Case Study

Dispute Resolution and Litigation in PPP Road Projects:

Evidence from Select Cases
Ajit Kumar Sinha 1 and Kumar Neeraj Jha, Ph.D. 2
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Abstract: Public–private partnership (PPP) projects came to prominence with the launch of the National Highway Development Project in
India in 1998. Since then, the PPP procurement approach to service delivery has permeated the transportation sector and its subsectors of
highways, ports, airports, and railways. Many of these projects have suffered cost and time delays due to disputes over land acquisition, grants
for environmental and forest clearance, and other approval. Concession agreements (CAs) in the road-building sector provide for dispute
resolution clauses, although not in detail; however, it has been observed that dispute resolution is not normally achieved unless all the stages
of litigation have been exhausted. CAs are still evolving, and no PPP-specific legislation yet exists in India, unlike in the UK and Hong Kong,
where individual legislations are enacted for each project. Suitable changes in the land acquisition process and legislation and provision
for strict, time-bound implementations and fair and reasonable compensation can aid in reducing the number of litigation cases. Incentives
and penalties are required to ensure strict compliance with contract provisions. DOI: 10.1061/(ASCE)LA.1943-4170.0000336. © 2019
American Society of Civil Engineers.
Author keywords: Public–private partnerships (PPPs); National Highway Development Project; Disputes; Case study; Arbitration.

Introduction projects are long term and suffer from many unforeseen circum-
stances and pitfalls, often leading to disputes between the public
The development of road infrastructure is crucial to the economic and private partners. These disputes are frequently resolved through
growth of any country. The upgrading of highways in India com- several rounds of dispute resolution, and, when this fails, by liti-
menced with the launch of the National Highways Development gation. The hierarchy of the judicial system in India comprises
Project (NHDP) in 1998. The public–private partnership (PPP) (1) local and district courts, (2) high courts with jurisdiction over
approach to procurement has deeply penetrated the transportation the geographical spread of the respective state(s), and (3) the
sector. In India, the road network comprises (1) national highways, Supreme Court (the apex court).
(2) state highways, (3) major district roads, and (4) rural roads. In Like most contract documents, the PPP concession agreement
general, the upgrading of national highways involves increasing (CA), the most important of all agreements related to a project,
roads from two to four lanes, or from four to six lanes. The pro- invariably includes certain clauses and provisions relating to the
vision of four or six lanes means two or three lanes (where each resolution of disputes. Clauses pertaining to arbitration are integral
lane is approximately 3.5 m wide) for travel in each direction, sep- to all PPP agreements, and this is considered to be the final option
arated by physical dividers. National highways form approximately before litigation is begun. The results of arbitration may be binding
1.5% of the total road network, but handle 40% of the road traffic or otherwise in nature, and in the former case the clauses of the
(MoRTH 2015). The increase in road networks between 2003 and contract should explicitly clarify the method of enforcement. Be-
2013 was around 4%, substantially less than the growth in the cause PPP projects are very complex, occasions may arise in which
number of registered vehicles, which grew at a compound annual disputes are hard to resolve or settle, and these may have an impor-
growth rate of 11% during the same period. The PPP procurement tant bearing on the outcome of the project. However, the arbitration
model has been adopted to improve the road network in India since process has an important advantage over litigation: since disputes
the mid-1990s. The other primary reason for adopting the PPP pro- are very technical and complex in nature, local and subordinate
curement model is the acute shortage of resources that are available courts may not have the relevant expertise to effectively address
to the government of India for financing such investment-intensive the issues involved (Timmermans and Behr 2016). PPP contract
projects. clauses dealing with dispute resolution should mandate the priority
Experience in the implementation of PPP projects has shown of the procedures to be followed, including (1) governance and
that this procurement model is very complex in nature; these contract management, (2) the dispute review board, (3) mediation,
(4) conciliation, (5) testimony of independent experts, (6) arbitration,
1 and finally, (7) litigation (Marques and Berg 2010).
Research Scholar, Dept. of Civil Engineering, Indian Institute of
Technology Delhi, New Delhi, Delhi 110016, India (corresponding In India, the issue of aggressive bidding has on more than one
author). ORCID: https://orcid.org/0000-0002-9597-6238. Email: ajitgaya@ occasion led to either complete or near failure of PPP road projects
rediffmail.com due to time and cost overruns. Insufficient coordination between
2
Professor, Dept. of Civil Engineering, Indian Institute of Technology the different authorities involved in the preparation of tenders
Delhi, New Delhi, Delhi 110016, India. Email: [email protected]
and inadequate preparation and management by the public sector,
Note. This manuscript was submitted on December 20, 2018; approved
on April 30, 2019; published online on October 1, 2019. Discussion period
including poor accountability, are some of the basic reasons for ag-
open until March 1, 2020; separate discussions must be submitted for in- gressive bidding. This is aggravated by a lack of proper regulation
dividual papers. This paper is part of the Journal of Legal Affairs and and contract management. If the concessionaires believe that it may
Dispute Resolution in Engineering and Construction, © ASCE, ISSN not be easy to extract profit by resorting to aggressive bidding, they
1943-4162. will obviously be less inclined to take the risk arising from this

