India Genius Self Executing Contracts -PHDCCI conference

The conference commenced with National Anthem and the traditional lighting of the lamp. The inaugural ceremony featured addresses which set the tone for the conference. Dr. Jatinder Singh, Deputy Secretary General, PHDCCI delivered the opening remarks, giving a perspective of arbitration norms for construction and infrastructure sectors pointed out that the economic developments taking place in India are surpassing expectations. Considering the fast pace of developments, he suggested that the domain experts should remain ahead of the time, to be able to resolve the disputes. He said that to understand the nuances and dynamics of the ADR ecosystem, ProUltimus and PHDCCI have collaborated to stage this conference, which is not only pivotal for the construction and infrastructure sector but also for the framework of the Indian economy. Talking about PHDCCI, he said that the organisation is committed to driving growth, stability and fairness within the construction and infrastructure landscape. He highlighted that the purpose of PHDCCI is to bring together the decision makers, the legal experts and industry leaders to collectively shape and refine arbitration norms that ensure efficiency, trust and progress at all levels of project execution.

Reflecting on alternative dispute resolution methods, he shared that arbitration has emerged as a preferred ADR method and in India it is governed by the Arbitration and Consolidation Act of 1996, which offers a offers a streamlined process that is less formal and more expedient.

Further, he elucidated on some innovative approaches such as pre-litigation mediation which has gained traction. The Mediation Act, 2023 mandates mediation as a first step in non-urgent cases, promoting quicker resolutions and reducing congestion in Courts. He also pointed out that we must continue to evolve our dispute resolution mechanisms and embrace best practices from international best practices while tailoring them to our unique context.

Mirroring Dr. Jatinder’s view Ms. Charanya Lakshmikumaran, Chair, Law & Justice Committee, PHDCCI in her Special Address highlighted that in the coming decades, there will be humongous growth in the infrastructure centre as India is emerging as a power in the global scenario and in global supply chain. Hence, it is the need of the hour to understand and introspect how arbitration can prove useful and can be an alternate mechanism.

The Keynote Address was delivered by Mr. Anand Kumar Singh, Director (Projects), Ircon International Ltd. He shared valuable insights on how disputes typically arise due to breaches or misinterpretations of contracts. He stressed that the first step in resolving such conflicts lies in ensuring that both parties have a clear understanding of the contract terms and that early intervention at the executive level can prevent many issues from escalating into full-blown disputes. Highlighting the importance of “speaking orders” in dispute situations, he emphasised that the executives who are directly involved in contract management must provide clear, on-record justifications for their decisions, especially when disagreements arise. Such transparency can play a pivotal role in preventing disputes from progressing to arbitration.

Further, he called out for more mature and well-prepared contracts, which are designed to address various eventualities that may arise during the course of long-term projects. By predefining responses to issues such as cost escalations, changes in revenue, and unforeseen risks, contracts can minimise ambiguity and reduce the chances of disputes later on.

He also shared a success story from back in 2010, when a matrix was developed to settle disputes for the Ministry of Road Transport and Highways which helped resolve over 1.2 lakh crore worth of arbitration cases for just 17,500 crores, demonstrating the power of structured, pre-emptive frameworks in dispute resolution. Concluding his address, he thanked PHDCCI for organising this conference.

The Guest of Honour Justice A.K. Sikri, Former Judge, Supreme Court of India addressed the audience with his insightful address focusing on the critical issues surrounding construction and infrastructure disputes in India. Justice Sikri shared his thoughts on the need for speedy resolution of construction disputes, particularly those involving delays, cost escalations, and contractual obligations. He highlighted the fact that construction disputes account for nearly 60% of arbitration cases, with delays being the primary cause of most conflicts between contractors and employers.

Drawing from his vast experience, Justice Sikri pointed out that these delays often result in claims for cost escalations and loss of profits from contractors, while employers frequently attribute the delays to the contractor’s failure to meet deadlines or deploy adequate resources, requisite manpower and machinery, etc. He underscored the economic significance of infrastructure projects and the importance of ensuring that ongoing disputes do not hinder the progress of vital national projects. He stressed that the resolution of such disputes should be expedited, particularly in large-scale public-private partnership (PPP) projects where delays can have devastating financial consequences. He pointed out that in cases where premature termination of contracts occurs, the lack of timely payment or compensation often results in bankruptcy, with contractors unable to service their debt due to stalled projects and delayed collections.

