Early scrutiny of infrastructure contracts can save thousands of crores in disputes: Ex-CJI Lalit

New Delhi, Mar 7 (PTI) Former chief justice of India UU Lalit said on Saturday that infrastructure contracts should undergo scrutiny by a specialised government agency before they are signed, as early examination could prevent costly arbitration disputes and save thousands of crores of public money.

Justice Lalit was speaking at a conference on 'Dispute Resolution and Arbitration Norms for Construction and Infrastructure Sector: An Indian and International Perspective' hosted by PHD Chamber of Commerce and Industry (PHDCCI) here in the national capital.

"According to me, all these construction and infrastructure project contracts must be screened by an agency in the ministry first before you sign on the dotted line in the contract. This is one area that, if you are careful, you will be saving thousands and thousands of crores of public exchequer," he said.

Drawing on his experience of being associated with nearly 20 construction and infrastructure arbitrations over the past three years, Justice Lalit said many disputes arise because of gaps in contract drafting, project planning and coordination among government agencies.

He noted that arbitration claims in infrastructure projects often exceed the original project cost, creating a perception that the mechanism is sometimes used by contractors to seek higher compensation.

"If the project cost was about Rs 800 crore, the claims are more than Rs 1,000 crore. It gives an impression as if arbitration becomes the tool to get more and more profits and revenues for the contractors," he said.

The former CJI also cited the example of environmental restrictions such as GRAP-III and GRAP-IV measures imposed during severe air pollution, which frequently halt construction work.

"Contractors later claim compensation on the ground that their manpower and machinery remained idle during such periods," he said, noting that contracts rarely anticipate such recurring disruptions.

He also referred to disputes arising from inaccurate estimates at the tendering stage.

"At the stage of contract, perhaps not sufficient attention was paid, and it creates difficulties for the arbitral tribunal because there are no norms on the basis of which such claims can be assessed," he said.

Justice Lalit said that infrastructure projects must balance three objectives: quality construction, timely completion and benefits to society, while ensuring that costs do not spiral out of control.

The former top court judge also flagged a lack of coordination between government departments, particularly in projects involving railway overbridges, where design changes by the railways after contracts are awarded often lead to disputes.

"What happens is somebody gives you a design which may be for the existing railway line that may be about two years old, and suddenly the railways decide that, let there be a broader kind of you know network. If there has to be a broader network, then naturally, your road over bridge has to be of a different dimension, and there is a complete lack of correlation between these two departments," he said.

He also suggested creating mechanisms to address disagreements during the execution stage of projects instead of waiting for them to escalate into arbitration several years later.

Former Supreme Court judge Hema Kohli was also present among the dignitaries who spoke during the inaugural session of the event and said that India is witnessing large-scale investments in highways, railways, urban transport, energy and logistics that are reshaping the country's development landscape.

Citing official data, she said the National Infrastructure Pipeline currently identifies projects worth about Rs 184 lakh crore (around USD 2.7 trillion), reflecting the scale of investment in the sector.

Justice Kohli underlined the importance of strong dispute resolution frameworks in supporting major infrastructure projects and sustaining investor confidence.

"The strength of an infrastructure ecosystem is measured not only by the scale of the projects that it undertakes, but also by the credibility of the legal architecture and institutional framework that sustains them," she said.

The former Supreme Court judge highlighted that efficient dispute resolution mechanisms are critical to ensuring that commercial relationships are stable even when disagreements arise in complex infrastructure projects involving multiple stakeholders.

"In a sector of such magnitude, disputes are not aberrations. They are structural possibilities inherent in complex commercial engagements," she said, adding that the real challenge lies in ensuring that conflicts are resolved with "efficiency, predictability and fairness." The event was attended by other prominent dignitaries, including Delhi High Court Judge, Justice Tejas Karia, Former High Court judge, Justice Jayant Nath and others. PTI SKM MPL MPL