Manoj Singh and Nilava Bandyopadhyay discuss the growth of commercial litigation in India, with a focus on infrastructure projects
Broadly speaking, commercial litigation encompasses any type of litigation that deals with or involves issues related to business, usually between two business entities but definitely not restricted to that. Currently, in India commercial litigation has turned out to be a burgeoning field of law. Its growth has been spurred by the recent trend of booming domestic businesses, newly-emerging small businesses, and vast diversification of already existing businesses and players in the market. An overview follows of a few of the areas that are frequently associated with commercial litigation and those that are primarily arising out of this sort of litigation.
Commercial litigation is synonymous with the infrastructure industry in India. It also necessitates an interplay of various central and state legislations, the primary legislations governing commercial disputes including:
- the Indian Contract Act 1872 – governing contractual disputes;
- the Transfer of Property Act 1882 – the law dealing with immoveable property; and
- the Companies Act 2013 (formerly the Companies Act 1956) – the law relating to corporate entities.
Indian law is based on the common law system and, like any other common law countries, the role of judicial pronouncements and precedents are significant and noteworthy in the development and interpretation of different aspects of commercial law.
In terms of the legal framework, commercial disputes go to different courts based on the value and location of the dispute. To keep up with the growing economy, various new legislations impacting commercial disputes have also been introduced.
Further, the government of India has recently introduced the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act 2015, under which specific courts in each state have been exclusively designated for adjudicating high-value commercial disputes within specified timelines (the Commercial Courts Act is in the process of being amended through the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Bill 2018 and recently an ordinance has been passed to amend certain provisions of the Commercial Courts Act). Moreover, there are institutional and ad hoc arbitrations for alternative dispute resolution.
In the recent past there has been vast infrastructure and commercial growth in India. With the commercial push, the industry size has also grown and the government of India has put special emphasis during the last decade on the development of road infrastructure. It is essentially arising out of the public-private partnership, which is guided by the commercial agreements/contracts base of the various models, such as:
- engineering, procurement and construction model;
- build–operate–transfer (BOT) – toll model;
- BOT – annuity model;
- operation, maintenance and tolling; and
- BOT – toll/annuity hybrid model.
Despite the brisk pace of development, especially by way of augmenting national and state highways, there has been the downturn of the many infrastructure developers/contractors. These downturns and lapses may be due to various factors. Certain underlying factors need to be borne in mind, which can cause hindrance and prove fatal to the health of the project, and more importantly they are not merely attributable to the developers/contractors – the principal employer may also be responsible for the same, for example, the issues related to right of way, overheads, change in scope of the work or any other factor that results in the delay that spins the project costs out of the control of the contractor/developer.
Delays like these that are not attributable to the contractor/developer affect the project completion very dearly and more often than not it results in complete financial devastation for the contractor/developer. Therefore, to curtail or contain such kinds of risk, it is very important to have a strong claim management team, or as it can be critically said, strong and watertight claim management is essential and indispensable for the companies to survive, especially in the infrastructure industry. There are many unforeseen situations that cannot be contemplated at the time you are entering into the contract. Therefore, when the contract is executed or performed, the communication between the developer/contractor and the principal employer gains the utmost importance. For example, whenever there arises a change in the scope, problems with regards to ROW or any other contractual and/or extra-contractual issues the contractor/developer must apprise the principal employer immediately so that the same can be used at the appropriate stage of the claim. Scientific claim management is at the core of the infrastructure industry, however, previously the contractor/developer has not given this due importance, but with changing tides in the industry and dynamics being overturned, the contractors/developers are becoming much more aware and mindful of the concept of claim management. This has seen a surge in dispute resolution and arbitration in the infrastructure industry. In the recent past, in many cases, lots of companies have received large sums as awards arising out of issues related to ROW, overheads and other issues.
In this regard, to be able to manage the claims, emphasis needs to be placed on maintenance of the day-to-day correspondences being exchanged between the parties. And when the time comes for preparing the claims to be placed before the arbitral tribunal, the fallback is always on the discovery process, which acts as the pillar on which the claims are rested.
Though claims are project specific, based on the vast range of road projects that we deal with on a daily basis, it is fair to collate a few of the more prominent claims that are often common for most road projects. Mostly, in case of road projects, usually the claims are that of project over-run, ie, beyond the stipulated time period, and the manifold implications on the cost of the project that comes along with it. There are disputes with regards to non-availability of unhindered right of way, felling of trees, removal of utilities, ie, broadly based on the non-performance of the obligations of the respective parties, fee of IE, idling of machinery/manpower, extension of time, supplementary agreements, etc.
Manoj Singh and Nilava Bandyopadhyay (pictured left to right),
Singh & Associates.
