1. Golden Quadrilateral
- Legal Issues
Prof G Raghuram
M Rajesh Kumar
Indian Institute of Management, Ahmedabad

2. Details of Contracts & Legal issues
Till March 31, 2009
Total no of contracts awarded: 128
Total no of stretches completed: 113
Total number of JV’s formed: 54
Total number of contracts under disputes: 84

3. Progress of work
Work done till March 31, 2009
Cumulative length Cum % progress of
Total Length
Corridor completed in km contracts under
(kms)
(%) implementation
1419
DELHI-MUMBAI 1419 -
(100%)
1263 49.58%
MUMBAI-CHENNAI 1290
(97.90%) (for 164km)
1591 50.64%
KOLKATA- CHENNAI 1684
(94.48%) (for 197 km)
1440 89.82%
DELHI-KOLKATA 1453
(99.10%) (for 366 km)
TOTAL GQ 5713 80.71%
5846
(97.72%) (for 727 km)

4. GQ: Time Overrun
40
30
Time overrun (months)
20
10
0
0 20 40 60 80 100 120
-10
Contract No

5. GQ: Cost Overrun
250
200
Cost overrun (Rs Crores)
150
100
50
0
0
20
40
60
80
100
120
-50
-100
Contract No

6. Dispute Resolution Mechanism
There were innumerable number of Dispute
Resolution Boards (DRB) formed to resolve
various disputes and finally 84/128 packages
resorted to arbitration for resolution/reversal
of various recommendations made by DRB.
There were also many court cases.

7. Methodology of Analysis
Total number of court cases analyzed: 11
Total number of arbitration cases analyzed: 47
The study involved:
Collection and detailed study of various arbitration and court
cases related to GQ.
Analysis of the disputes and relevant contractual clauses to
check which party has wrongly interpreted the clause leading
to the dispute.
Scripting out the lessons.
Still in progress, Why no disputes in 44 packages?

8. Reasons for Dispute
Provision of inadequate data
Misinterpretation of technical specifications
Change in policies or legislations in the region
of work
Misinterpretation of contractual clauses
Non adherence to time limitations
Erroneous actions of engineer, employer, or
contractor

9. Reasons for Dispute
Provision of inadequate data
The main reason for the occurrence of the dispute is due to
faulty data provided by the NHAI
Misinterpretation of technical specifications
In some cases the technical details were not specified
properly and discrepancies were reported in payment made
due to such misinterpretations
Change in policies or legislations in the region of work
There were claims against the increase in the prices due to
variation in tax rates, policy changes during the
implementation of contract

10. Reasons for Dispute
Misinterpretation of contractual clauses
Interpretation of a sub clause independent of other sub clauses in
the same clause.
Interpretation of the clause independent of other clauses of the
contract.
Interpretation of clause along with other clause when the clause
should be interpreted individually.
Interpretation of a clause of a contract along with some other law
outside the contract but relevant to present situation. (Like
refereeing to another judgment of similar case).
Interpretation of a clause based on current policy instead of old
policy after it has been completely amended.
Interpretation of similar clause in contract which has higher
priority than this clause of the contract when there is no scope of
ambiguity in the present clause etc

11. Reasons for Dispute
Non adherence to time limitations
The Contractor is not aware of the policy announcement or
he neglected the announcement because he did not pay
attention to this particular rule.
The Employer not providing compensation for increase in
various taxes during the implementation of the contract,
due to change in policy during the implementation of
contract.
These changes are applicable and the claim should be
made within a particular duration mentioned in the contract.
In case of no claim there is compensation made and the
Contractor is liable to pay the variation.