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J. Leg. Aff. Dispute Resolut. Eng. Constr., 2020, 12(1): 05019007

 approach (Guash 2004). In many PPP road projects, litigation re- Inequitable Lack of
sults in precious resources becoming locked in for long periods, Risks assigning of Conflicts conflict
risks management
leading to progress in these projects being hampered, and finally
causing tremendous time and cost overruns in these projects.
This paper attempts to shed light on the causes of the disputes
that often arise and are followed by long-drawn-out litigation,
leading to a delay in the completion of a PPP road project. The Claims Remains Disputes
unresolved
methodology adopted here includes a content analysis, case studies,
and a study of PPP road CAs. The paper begins with a literature
Fig. 1. Stages leading to origin of disputes.
survey of contract provisions and the causes of conflicts leading
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to disputes and litigation in different countries, including India.

Contract provisions for dispute resolution are also studied, and
PPP projects that have been beset by a number of court cases at involved with different opinions and goals. Private partners in
different stages of litigation are also examined. Finally, recommen- PPP projects need to devote a major part of their assessment efforts
dations are given for important steps and urgent action that should to the evaluation of the different risks of the contract and the mech-
be taken, particularly by public authorities. anisms and contract provisions available for the resolution of
disputes. In general, the available mechanisms are mediation or
conciliation, in which the decisions made are not binding, or a de-
Literature Survey cision that is arrived at by a specialized regulatory body (EIB
2012). This may be followed by testimony by domain experts,
The underlying spirit of partnership in PPP schemes for the delivery
which is used for specific issues and interim decisions, although
of infrastructure projects, and in particular build, operate, and trans-
these are often appealed in arbitration or litigation. The final
fer (BOT) projects, has not prevented disputes from arising across
two stages in dispute resolution involve national or international
the world. Partnership in PPP-BOT schemes has led to alliances
arbitration and litigation at the different levels of the judicial system
emerging between foreign and domestic partners, heralding an
of a given country.
internationalized environment in which disputes are unavoidable.
Until recently, litigation covering construction disputes and their Alliance Contracting and the Best Value Method
resolution in PPP infrastructure projects has traditionally been Lack of commitment, poor cooperation, and lack of communication
under the purview of the administrative courts in India. Despite have been identified as the primary causes of litigation, conflicts,
the use of extremely sophisticated contractual structures, disputes and disputes in a model based on the principle of alliance con-
are inevitable at both the upstream and downstream stages of PPP tracting (Hampson and Kwok 1997). Similarly, the best value
projects, and intraparty and third-party (lenders and financiers) method (BVM) is based on price and quality factors that enhance
disputes also arise. the value and long-term performance of construction and has been
assessed as an alternative approach, although a lack of transparency
Conflicts and Disputes in such cases triggers litigation (Scott et al. 2006). PPP may be
capable of successfully delivering projects, but it also encounters
A dispute involves and has its origin in distinct justifiable (or issues in terms of the differences in the priorities assigned to man-
otherwise) issues (Barrie and Paulson 1992). It comprises expect- aging stakeholder expectations on the one hand and meeting the
ations for results, that will enhance, to survive and prosper impulse needs of the public and private sectors on the other (Takim 2009).
in any individual, group, or team. Disputes arise from conflicts that
are mismanaged and left unresolved. Conflicts destroy harmony
and healthy coexistence and are destructive in nature, meaning that Alternative Dispute Resolution
they should be avoided (Farley 2000). The management of conflicts
includes resolution, prevention, and measures for containment. In Alternative dispute resolution (ADR) is a set of methods that some-
times prove to be viable substitutes for settling disputes without
practice, conflict management comprises dispute resolution and
requiring litigation (Treacy 1995). The various ADR approaches
other aspects (D’Estree et al. 2001; Lynch 2001).
A dispute is said to exist when an assertion is made by one are shown in Fig. 2. If there is a failure to resolve a dispute, then
party to a partnership that is rejected by the other party, and arbitration is unavoidable; this offers a last chance for resolution
when this rejection by the latter is not acceptable to the former of the contentious issues and involves the judicial determination
(Kumaraswamy and Yogeswaran 1998). If such disputes are not of disputes by an independent third party, such as an individual or
addressed appropriately in a timely, adequate, and proper manner, a tribunal. Arbitration becomes the inevitable choice if the softer
this may lead to schedule and cost overruns, among other problems options of ADR fail to resolve the issues, and usually it proves to
(Cheung and Suen 2002). be ineffective (Tanielian 2013). However, the question of whether
arbitration is the most economic and efficient way of resolving
Stages Leading to Disputes disputes is still subject to interpretation in various studies. It is ex-
The successive stages that lead from the development of inequitable tensively used as a final step before litigation is begun since the
risk to conflict and from unresolved conflicts to disputes are illus- whole concept of conducting and concluding arbitration has to
trated in Fig. 1. If these disputes remain unresolved due to a lack of be in consonance with the rules of the contract. However, a decision
management and timely redress, they enter the litigation phase. by arbitrators does not always ensure fairness or outcomes that are
in the public interest.
Successive Stages in Dispute Resolutions The road CAs executed by the National Highways Authority of
Contract disputes are very common in PPP projects, first because a India (NHAI) and the concessionaire invariably contain provisions
PPP contract has a long-term duration and unforeseen circumstan- for mediation by an independent engineer (IE) at the first stage,
ces are likely to arise over its course, and second because the PPP followed by stages involving dispute resolution or a review board.
model tends to be complex on account of the many stakeholders In general, the dispute resolution mechanisms that precede the

