SEMINAR ON “CONTRACTS FOR INFRASTRUCTURE WORKS”
The CEAI Western Region Centre organized a seminar on “Contracts for Infrastructure Works” on 15th October 2022 at Taj President, Cuffe Parade, Colaba, Mumbai, to analyse and examine the changes over the last two years and more that the pandemic had thrust upon the judicial thinking, processes and procedures for contracts, especially those related to the extensive infrastructure developed in the Country. The term ‘Infrastructure’ was used to imply all sectors – Roads & Highways, Railways & Metros, Shipping & Water transport, Airports, Water, Wastewater & Solid Waste, Power, Irrigation & Flood Control, Townships, Smart Cities, Buildings, Hospitals & HealthCare, Industrial, etc.
The seminar which covered six current issues in the legal eco-system was made possible by the whole hearted support of the members of the CEAI-WRC event team. The speakers and panellists comprised eminent professionals from the legal sector, construction and engineering who have their finger on the pulse. They shared their views, experience and the recent pronouncements on legal matters and their impact on the Works. Participants comprised Corporate Legal Heads, VP/ GM Contracts, Commercial Managers, Project Managers, Engineers & Quantity Surveyors, Construction Professionals, Consultants, Lawyers & Arbitrators, Insurance Professionals and others who have a professional interest in the handling of contracts. Ample opportunities were planned to give the participants time to exchange their experiences and views with the speakers, panellists and amongst themselves.
Dr. Harshavardhan Subbarao, Member Governing Council CEAI and Chairman, CEAI-Western Region Centre, welcomed everyone and requested the Chief Guest, Vice Admiral Rajaram Swaminathan, AVSM, NM, Director General Naval Projects (Mumbai) for lighting the lamp. Other dignitaries also joined for that. Thereafter Dr. Subbarao invited the Chief Guest to deliver the Keynote address.
Vice Admiral Rajaram Swaminathan, AVSM, NM at the outstep clarified that the Navy “also deal with creation of infrastructure through the home-grown Military Engineer Service or through EPC/ PMC contracts. Techno-legal issues faced by us are much the same and I’m sure there will be learnings today for us too.” He went to dwell on the link between infrastructure and the country’s economy and “India is the third largest construction market in the world today.” He talked of the National Infrastructure Pipeline which envisages investment of USD 1.4 Trillion and all that would help India achieve its “Sustainable Developments Goals 2030 for improving living standards of people and inclusive growth.”
He then spelt out the initiatives and the drastic improvements in the speed of execution of projects due to new materials, technologies and processes for construction. He went on to add that “Technology can also enable project and contract management by way of remote monitoring, remote inspection of stage works, basic adjudication on claims, preparation of monthly progress reports, physical and financial progress and monitoring of projects. The potential to reduce decision making/ reporting delays, especially on issues like extension of time or cost is enormous. Similarly, Systems for capability, capacity and performance rating of vendors can be generated which would facilitate ease of selection based on PQC thereby reducing contracting time.”
He went to say that despite all that “bottlenecks and pain points that remain are delays in resolution of techno-legal issues” and that in most cases the starting point of the discord was accuracy of site data and pacing the onus on the contractor could be unfair. Hence there was need to provide more accurate site data using better technology and also incorporate fair clauses in the contracts with respect to extension of time and monetary compensation for deviations. They help to reduce litigations due to “unforeseeable conditions”.
To do that he clarified required proper drafting of contracts. He suggested that the Employers need to work towards project partnership to “Transforming employer- contractor relationships into a mutually beneficial partnership with the sole aim of moving projects ahead and curbing delays.”
Vice Admiral Rajaram Swaminathan, then gave examples of “conflicts and inconsistencies of contractual clauses vis- a-vis law of the land which led to delays adjudication.” He gave examples of the concept of extension of time in contracts and its ramifications. He also mentioned about the provision in Code of Civil Procedure – Order 2, Rule 2 Res Judicata, which is not recognised by Arbitration tribunals and thus leads to multiple claims. Then he went on to point out the disconnect between infrastructure contracts and the Indian legal framework.