12. List of Some Claims
Reimbursement of additional costs incurred on account of change
in legislation/policy with respect to deemed export benefits.
Loss of overheads and profit on account of omission of BOQ item
for cutting and stacking of trees.
Separate payment for the reinforcement of the cast insitu piles.
Payment towards price adjustment on works executed as per
BOQ.
Determination of rate for scratching of existing bituminous surface
before laying of WMM/GSB layer as a profile correction course.
Decision of rates for sinking of wells pertaining to different
diameters and depths.
Payment for embankment construction in clearing and grubbing.
Payment for provision of 20mm pre moulded filler joints in
Culverts, Minor Bridges and Underpasses.
Wrongful extension of defect liability period by the engineer

13. Reasons for Dispute
Obligations of employer not being met
Events defined as an employer’s risk
Variations to the terms of the contract
External events
Ambiguity in contract conditions
Subsequent legislation
Force majeure
Unjustified termination of contract
Inequity in the contractual provisions
Engineer not performing actions as required
Cost claims on account of delay
Source: Gupta and Venkatraman

14. Arbitration Cases
200 600
Project Cost
175 Claimed vs Project Amount 500
150
400
125
Percen tag e
R s C ro re
100 300
75
200
50
100
25
0 0
1 6 11 16 21 26 31
Case

15. Arbitration Cases
Claimed Amount
120 Aw arded vs Claimed Amount 200
100
150
80
P e rc e n t a g e
R s C ro re
60 100
40
50
20
0 0
1 6 11 16 21 26 31
Case

16. Dispute Resolution Mechanism in FIDIC
Contract
High Courts
Engineer In charge &
Supreme Court
Dispute Resolution Arbitration Tribunal
Board (DRB) (AT)

17. Implications and Lessons
Contractors
The contractor has to get written approval of engineer/employer
prior to usage of method and material which is unconventional and
other than prescribed in contract clauses as a variation item. This
might some times lead to washing away of overheads and profits if
the variation is not approved.
The contractor should provide a bill of approximate final cost that
will be incurred before start of modified work under any clause.
This helps both the contractor as well as the employer in
negotiating the final cost per unit of the same item if the proposed
costs of the contractor mismatch with expected cost of employer.
The contractor should be clear on the rebate quoted for such
material since he is not sure on final condition of the material and
the salvage value. A better option would be quoting the variable
rebate cost based on the condition of the material and the effort in
terms of cost to recover the material.

18. Implications and Lessons
Engineer
Neutrality
Documentation
In certain FIDIC contracts, can be the first
call of dispute resolution

19. Implications and Lessons
Employer/NHAI
The NHAI tends to interpret the clauses of contract differently and
there are certain technical gaps in the contract which should be
corrected. Also NHAI should give adequate flexibility for the
contractors in usage of new material and varying the pavement
design if it follows the codes. (Substitute for the old conventional
design with new design done based on the life cycle cost
analysis).
The engineer always has a key role in approval of technical
design in any project. He should work harmoniously with the
employer and the contractor to prevent such technical
discrepancies and misinterpretations.
The NHAI take adequate care in appointing both resident and the
engineer representative for any project. Also both the engineers
should be consistent in interpretation of the clauses otherwise,
misleading both contractor as well as the employer which can be a
potential cause for a dispute.

20. Implications and Lessons
Financier
There is a need for the financier to play a key role in
reducing the disputes. The financiers like World Bank,
Asian Development Bank should play a key role in
modification to be made to the clauses of the contract
and especially dispute resolution mechanism. Since
most of the projects seen have under gone time and cost
over run which obviously affects the pay back period and
increase in the cost to be financed. In projects financed
by NHAI/MORTH, there is greater concern because the
overspending on project is indirectly overspending
taxpayer’s money.

21. Conclusions
Inadequacy of the contract, loose wordings,
margin of error
Inadequacy of the DPR
Land acquisition and provision of
unencumbered site
Disputes are consuming enormous energy of
the road infrastructure development process
Safety yet to come in as an issue: PILs

22. Conclusions
Multiple stakeholders, high stakes
Complexity of aspirations
Litigation friendly, attitudes
Natural context for legal disputes
No getting away from doing detailed
homework, with adequate legal support, and
knowledge management
Focus on dispute minimization

23. Conclusions
Project Structuring
Risk Assessment and Mitigation
RFQs, RFPs
Tendering and Bidding
Financing
Concession Agreements
Project Management

24. Thank you