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 Sound governance and contract management Indian PPP contracts in the transportation sector, including the
four subsectors of roads, railways, ports, and airports, are affected
Arbitration review board
by problems associated with land acquisition, leading to inordinate
delays in the granting of environmental clearance and nonfulfill-
ment of contractual obligations.
Mediation

International Laws Related to PPP

Conciliation
Research and case studies indicate that Korea, Mexico, and
Australia have the requisite strong legal and regulatory frameworks
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Independent expert for PPPs that are designed to promote investment in infrastructure.
The PPP Act, Mexico (Hodges 2006) and the Partnerships Victoria,
Arbitration
Australia (Abdel Aziz 2007) framework facilitate the efficient,
equitable, and proper distribution of risk between the public and
private partners; these legislations also ensure a framework for
Litigation transparency and accountability, and provide legal certainty to
those involved in the projects. Similarly, the PPP Act of 1994 is a
Fig. 2. Sequential ADR stages leading to litigation. very strong legislative document in Korea that regulates matters
delegated by the act and those that are necessary for its strict
implementation (APEC 2014).
arbitration stage have only recommendatory authority. Dispute res-
olution may also be required at the procurement stage, i.e., prior to Litigation Related to Land Acquisition and
the contract management stage. Disputes may arise over issues such Environmental Clearance
as questions of interpretation and nonfulfillment of contractual ob-
ligations. If these contentious issues remain unresolved following Issues Leading to Conflicts over Land Acquisition
the ADR stage, the matter enters arbitration, and if the disputes In many of the PPP projects in India, several court cases have been
remain unsettled it enters the litigation phase. launched in the course of the acquisition of land and rights of way
Decisions via the first three methods enumerated previously are (RoWs), mostly between landowners and public sector authorities.
typically binding, based on the provisions of the PPP contract. Issues related to land acquisition are not suitable for the arbitration
However, a decision made by an arbitrator may involve the addi- provisions and clauses contained in CAs, and court cases take a
tional application of the arbitrator’s own mandate or judgment, long time to settle or receive a judgment. These cases mostly relate
including on the contract provisions of the project. Thus, the reg- to issues of compensation and resettlement, and include other in-
ulator’s decision also involves the exercise of discretion. tegrally related issues such as livelihoods, places of residence,
ownership of land, and the return of excess acquired land. Such
cases therefore lead to inordinate delays in the acquisition of land.
PPP Laws and Policies in India and Worldwide Lenders and providers of debt do not look kindly on such delays,
In India, there are no specific laws or policies governing PPP proj- and therefore often a financial closure in projects gets overdelayed.
ects, unlike in Belgium, Italy, Poland, Portugal, and Spain, which The Shivpuri-Dewas highway is one example where financial clo-
put into place concession laws very early in the course of develop- sure could not be achieved within the stipulated time and the public
ment of PPP. Until now, issues related to PPP in India have been authorities had to recall tenders after splitting the original project
administered mostly through executive orders. In practice, the ab- work into three smaller packages. This led to a considerable time
sence of PPP legislation has led to changes in and references to delay of 3 years (from 2012 to 2015) and a cost overrun of USD
other binding legislation and regulations. However, the existence 100 million (USD 1 ¼ INR 70). Although land acquisition is gen-
of specific laws is certainly not a mandatory condition for the de- erally the responsibility of the public authorities, the nonavailability
velopment of PPP because the legal framework can also be created of land often results in exchange of reasons for the delay between
by changing existing legal provisions with bearing on the PPP the private partner and the public authority, and has in many cases
compelled concessionaires to abandon PPP projects in the past,
project. The UK has developed its public finance initiative (PFI)
even before construction commences. Lenders foresee increased
model based on specific legislation that confers power to enter into
financing risks in such a situation, and if they are still prepared
a PPP contract (Guash 2004). However, the existence of such laws
to extend debt, they may require the private partner to pay a higher
goes a long way toward establishing the basic principles that are
rate of interest. If the project continues with the original conces-
required in order to ensure transparency and accountability for
sionaire, this may lead to tremendous cost and time overruns, which
PPP arrangements.
in turn may lead to further litigation.
In addition to the provisions contained in the Constitution of
India and the rules and regulations enacted from time to time by Issues Leading to Conflicts in Environmental Clearance
various state bodies, several other laws also have a bearing on The situation is similar when obtaining environmental and forest
PPP arrangements in India, such as the National Highways Author- clearances. This process is time-consuming, and several different
ity of India Act (1988), and laws governing normal commercial authorities may be involved (the federal or state Ministry for For-
transactions such as the Indian Contract Act (1872), the Sale of ests and Environment, the Wildlife Authority of India, the district
Goods Act (1930), and the Negotiable Instruments Act (1881). administration, and the local civic bodies), who often work at cross
In addition, various statutes governing dispute resolution are also purposes. Many of the PPP highway projects that span more than
relevant, for instance, the Code of Civil Procedure (1908), the one state in India face problems with land acquisition due to the
Specific Relief Act (1963), and the Arbitration and Conciliation different policies and rules and regulations of the states concerned,
Act (1996) with their latest amendments. particularly when different political dispensations rule these states.

