Bombay HC on Limits of Arbitration Referral in Mumbai Metro Line Dispute of Settlement Agreement

Interim Application No.1969 of 2025 in Commercial Summary Suit No.3 of 2025 of Mumbai Metro One Private Limited in the matter of Hindustan Construction Company  Vs.  Mumbai Metro One Private Limited

Clause 19.7 of the Contract dated 16.8.2010 between the Mumbai Metro Line 1 and the the Company provided for dispute resolution.

The respondent filed section 9 petition for release of performance bank guarantees.  During the pendency of the said petition, the parties entered into Settlement Agreement dated 28.3.2024 and it was agreed to return the performance bank guarantees to the respondent and to pay Rs.9 crores to the respondent as full and final settlement of the disputes between the parties.  Article 2 provided for the jurisdiction of the Courts at Mumbai over the subject matter.   Thus, the said agreement expressly omits arbitration clause.

The Respondent filed the commercial suit on the basis of settlement agreement for outstanding dues of Rs.9 crores with interest.

Mumbai Metro filed section 8 application on the ground that the Settlement Agreement was executed in furtherance of the contract and the dispute under the Settlement Agreement would also be required to be referred to arbitration.

HELD that where the issue of ‘arbitrability’ arises in the context of an application under Section 8 of the Act in a pending suit, all aspects of arbitrability have to be decided by the Court seized of the suit and cannot be left to the decision of the Arbitrator.

The Settlement Agreement is a separate agreement between the parties which does not contain any arbitration clause.   The Settlement Agreement having superseded the Contract and as it does not make a specific reference to arbitration despite containing a specific governing law and the jurisdiction clause.