Critical Analysis of Contract Clauses in Road Sector: Case Study

Abstract

Construction litigation in the infrastructure sector has long had the potential of locking in investments. The court case in this study finally ended, with the judgment delivered by the high court of Delhi, on March 16, 2012. The court itself took 2.25 years to adjudicate and give its judgment. The case was filed challenging the arbitration award by a public authority. The reason for challenging the award arose out of claims emanating from alleged extra costs incurred by the respondent, particularly in the extended period of the contract which were upheld by the arbitral tribunal. The grant of extension of time was never a controversy in the present case, but the related costs formed the core issues under arbitration, followed by the litigation. The claims included amount against loss of profit and financing charges, and the award against these two claims by the tribunal was finally struck down by the court. The court was of the opinion that these two claims were beyond the scope of the contract provisions and that they were not costs but damages. The judgment in the case did not violate the established doctrine of precedent.” The award pronounced by the arbitral tribunal was not in the true spirit of the settled principles of law and not aligned to the appropriate interpretation of the clauses stipulated in the contract. Therefore, the judgment delivered by the high court quashed and modified many of the awarded amounts; still, this wasn’t a case of violation of the doctrine of precedent by any stretch of imagination. However, there are many cases where precedent has been violated. Examples of such cases include ONGC v. Saw Pipes Ltd. Although interference by courts is undesirable and it is settled that facts need not be appreciated again, the present case involved a mixing of facts and law with pure law. The methodology adopted involves ensuring the compliance of general and specific conditions stipulated while granting environmental clearance. These conditions comprise, for example, (1) whether or not a sewage treatment plant was built for the construction workers, (2) whether or not compensatory afforestation was taken up and completed, and (3) ensuring that the natural profile of the slopes were not disturbed. Whether or not these conditions were complied with by the concessionaire and public authority needed to be evaluated. Constraints to ensure compliance needed to be mitigated. This paper contributes toward greater awareness on the part of contract framers of apt language to be used when detailing contract clauses and provisions.