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 Thus, political risks are in many cases at the forefront of environ- program (upgrade of the national highways) to connect the four
mental clearance issues, and these cases often end up in litigation established metropolitan areas of Mumbai, Chennai, Kolkata,
that could have been avoided. and Delhi. However, no in-depth research has been conducted
and documented, particularly with respect to PPP projects that
Factors Affecting Disputes and Litigation in India have suffered avoidable costs in terms of delays and due to
In India, and particularly in PPP projects in the transportation sec- long-drawn-out litigation or arbitration. Thus, the problems of
tor, due to the linear nature of highways and railways land acquis- high legal costs and long delays, and the causes of these in relation
ition is a significant barrier (both for greenfield and brownfield to PPP road projects, have not been adequately addressed and
projects). Because RoWs involve the acquisition of land parcels documented.
spread over more than one state, and since these states may have
different statutes governing land acquisition, the construction of
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highways and railways faces delays and time overruns, which also Dispute Resolution Mechanisms
impact cost overruns. The subsectors of ports and airports are less
affected since the land required for these projects is in concentrated Details of the dispute resolution mechanisms provided in CAs are
pockets and is normally subject to favorable, single-state rules. given in Table 2 for several PPP road projects in India. These were
A detailed summary of the reasons for the delays in granting chosen randomly to give an insight into the provisions contained in
environmental clearance and other forms of approval and for the the contracts. The CAs detailed in Table 2 do contain dispute res-
noncompletion of land acquisitions are shown as causes of disputes olution clauses, but these are not elaborate or exhaustive.
and litigation in Fig. 3. From the contract provisions outlined in Table 2, it can be seen
that the dispute resolution procedures are not set out in detail, and
Identifying Factors Affecting Disputes and Litigation this may lead to different interpretations of the process adopted for
in Countries across the World the settlement of disputes, increasing the likelihood of slipping into
The causes of litigation in different countries that have been studied avoidable litigation.
by researchers or authors have several factors in common, such
as changes in the scope of the project, site conditions that are differ-
ent from the information available in the detailed project report, Successful PPP Projects
and differing interpretations of the contract provisions. The most
common causes of claims or counterclaims that lead to disputes, A number of court cases that have been pending in different stages
and then to litigation if not resolved, are changes in the project of litigation over the past 7 or 8 years related to issues of compen-
scope and restricted access to the site (Semple et al. 1994). Sim- sation for land acquisition and changes in alignment, among others,
ilarly, differences in project characteristics, including processes were analyzed with regard to the time duration of this pendency
and other aspects of projects, can contribute to contract disputes leading to delays in completion, and the conclusion was drawn that
(Diekmann and Girard 1995). The most frequent causes within the majority of PPP road projects have encountered problems due
different countries are given in Table 1. to the nonavailability of land. Two successful PPP cases were also
Nearly two decades have passed since India initiated its PPP examined, one in Hong Kong and the other in India. Other PPP
program on a large scale by launching the Golden Quadrilateral road projects that have suffered a time delay of 3 years and cost

Causes of litigation /arbitration

Causes related to land Causes related to Causes related to Concession

acquisition environmental technical issues agreement related
clearance/forest clearance issues
Enhanced Delay in Location of toll
compensation environmental plazas Non-fulfilment
clearance leading of stipulated
to delay in land obligations on
Return of excess Change in scope
acquisition the part of
acquired land
public / private
partners
Challenging road Differing site
alignment Cost and time conditions
overruns
Cutting of trees

Reviewing orders
for award of
compensation

Ownership of
land issues

Fig. 3. Causes leading to ADR, arbitration, and litigation India.

