodal authority for the project), as the fresh advertisement was unconnected with MM Project Consultants.
The judge also found fault in the quantification of the purported damages, as the firm had not tendered any evidence to support the loss suffered or likely to be suffered by it because of the termination of the agreement.