He next said that faster resolution of disputes is a sine qua non for ensuring regular cash flows and physical progress of projects. He mentioned that a former CJI had advocated that “arbitration awards must be binding and escalation to higher courts must be avoided to reduce load on the courts as also speed up contractual dispute resolution.” Vice Admiral Rajaram Swaminathan therefore advocated that the techno-legal aspects be ironed out and efforts taken to draw up Infra Vision 2025. He suggested that steps need to be taken to make the Engineers determination “final and binding” in the interest of the project. He wished the sessions good deliberations.
Dr. Subbarao thanked Vice Admiral Rajaram Swaminathan for his enlightening address and putting across the disconnects between the contracts, the law of the land and the practices. He then invited the expert speakers to make their presentation.
Mr. Aditya Gupte, Partner, Tuli & Co. Advocates and Solicitors, Insolvency & Arbitration dealt with the “Current Judicial trend and issues in Limitation of Interest clauses in Contracts”. He covered the provisions of Interest as per the Interest Act 1978 – the power of the court to allow interest, and also what the Code of Civil Procedure 1908 stipulates vide Section 34(1) which envisages three categories viz. Pre lite interest, Pendente lite interest and Post lite interest. He then dealt with Section 29 of the Arbitration Act 1940 and also the Arbitration & Conciliation Act 1996.
With that background he discussed various judgements which had been passed by courts in respect of interest such as the Ambica Principles (2016) and interest barring clauses being binding on the arbitrator. He then moved on to the issues created by the current position of law and as a closure presented the case where the constitutional validity of Section 31(7)(a) of the 1996 Act and Section 3(3)(a))ii) of the Interest Act 1978 has been challenged.
Mr. Rajat Taimni, Partner, Tuli and Co., Advocates and Solicitors, Head of Practice-Dispute Resolution went on to elaborate on the matter of interest and the limitation of interest clauses in contracts and summed up that in all fairness and interest of justice there is a need for a solution to the issue of interest.
Mr. Suvigya Awasthy, Associate Partner, PSL Advocates & Solicitors took up the matter of “Recent Judicial Pronouncements on Liquidated Damages”. He set off by expanding on understanding Liquidated Damages and what and how they are in construction contracts. To elucidate that he presented some sample LD clauses. He clarified the difference between Liquidated Damages and Penalty clauses vis-à-vis enforceability, statutory provisions, the two-pronged test and the test for determination whether LD or Penalty. He presented landmark judgements from India, Singapore and the UK.
Moving on to the Guiding Principles he talked of computation of LD, no guess work to be done, and the types of recoverable damages. Regarding Evidentiary Threshold he explained the First Test – Named Sum v Formula, Second Test – Aggrieved party under an obligation to plead and prove the loss suffered on account of breach, and the Third Test – leading evidence. He presented the case wherein the legitimate interest of the innocent parties was an issue. Mr. Awasthy thereafter presented five more recent judgements and summed up with a note for the contracting parties.
Mr. Vikas Kumar Sinha, IRAS, DFCCIL took up the matter regarding the “Right to Claim variations and acceleration/ damages and time extension in Contract Execution – What to watch out for”. He represented the public organisation with great conviction and explained the matter from the perspective of the working of a government organisation and the right to claim by a contractor. He clarified as to what one needs to look out for with regards to procedural aspects; contemporaneous managing the contract; what is theoretical and what is as per the contract and the law.
Mr. Sinha explained the clause on Variations which covers additions, omissions, substitutions or alteration from a contractual perspective. Thereafter he moved on to discuss Value Engineering that could be done by a contractor to benefit the client/ project. He next dealt with damages form a legal perspective. He concluded by emphasising that the Project is supreme.
Mr. Ashutosh M Kulkarni, Advocate speaking on “What the Future outlook would be vis-à-vis Operation and Interpretation of Force Majeure clauses in Covid-19” clarified as to what Force Majeure is and gave its definition as per Black’s Law dictionary.
He spelt out the statutory provisions which deal with Force Majeure and then moved on to judicial interpretations of the term and also its jurisprudentical evolution.
Mr. Kulkarni related some pertinent judgements and went on to discuss the broad principles associated with Force Majeure. While concluding he clarified how it would apply to the pandemic created issues.