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 Table 1. Comparison of the main causes of litigation in different countries flexible attitude toward the enforcement of the contract provisions
S. No. Cause Country Reference in significant matters, while strictly adhering to the contract provi-
sions as a whole.
1 • Communication Australia Waldron (2006)
The government guaranteed the franchisee the following: (1) the
• Access to construction site
and materials
right to terminate the contract if circumstances such as law and or-
• Change of scope der problems or riots hampered the required progress for a substan-
• Site conditions tial period; and (2) schemes for infrastructure development and
traffic management in order to facilitate the smooth flow of traffic
2 • Changes of site conditions Hong Kumaraswamy to and from these tunnels. These BOT projects were completed
• Change in the scope of work Kong and Yogeswaran
very effectively and efficiently, despite the fact that there were
• Lack of predictability (1998)
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• Unrealistic expectations no guarantees regarding minimum traffic flow or economic returns

• Design issues or against the future development of competitive routes (Zhang and
• Contract documents Kumaraswamy 2001). All of the five projects had specific ordinan-
• Lack of communication ces since each had its own unique conditions. It was also found that
the need for specific legislation did not necessarily delay the project
3 • Differing site conditions Korea Acharya et al.
implementation process, and the advantage of this legislation was
• Errors and omissions (2006)
in design that it both protected the public interest and assured the franchisee’s
• Ambiguous meaning in rights to manage the project on a BOT basis, thereby minimizing
specifications the political risks. A favorable political, economic, and social sit-
• Excess quantity of work uation, including the acceptance of toll levels by users and equi-
beyond bill of quantity (BoQ) table allocation of risk, contributes significantly to the avoidance
• Resistance by local people of litigation, arbitration, or triggering of disputes, and has been
• Change order correctly identified as an important factor in success (Qiao et al.
4 • Communication and gap Netherlands Sykes (1996) 2001).
misunderstanding In this case, the public authority had put in place control systems
between the stakeholders to prevent the underpricing of bids; thus, the risks arising from ag-
• Lack of predictability gressive bidding, which could also lead to disputes and litigation,
5 • Change in the scope of work Netherlands Heath et al.
were mitigated in these five PPP tunnel projects.
• Change in site conditions (1994)
6 • Disputes over drawing and UK Klinger (2009) Ankapalli–Tuni Highway Project, State of
submittals Andhra Pradesh, India
• Change orders
• Differing site conditions This was one of the first annuity-based projects in India and was a
• Construction defects major success since at a later stage the concessionaire obtained a
• Plans and specifications loan against future receivables of USD 62 million. This reduced
the cost of the project debt by 3% and was subsequently used for
7 • Design issues US Genberg et al.
repayment of the original debt. NHAI had provided a revolving
• Delays and disruptions on (2014)
project
letter of credit for USD 5 million throughout the concession
• Termination claims period (17.5 years, including a 2.5-year construction period).
• Compliance disputes The project was completed with only a month’s delay and a low
• Change of project scope project cost; since the concession period included the construction
period, this proved to be an incentive for early completion of the
project.
Attempts to incorporate elements of flexibility in the provisions
overruns of USD 100 million are discussed. The data on these proj- of the contract tend to cause ordinary citizens to think that the
ects were collected from official websites regarding the length of public authority is friendly toward private partners. CAs need
the delay due to court proceedings. to include project-specific clauses and provisions rather than fol-
low a standardized concession agreement that may have been
framed for another project involving substantially different issues
Project-Specific Legislation: Large Tunnels in such as existing traffic and its growth potential, the demographic
Hong Kong profile and its needs, and the land profile. Project-specific agree-
A project involving the construction of five large tunnels in ment provisions can also ensure flexibility in some ways, and such
Hong Kong was undertaken through the BOT route. The construc- CAs can also be useful in mitigating the causes of disputes and
tion of the first tunnel project started in September 1969 and was litigation.
completed in August 1972 (the Cross Harbour Tunnel); the fifth
tunnel was opened in July 1998, the construction having com-
menced in May and June 1995. These tunnels represent some of Case Studies under Adjudication
the most successful PPP infrastructure projects in the world.
In Hong Kong, there is no general legislation dealing with BOT Unlike litigation in the rest of the world in the field of PPP infra-
projects. Each BOT project is governed by a special ordinance be- structure projects, where changes to the scope of the project and
cause every project has its own unique conditions. None of the five differing site conditions are the principal causes of disputes, nearly
tunnel projects in Hong Kong faced arbitration or major disputes 60% of cases in India relate to compensation regarding land acquis-
since the obligations were unambiguously defined in the contract ition, and the remaining 40% involve challenges to arbitration
documents, and both the government and the franchisee adopted a awards and/or aspects of arbitration.

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 Table 2. Details of dispute resolution clauses in Indian PPP road concession agreements
Signing of concession
S. No. Project name agreement date Contract provisions for dispute resolution
1 Durgapur Express Project, National Highway (NH) 2 March 2012 Clause 17.1 (a and b) refers disputes related to the agreement to
(stretch of NH from km 581 to km 646 on the existing the chairperson, NHAI, and the chief executive officer of the
Durgapur Expressway—Dankuni–Palsit section of NH 2 concessionaire (meant as an effort toward conciliation) as the first
step. If the disputes are not settled amicably within 15 days of the
meeting of the previous two authorities, the same is referred to
arbitration, which shall be binding upon the parties and the
enforcement thereof shall be in accordance with the provisions of
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the Arbitration and Conciliation Act in terms of Clause 17.2.