Considering this, Justice Sikri advocated for adopting mediation in construction and infrastructure disputes. He proposed MED-ARB (Mediation-Arbitration) approach, drawing from successful international arbitration models, where mediation can play a key role in resolving disputes before arbitration proceedings are invoked. He also shared anecdotes where mediation has successfully led to settlements in high-stakes cases, demonstrating its potential to deliver quick and mutually beneficial outcomes. He suggested that more structured mediation models should be incorporated into the process, particularly in infrastructure disputes, to ensure that these critical projects proceed without unnecessary delays.

Concluding his address, Justice Sikri called for specialized mediation mechanisms to address the complexities of infrastructure disputes, urging the creation of a dedicated committee to develop tailored mediation strategies.

Furthering the conference, Justice (Retd.) Jayant Nath, Delhi High Court delivered an insightful keynote address sharing his insights on the growing relevance of arbitration in resolving construction and infrastructure disputes. Justice Nath reflected on his earlier reservations about arbitration when he served as a Judge. He acknowledged that, during his tenure, he questioned the need for arbitration, believing that experienced Civil Court Judges were well-equipped to handle such disputes. However, after his retirement and transition into the field of arbitration, he realised the significant advantages of arbitration, especially in complex cases related to construction and infrastructure contracts. He highlighted that such disputes often involve highly technical issues that require specialized adjudication. He pointed out that the traditional Civil Court system, with its slower pace, often results in lengthy delays, sometimes stretching over decades, and thus is not suitable for resolving disputes that need urgent attention.

Sharing a case in point, Justice Nath shared his experience adjudicating a 20-year-old dispute between a construction contractor and the Municipal Corporation of Delhi, which was finally resolved with arbitration. Tracing the path of arbitration in India, he pointed out that arbitration has existed in India from quite a long time. Further, he discussed several benefits of arbitration, including its consensual nature, neutrality, confidentiality, and most importantly, the timelines ensured by Section 29-A of the A&C Act. These features make arbitration the ideal mechanism for resolving disputes related to construction and infrastructure projects, which often involve complex and time-sensitive issues.

He said that disputes in construction and infrastructure projects are inevitable, and a strong arbitration mechanism is crucial for addressing these issues efficiently. He urged the Government to reconsider any restrictions on arbitration and to continue supporting the growth of arbitration as a primary means of dispute resolution. Concluding his address, he suggested that steps to strengthen the entire arbitration process should be taken.

After Justice (Retd.) Jayant Nath, R. Venkataramani, Attorney General for India addressed the gathering.

He highlighted the evolution of arbitration and construction law in India, reflecting on the significant changes that were brought about by the introduction of the RERA Act and consumer protection laws. . Through his insightful address , the Attorney General underscored how our legal systems have continuously evolved and are poised to address both new and long-standing challenges in the sector.

He further elaborated on the expansive nature of construction law, humorously noting that it “probably includes everything except the law of dentistry,” illustrating how broad and far-reaching the field is now . He acknowledged that the complexity and diversity of human transactions make it difficult for any single legal procedure or system to effectively address every situation to the complete satisfaction of the parties involved. In this context, he emphasised the importance of constant innovation withing the existing legal frameworks which involves employing new methods, systems, and procedures to keep pace with emerging human transactions.

Looking ahead, he suggested that just as commentary on arbitration law has evolved over time, a similar shift might occur in mediation law over the next 15-20 years, where future discussions will likely consider how best to address the changing dynamics of human interactions.

R. Venkataramani further discussed the potential benefits of integrating different legal systems, particularly in the context of arbitration and mediation. He acknowledged that while some practitioners have argued for the separation of these systems, there are significant advantages in exploring their intersections.

He made a suggestion to the PHD Chamber of Commerce to consider establishing a working group to examine the possibility of the adoption of an “amalgamated” approach—combining different legal systems that could lead to better results in resolving disputes.

He noted that in construction contracts, issues of delay are common, and shared that in some cases, arbitrators or courts face difficulties in determining how to fairly allocate blame for delays. This, he argued, reflects the complexity and uncertainty inherent in the legal process, especially in areas like construction law, where various factors complicate the resolution of disputes.

