Mumbai monorail:L&T-Scomi seeks HC stay on encashing bank guarantees

The L&T-Scomi Engineering consortium has moved the Bombay High Court seeking a stay on the Mumbai Metropolitan Region Development Authority's move to encash six bank guarantees, worth Rs 200 crore, following termination of their contract to operate the city's only monorail network.

On December 14, town planning authority MMRDA had terminated its contract with the LTSE consortium, which had the contract to build the country's first and only monorail in the megapolis.

While terminating the contract, the MMRDA had squarely blamed Scomi, saying the Malaysian company had failed to supply the contracted rakes and other operational materials, including the signalling equipment, despite many extensions and that encashing the bank guarantees should be treated as a penalty.

The consortium approached the court the same day seeking MMRDA and Axis Bank to be restrained from invoking the bank guarantees worth Rs 200 crore.

According to the petition, the termination notice states that the contract stands terminated on completion of 15 days from the receipt of the termination notice under which the petitioner has to handover the project to MMRDA, which has decided to own and operate it, within 15 days.

By this, the petitioner has time till December 30.

Senior counsel Dinyar Madon, appearing for the petitioners, argued that despite this, the MMRDA has demanded immediate payment under the bank guarantees.

"The consortium has only challenged the invocation of the bank guarantees and not the termination of the contract," Madon told PTI.

The petition came up for hearing before a single bench of Gautam Patel who after hearing the facts of the case opined that no prejudice would be caused to the MMRDA if the bank was restrained from acting on invoking the bank guarantees.

The court directed the bank not to act on the guarantees till December 19. The petition is likely to be heard again before Friday.

The authority claimed that it decided to terminate the contract after Scomi failed to meet contractual obligations and maintain the quality of monorail services.

Last year one rake went up in flames, while on service, and it forced shutting of the services for many months.

The L&T-Scomi consortium won the Rs 2,460-crore contract in 2009 to build and operate the 19.5-km monorail network on the Chembur-Wadala-Jacob Circle corridor connecting the eastern periphery of the island city to the central parts.

The 8.9-km-long first phase of the monorail from Chembur to Wadala was opened to the public in February 2014, almost four years after the original deadline.

MMRDA commissioner RA Rajeev had said they terminated the contract as Scomi failed to meet contractual obligations despite getting several extensions.

"L&T was the civil contractor and met its contractual obligations by completing the work and so cannot be blamed for our decision. But, Scomi failed to meet their contractual obligations of operating and maintaining the project apart from supplying the rolling stock," Rajeev had said.

Under the consortium agreement, L&T was responsible for the entire civil works, electrical and automation, while Scomi, which is one of the world's top three monorail manufacturers, had to bring in the rolling stocks, signalling and other equipment, and the operation and maintenance side of the project.

"As per the contract, the consortium had to supply 15 rakes, however, Scomi had supplied only 10. Of these 10 rakes, only four are operational," Rajeev said.

"We cannot continue to grant more extensions. We have decided to terminate the entire contract after they have failed to respond to our legal notices. Now, we are in the process of issuing fresh tenders to procure additional rakes," the MMRDA commissioner had said.

Since Scomi has "failed to meet its obligations, we have decided that the bank guarantee paid by the consortium will be treated as penalty", he said.