2 Bhubaneshwar–Puri (section of NH 203 from km 0.00 to 2010 Clause 44.2 deals with the process of conciliation as described
km 59.00—BOT toll on design, build, finance, operation, against Project 1 in this table, failing which the process of
and transfer (DBFOT) pattern—NHDP III arbitration as per Clause 44.3 gets initiated and proceeded with.
Further, Clause 44.4 states that in the event any regulatory
authority or commission for adjudication of disputes is formed, the
disputes shall be referred to such entity instead of arbitration and
adjudication shall not be final and binding until an appeal has been
preferred and decided by an appellate tribunal or a high court.
3 Design, construction, development, finance, operation, and February 2006 Clause 39.1 (a and b) states that the first stage for dispute
maintenance of km 80.000 (Jadcherla) to km 135.74 (end of resolution shall be mediation by the independent consultant to
proposed Kotakatta bypass) on NH 7 on BOT or BOT amicably settle the same, failing which the disputes are referred
(annuity basis) for settlement to the chairman, NHAI, and chairman of the board
of directors of the concessionaire. If still the disputes do not get
settled, the process of arbitration, the award of which shall be
binding on both parties, is initiated in terms of provisions
contained in Clause 39.2.
4 Design, construction, development, finance, operation, and May 2007 Clause 39.1 (a, b, and c) states that the first stage for dispute
maintenance of km 278.000 (Kadtal) to km 308.000 resolution shall be mediation by the independent consultant to
(Armur) on NH 7 on BOT (annuity) basis amicably settle the same, failing which the disputes are referred
for settlement to the chairman, NHAI, and chairman of the board
of directors of the concessionaire. If still the disputes do not get
settled, the process of arbitration, the award of which shall be
binding on both parties, is initiated in terms of provisions
contained in Clause 39.2.
5 Nellore bypass project on NH 5 (construction of a new March 2002 Clause 17.1 (a and b) states that an independent engineer will
highway for bypassing the town of Nellore from km attempt to settle the disputes amicably, failing which the
161.300 to km 178.200 and strengthening of the existing chairman, NHAI, and CEO of the concessionaire shall attempt
two lanes from km 161.034 to km 161.300 and widening resolution. Further, failing which, arbitration shall commence as
thereof to a 4-lane dual carriageway on a (BOT) basis per Clause 17.2 of the agreement.
6 Design, engineering, financing, procurement, construction, September 2002 Clause 39.1 (a, b, and c) states that the first stage for dispute
operation, and maintenance of the second Vivekananda resolution shall be mediation by the independent consultant to
bridge across the river Hooghly along with its approaches, amicably settle the same, failing which the disputes are referred
both Kolkata and Howrah sides for settlement to the chairman, NHAI, and chairman of the board
of directors of the concessionaire. If still the disputes do not get
settled, the process of arbitration, the award of which shall be
binding on both parties, is initiated in terms of provisions
contained in Clause 39.2.
7 Indore–Dewas section of NH 3 from km 577.550 to km May 2010 Clause 34.10 states only that disputes shall be finally settled in
610.000 and km 0.000 to km 12.600 (approximate length accordance with the dispute resolution procedure without
45.05 km)—to be executed as BOT toll project on DBFOT detailing anything further.
pattern
8 Surat–Dahisar section of NH 8 from km 263.000 to km April 2008 Clause 34.11 states only that disputes shall be finally settled in
502.000 (approximate length 239.000 km) in the state of accordance with the dispute resolution procedure without
Gujarat and Madhya Pradesh—to be executed as BOT toll detailing anything further.
project on DBFO pattern—NHDP V
9 Varanasi–Aurangabad section of NH 2 from km 786.000 to July 2010 Clause 34.10 states only that disputes shall be finally settled in
km 978.400 (approximate length 192.400 km) in the states accordance with the dispute resolution procedure without
of Uttar Pradesh and Bihar—to be executed as BOT toll detailing anything further.
project on DBFOT pattern—NHDP V
10 Chilkaluripet–Vijayawada section of NH 5 from km June 2008 Clause 34.10 states only that disputes shall be finally settled in
355.000 to km 432.15 (approximate length 82.05 km) in the accordance with the dispute resolution procedure without
state of Andhra Pradesh—to be executed as BOT toll project detailing anything further.
on DBFO pattern—NHDP V