Dr. Subbarao invited the Distinguished Guest, to share his views.
Dr. Ramnath Sonawane, Secretary, Maharashtra Water Resource Regulatory Authority, while addressing the gathering spoke about contracts based on his experience of dealing with many of them on varied projects. He drew attention to certain practices, especially during preparation of DPRs which led to issues during the execution of the project and consequently led to disputes. The sum of his address was that there needs to fair dealing by all parties to a contract so that the project is done smoothly and interest of all is addressed.
Mr. Kirindeep Singh, Senior Partner, Dentons Rodyk & Davidson LLP, Litigation & Arbitration Practice took up the issue of “Design Liability in Design and Build Contracts”. He commenced by lucidly explaining the responsibilities of contractors under a design and build contract and then the design liabilities. With that background he covered fitness for purpose and presented a judgment on the same.
He next took up the matter of variation orders under design and build contracts and presented a judgment on that and moved on to analysing the FIDIC and the JCT forms for design and build contracts. While concluding he stressed that contractor needs to take extreme care under such contracts and gave some suggestions.
Mr. Sachin Mishra, Head Legal & Company Secretary, TATA Consulting Engineers Limited touched on the issue of “Engineers Determination Clause : Final & Binding Effects – How can this be challenged with reference to Indian Contract Act?”. He commenced with presenting global data on the construction disputes – their value, length, cause, method of resolution, important factors in mitigation/ early resolution and claim avoidance techniques.
With that background he took up the clause on Engineer’s Determination as per FIDICs rainbow suite of contracts and also the Indian contract law. He mentioned that the Engineer’s determination could still be challenged on many grounds and presented some judgements and the learnings from them. On the way forward to save time and cost he made some suggestions.
Mr. A P Mull, Past President CEAI and Former MD& CEO Tata Consulting Engineers Limited spoke on “Ethics & Quality” with reference to the Code of Ethics of the Consulting Engineers Association of India (CEAI) which is mandatory for all members to adopt and abide by. He explained all the clauses with reference to that Code.
He next, delt with Quality and what is means and implies for the purpose of engineering. Emphasising that Engineers are the backbone of development and must therefore be particular regarding quality, he mentioned that Green Engineering and Sustainable Development must be the aim. He showed how ethics and quality are interlinked and also essential to fulfil contractual requirements. Mr. Mull summed up that planning & design must be integrated and holistic.
Panel Discussions
Experts shared their experience during two Panel discussions moderated by Mr. Rajat Taimni. During those sessions, the Speakers and members from the audience also participated and spoke of their experience and offered suggestions.
The experts were:
| Dr. Vandana BhattPRO CARE
Contract Administration Consultant |
Mr. Uttam SenguptaFmr Corporate Advisor
Contracts & Risks Voltas Ltd. |
| Mr. Chetan KavdiaFounder
Secure Legal & Associates |
Dr. Milind WankhedeLegal Advisor
Construction Contracts & Arbitration Law |
Dr. Vandana Bhatt very eloquently summed up the day long deliberations and echoed the need of knowledge regarding Construction Law for engineers. For that she informed that CEAI was planning to have a short-term course for the working professionals. The dates would be announced later on.
Mr. Jeffrey Nambiar, Hon. Secretary & Treasurer, CEAI – Western Region Centre thanked all the Chief Guest, the Distinguished Guest, the Speakers, the Panellists and the Participants for their wide but incisive talks and presentations, to all the participants for the extensive interaction which was the goal; all that made the event a big success. He also thanked the sponsors Tuli & Co and PSL Advocates & Solicitors, the Supporting Organisations and the Media Partners. A special thank was to Dr. Vandana Bhatt for generously providing, for the kit bag, the book “Law for Engineers” co-authored by her. He thanked the members of CEAI -WRC’s Core Committee Seminars-for their unstinted help in organising the seminar; Taj President Hotel for the excellent arrangements, Soundtrek for the projection and sound systems, the staff at Chempro Expertise, Tuli & Co. and Secure Legal for being the backbone; and Dr. Harshavardhan Subbarao for his excellent compering of the seminar and Mr. Rajat Taimni for the panel discussions.