Former CJI UU Lalit said infrastructure contracts should be carefully screened by a government agency before signing to avoid costly arbitration disputes. He noted that better planning and contract drafting could save the public exchequer thousands of crores in project-related claims.
New Delhi: Former Chief Justice of India Uday Umesh Lalit has suggested that all major construction and infrastructure contracts should be carefully examined by a specialised government agency before they are finalised. According to him, such early scrutiny can prevent future arbitration disputes and save thousands of crores of public money.
Justice Lalit made these remarks while speaking at a conference titled ‘Dispute Resolution and Arbitration Norms for Construction and Infrastructure Sector: An Indian and International Perspective’ organised by the PHD Chamber of Commerce and Industry in New Delhi.
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Highlighting the importance of proper contract scrutiny, the former Chief Justice emphasised that many disputes arise because infrastructure contracts are signed without detailed review. He said that if contracts are properly examined at the initial stage, the government can avoid huge financial losses later during arbitration proceedings.
“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 from his experience in arbitration matters, Justice Lalit shared that he has been associated with nearly 20 arbitration disputes related to construction and infrastructure projects in the past three years. Based on this experience, he observed that many of these disputes arise because of poor contract drafting, lack of planning at the project stage, and weak coordination between government departments.
He further pointed out that arbitration claims in infrastructure projects often become larger than the original project cost. This situation creates a perception that arbitration is sometimes used as a tool by contractors to demand additional financial compensation.
“If the project cost was about ₹800 crore, the claims are more than ₹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.
Justice Lalit also discussed the impact of environmental restrictions on infrastructure projects. He noted that measures such as GR-III and GR-IV restrictions, which are imposed during periods of severe air pollution, frequently halt construction activities in cities like Delhi. When construction work stops due to such restrictions, contractors often seek compensation claiming that their workforce and machinery remained unused during that period.
“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.
Another important issue raised by Justice Lalit was the problem of inaccurate project estimates at the tendering stage. He explained that when project costs are not properly assessed at the beginning, disputes arise later because arbitral tribunals find it difficult to determine the basis on which compensation claims should be calculated.
“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.
According to Justice Lalit, infrastructure development must always maintain a balance between three important objectives: ensuring quality construction, completing projects on time, and delivering benefits to society. At the same time, project costs should remain under control so that public resources are not wasted.
The former Chief Justice also highlighted the lack of coordination between government departments as a major cause of disputes. He gave the example of railway overbridge projects, where design changes introduced by railway authorities after the contract has already been awarded often create complications for contractors and lead to arbitration claims.
“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.
Justice Lalit also suggested that governments should create systems that allow disputes to be addressed during the execution phase of projects itself rather than allowing them to grow into large arbitration disputes years later.
Speaking at the same event, former Supreme Court judge Justice Hema Kohli highlighted that India is currently witnessing massive investments in infrastructure sectors such as highways, railways, urban transport systems, energy projects and logistics networks. These investments are transforming the country’s development landscape.
Citing official data, she noted that the National Infrastructure Pipeline (NIP) currently includes projects worth nearly ₹184 lakh crore, showing the scale at which infrastructure development is taking place in India.
Justice Kohli emphasised that a strong and reliable dispute resolution system is essential for sustaining such large-scale investments and maintaining 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.
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She further explained that in complex infrastructure projects involving multiple stakeholders, disputes are often unavoidable. However, the key challenge lies in resolving such disputes quickly and fairly so that business relationships remain stable and projects continue without major disruptions.
“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 conference was attended by several prominent members of the legal community, including Delhi High Court Judge Justice Tejas Karia and former High Court judge Justice Jayant Nath, along with industry experts and arbitration professionals who discussed evolving dispute resolution mechanisms for India’s rapidly expanding infrastructure sector.
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