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 Court Cases Pending Adjudication and objectively defined. It has also been clarified that land acquis-
ition does not form part of the concession agreement. The cost aris-
The following highway PPP projects (stretches of highways) were
ing from land acquisition is added to the total project cost to give
researched, together with associated court cases that are still pend-
the total capital cost incurred in the project.
ing adjudication in various courts. It has generally been the case in
In all of the preceding projects, the process of land acquisition
PPP road contracts in India that projects that are almost complete
was governed by the 1894 Act. The details of the dispute resolution
contain some intermediate stretches that are incomplete due to the
procedure specified in the CAs of the projects and the nature of the
nonfinalization of land acquisition plans. The majority of court
disputes are analyzed for the seven projects in Table 3. Since the
cases relate to the various facets of land acquisition. The duration
CAs for these projects were based on standardized documents,
of these court cases ranges from 2 to 10 years, and in most instances
the dispute resolution procedure in all of them was the same.
the cases are not settled. The number of court cases and a summary
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An analysis of the dispute resolution clauses in the agreement and

of the contentious issues are provided in Table 3 for seven projects.
the nature of the court cases was also carried out for each project, as
The details of the court cases relating to the seven PPP projects
follows.
in Table 3 are explained in the following sections. The introduction
of PPP-specific legislation for arbitration and litigation and provi- Case Study 1: Bhubaneshwar–Puri, National
sions for incentives and penalties in contracts would probably allow Highway 203
for a major reduction in the number of court cases. The project was upgrading from two lanes to four of the 59-km
The central cause of litigation, which runs through all the proj- Bhubaneshwar–Puri section of National Highway (NH) 203,
ects in Table 3, is associated with aspects of land acquisition. The executed as a BOT project in terms of its design, construction,
perception of incorrect or inadequate compensation having been finance, operation, and transfer pattern. The dispute resolution
paid to landowners is the most common grievance since the people procedure was stipulated under contract Clause 44 and its sub-
whose land is slated to be acquired feel that they are being deprived clauses (44.1.1–44.4).
of their assets by the government. Prior to January 1, 2014, the The stages of dispute resolution start with a conciliation pro-
procedure governing land acquisition and the relevant rules thereof cedure involving assistance from an IE who is called upon to re-
were stipulated in the Land Acquisition Act of 1894 (the 1894 Act). solve the disputes amicably; this is also known as mediation. The
Many inadequacies in this legislation had become apparent, requir- next or concurrent stage is the referral of the case to the chair of
ing urgent changes to the provisions of the 1894 Act. A new act was NHAI or the chair of the board of directors of the concessionaire.
introduced by the Indian Parliament that came to be known as the If the issues cannot be resolved by conciliation, a decision is re-
Right to Fair Compensation and Transparency in Land Acquisition, quired by a board of arbitrators. This board comprises three mem-
Rehabilitation and Resettlement Act, 2013 (LARR), which took bers, one nominated by the authority and one by the concessionaire
effect on January 1, 2014. Many of the concepts involved were and the third appointed by the previous two, who acts as chair of
given a new and detailed definition. The scope for misuse of discre- the board. If a statutory regulatory authority or commission is asked
tionary powers by the authorities involved was eliminated since to settle the dispute, the issue is referred to the regulatory authority
every aspect of land acquisition was unambiguously and objec- for adjudication, which is not treated as final until an appeal against
tively defined. Addressing the rehabilitation and resettlement issues this adjudication is decided by an appellate tribunal or high court.
of those who had been ousted became an integral part of the LARR, The arbitration is held in accordance with the rules of the
unlike in the earlier 1894 Act. Second, the quantum of compensa- International Centre for Alternative Dispute Resolution, New Delhi
tion was substantially increased. Previously, the acquisition of land (hereinafter called the rules). This arbitration is also based on the
had been carried out in the name of providing services and assets provisions of the Arbitration and Conciliation Act, 1996.
for public purposes, and discretion had often been used when All 15 court cases related to this project, and as shown in Table 3,
declaring the infrastructure as being built for public purposes; were filed in the high court of the state of Orissa. The natures of the
however, these aspects have now been both comprehensively cases are as follows: three cases have been filed challenging the

Table 3. PPP projects and the issues needing adjudication

Number of
S. No. Project court cases Court name/location Nature of the case
1 Bhubaneswar–Puri 15 High court of state of Odisha Challenging of alignment under public interest
litigation and determination of compensation
2 Gwalior Bypass 9 High court of the state of Madhya Pradesh Issues related to arbitration, payment of
19 Commissioner’s Office, Gwalior compensation, and return of excess land
(Madhya Pradesh state)
3 Indore–Dewas 3 High court of the state of Madhya Pradesh Related to maintenance of existing road
1 Session Court, Dhar (Madhya Pradesh state)
4 Surat–Dahisar 1 High court of the state of Gujarat Issues related to land acquisition
9 District judge court at Valsad (Gujarat state)
5 Farakka–Raiganj–Section National 5 High Court, Calcutta (West Bengal state) Issues related to wrongful payment of
Highway 34 [design, build, finance, 1 Subordinate Court, Calcutta (West Bengal state) compensation, prayer for preventing
operation, and transfer demolition of structures, and further
(DBFOT)–toll basis] acquisition of land
6 Raiganj–Dalkhola Section NH-34 3 High Court, Calcutta (West Bengal state) Issues related to land acquisition
(DBFOT–toll basis)
7 Walajahpet–Poonamallee 2 High court of the state of Delhi Issues related to toll rates, maintenance of
roads, land acquisition, and exemption from
paying user fees