R. Venkataramani further reflected on the complexities of construction contracts, particularly in relation to delays. He highlighted that delays in construction projects are rarely attributable to a single party or factor; instead, both parties typically share responsibility for some aspect of the delay. He pointed out that modern construction contracts have evolved beyond the simple task of building a house; they now encompass a wide range of economic activities that are vital to a nation’s infrastructure. These activities involve various players, each contributing to different stages of the project, creating a broad spectrum of interactions. Given this complexity, he argued that it is not feasible to pinpoint one single cause or factor as the sole reason for any failure, lag, deficiency, or defect in the construction process. The interconnected nature of the industry implied that multiple variables, both within and outside the control of the parties involved, could influence the outcome, making it difficult to attribute blame or responsibility to any one entity.

He further emphasised the complexity of modern construction and infrastructure projects, underscoring the need to understand the broader economic impact of dispute resolution systems. He argued that it is crucial to examine how these systems, particularly arbitration, have contributed to economic efficiency over time. This includes evaluating arbitral awards and their role in improving the economic outcomes of disputes. He highlighted that economic efficiency in the context of dispute resolution is not just about financial outcomes but also about the satisfaction and accord that parties derive from the process. He suggested that understanding how arbitration and other dispute resolution mechanisms align with the economic interests of the parties and the way they contribute to the overall economic stability and growth is essential for refining these systems.

He suggested that disputes in construction and infrastructure law should not be viewed in a compartmentalized manner, urging a more holistic approach. He proposed conducting a survey or research to assess how party satisfaction and economic efficiency intersect, particularly in the context of dispute resolution.

According to him, it was crucial to look at the full picture, understanding the reasons behind the challenges faced, rather than simply pointing to past shortcomings. He acknowledged that sometimes interventions—whether from courts, arbitral bodies, or the necessity of mediation—occur for valid reasons, but these reasons may not always be applicable across all cases. He suggested that it is important to critically analyse these “good reasons” on a case-by-case basis, identifying their underlying causes and how they could be addressed or improved. The goal, he concluded, is to find practical solutions that can enhance the efficiency of dispute resolution mechanisms and address the unique challenges posed by each case, rather than relying on generalized solutions or blaming specific elements of the system.

Highlighting the role of government’s participation in shaping and refining legal frameworks, he mentioned it was crucial in improving the effectiveness of arbitration, mediation, and related systems. A working group, he suggested, could focus on identifying areas where government involvement could streamline procedures, enhance efficiency, and contribute to the overall improvement of the legal ecosystem. This approach, based on the matrix concept, would allow for a more integrated and comprehensive solution, considering the various dimensions of legal, economic, and governmental factors that influence dispute resolution.

Attorney General expressed his strong support for establishing a working group to explore the role of government in dispute resolution, offering his time to contribute and facilitate government engagement.

R. Venkataramani discussed the potential for creating a more efficient dispute resolution system, one where contracts are designed in a self-working, self-executing manner, reducing the need for extensive adjudication or dispute resolution processes. He believed that if such a system could be developed, it would serve as an ideal model for the world. He expressed confidence that India has not only the opportunity but also the capability and innovative genius to achieve this, citing his observations of leading legal practices and arbitrators globally. He emphasized that this wasn’t a nationalist perspective, but rather a recognition of India’s potential to lead in this area.

The focus he proposed should be on creating systemic solutions that could make the entire dispute resolution process smoother, more efficient, and less dependent on judicial intervention.

He urged the legal and business community to be proactive in devising innovative contractual schemes and procedures that could prevent disputes from arising in the first place. He suggested that rather than waiting for disputes to escalate, parties should be able to identify early signals of problems and come together to address them collaboratively.

He outlined his vision for a more dynamic and flexible approach to contractual processes, particularly in the context of construction and infrastructure projects. He suggested that a self-working, self-executing procedure could be developed, possibly assisted by a combination of mediation and advisory elements, to prevent disputes before they arise. This approach would require a shift away from traditional English contract law, which still governs much of the global contract scene, and instead embrace a more innovative and adaptable system tailored to the complexities of modern projects.

R. Venkataramani emphasized the importance of creating a new kind of contractual scheme, particularly for large-scale construction and infrastructure projects.

Concluding, he called for a broad, open-minded inquiry into how these laws could be reformed to create a more effective and flexible dispute resolution system. He expressed confidence that with the right initiative and government engagement, these reforms could be achieved, ensuring that legal frameworks evolve in tune with the changing needs of the industry.

Concluding the inaugural session, Mr. Adarsh Kumar, Partner, ProUltimus Consulting delivered the vote of thanks.