Bombay HC quashes MMRDA's termination notice to French firm

The Bombay High Court on Tuesday quashed a contract termination notice issued by the Mumbai Metropolitan Region Development Authority (MMRDA) to French consultancy firm Systra, which had accused several officials of the authority of corruption related to Metro projects in the city.

The HC said the decision of termination was "arbitrary and unfair" and directed the state-run agency to consider the issue afresh after hearing the company.

After the graft charges kicked up a political storm, sources said deputy chief minister Eknath Shinde, who heads the Urban Development Department (UDD), asked an additional chief secretary to "inspect the matter" after hearing officials of the French firm as well as the MMRDA, and submit a report to him in 15 days.

In a statement, the MMRDA, however, claimed Systra "misrepresented" certain facts to the representatives of the French government only after receiving the suspension and termination notices from MMRDA. "This clearly indicates that the allegations are an afterthought aimed at deflecting attention from their own contractual breaches," the authority said in a statement.

The statement said the consultancy firm claimed the issues began in August 2023, but did not submit any formal representation to the MMRDA, the UDD, the chief secretary's office, or the chief minister's office until after the suspension and termination notices were served.

They also pointed out that the so-called representation by Systra is unsigned, and as per the government of Maharashtra's policy, such an unsigned document can only be treated as a "mere printout of wild allegations".

"The French Embassy merely forwarded this printout without endorsing its veracity or merit (to the Maharashtra government)," it stated.

Last month, the MMRDA terminated the contract of Systra's Indian subsidiary which had been appointed as a general consultant for design, assistance in procurement, construction, management and supervision of three routes of Mumbai Metro — Thane-Bhiwandi-Kalyan, Andheri -CSIA and Mira Bhayander — in 2021.

The issue gained attention when the French Embassy wrote to Rupinder Singh, the resident commissioner of Maharashtra in Delhi, on 12 November 2024, and asked the state government to investigate the matter thoroughly and to "resolve the situation", citing Systra's complaints of "severe harassment" encountered while serving as a general consultant on MMRDA projects.

Systra alleged MMRDA officials sought "undue favours", delayed payments, pressured the firm to inflate orders to contractors, stalled approvals for critical staffing, and imposed arbitrary penalties.

While the initial contract was to expire in November 2024, it was extended to December 2026. But on 3 January, MMRDA issued the company a notice, stating it had decided to discontinue its services, prompting the company to move the HC. MMRDA claimed the general conditions of the contract enabled it to terminate it without assigning any reason.

On Tuesday, a bench of Chief Justice Alok Aradhe and Justice Arif Doctor noted that the MMRDA did not give reasons while discontinuing the services of Systra MVA Consulting (India) Pvt Ltd on 3 January 2025.

"We find that the action of the MMRDA in discontinuation of the terms of the contract, which was extended up to December 2026, without assigning any reasons, is arbitrary, unfair and unreasonable," the HC said.

The state or any of its authority, even while acting in the contractual field, is under an obligation to act fairly and cannot act arbitrarily or unreasonably, the bench noted.

"The general conditions of the contract cannot be read to mean that the MMRDA has a license to act unfairly, arbitrarily or unreasonably in the contractual field without assigning reasons," the HC said.

Quashing the MMRDA notice, the court directed the authority to take a fresh decision after hearing from the company. Though the MMRDA claimed in the statement that the HC's order had reinforced MMRDA's procedural integrity and its rightful discretion in the matter, the court had, however, not gone into the merits on the performance of Systra.

Opposition leaders, meanwhile, targeted the Mahayuti government over the Systra-MMRDA issue and sought a fair probe into the entire episode. Shiv Sena (UBT) leader and former minister Aaditya Thackeray hit out at Shinde — who heads the rival Shiv Sena — over the issue.

"While India and France get closer diplomatically, the @MMRDAOfficial run by Eknath Shinde's Urban Development department, rubbishes concerns of corruption raised by the French consultant," he said on X. "I urge @CMOMaharashtra to launch an open, free and fair inquiry into this issue."

The Maharashtra Congress said the accusations of corruption require an open and impartial investigation. The company's decision to seek assistance through diplomatic channels has cast doubt on our nation's standing internationally, party spokesperson Sachin Sawant said.

"We demand a judicial investigation into this grave issue. No international agency would choose to work in India if justice is not done here," Sawant added.

The NCP (SP) led by Sharad Pawar termed it a serious issue and an "absolute embarrassment" for the country. "#BJP led Maharashtra government that cries hoarse about transparency must clarify and expose all involved. It will not be surprising if they give a clean chit to the guilty and instead accuse the French company," NCP (SP) spokesperson Clyde Crasto said in a post on X.