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 notification for acquisition of land parcels under the respective before the date appointed for construction to commence) included
rules; two cases are related to challenges to the alignment of the the provision of an RoW, fee notifications, and approval for the
road; and 10 cases relate to the payment of compensation for the construction of railway underpasses and overpasses, including
acquired land. In one of these 10 cases, compensation is demanded all applicable permits to be obtained by the public authority. On
that is on par with the market price. Two of the cases related to this the date this project was awarded, 80% of the land was available
project were filed in 2010 and 2011, respectively; five were filed in and the remaining 20% was required to be made available to the
2012; four in 2013; and two in 2014. It has also come to light concessionaire within 90 days of the appointed date under the terms
through interactions with the landowners that these land parcels of Clause 10.3.1 of the CA. Of the four cases pending adjudication
are agricultural land and that their subsistence is dependent to a with the high court of Madhya Pradesh at Indore, three were filed
large extent on agriculture. These cases are still pending with by the Union of India, with one in 2010 and two in 2013. The fourth
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the high court. The project stands completed. The officer in charge case is pending with the session court at Dhar, which again was
for land acquisition and the concerned lawyer(s) were spoken with filed by the public authority, NHAI, and is related to the mainte-
and they were of the opinion that in a majority of cases the com- nance of the existing road (the stretch between Indore and the
pensation amount was strictly as per the rules. The lawyer opined borders of the Indian states of Gujarat and Maharashtra). The three
that liberal adjournments allowed by the court have resulted in the cases pending with the high court relate to the cutting of trees
dragging on of the cases. Only two authorities in the instant case and maintenance of the existing road. At the time of writing, the
could be contacted over telephone. pleadings were complete and awaiting adjudication. From tele-
phone conversations with representatives of NHAI (the nodal body
Case Study 2: Gwalior Bypass for upgrading roads and highways in India), it appears that the con-
The project was the Gwalior Bypass. The dispute resolution pro- dition of the existing road is poor and that the concessionaire was
cedure for the settlement of conflicts as stipulated in the CA was not heeding requirements for maintenance. All four cases are still
identical to that stated for the previous project, Bhubaneshwar–Puri. pending adjudication. The concerned general manager in charge of
Nine court cases have been filed and are pending adjudication court cases and working with the public authority, when contacted,
by the high court of the state of Madhya Pradesh at Gwalior. The could not express his views regarding delay in adjudication by the
nature of the cases in the high court are as follows: (1) three of the courts. However, he stated that the written pleadings are complete
cases are related to compensation for land acquisition; (2) in one and hearing is still to commence.
case, the petitioner seeks appointment as a stenographer in lieu of
land; (3) two cases relate to the release of excess land acquired; Case Study 4: Surat–Dahisar, NH 8
(4) one case is in the form of public interest litigation (PIL) and The project was upgrading six lanes over 239 km of the Surat–
relates to the issue of illegal mining; and (5) one case alleges con- Dahisar highway (NH 8), to be executed as a BOT (toll) in terms
struction of a road completed on land owned by a private party of its design, build, financing, and operation (DBFO) pattern.
without acquisition by the public authority, i.e., NHAI. Two of In this project, the stages of dispute resolution are as described
these nine cases, one related to land acquisition and the other to in the Case Studies 1 and 2. In all, 10 court cases are pending ad-
arbitration, are pending adjudication with the civil judge at Morena judication. Seven cases are pending with the principal district judge
and the additional district judge at Gwalior, respectively. The in Valsad, and one case with the civil court in Valsad. One further
remaining seven cases are pending adjudication with the court case is pending with the civil judge at Vasai, and the remaining case
commissioner and relate to arbitration. The commissioner is the with the High Court of Judicature at Bombay. Six cases were filed
administrative head of the respective courts, and oversees the tech- simultaneously in September 2009 and two cases each were filed in
nicalities of the petitions filed and ensures that the prerequisites are 2007 and 2013. The respondent in all cases is NHAI. Information
complete before they are put before the judges for hearings. All of regarding the status of these cases was gathered from NHAI by
the cases that are pending with the court commissioner were filed in telephone, and it appears that these cases relate to various aspects
either 2009 or 2010. Similarly, one of the nine cases pending with of land acquisition. Countersuits have already been filed by NHAI.
the high court was filed in 2009, one in 2012, one in 2014, two in The date for the next hearing has not yet been published. It was also
2013, and four in 2010. It has also been clarified that the land par- learned that the project is complete except for a small stretch,
cels acquired are all agricultural land and the owners are subsist- i.e., the last mile remains unfinished. The concerned land acquis-
ence farmers. Although the project is complete, these cases have ition officer could not be contacted despite best efforts. However,
not yet been decided. The registrar of the court at Gwalior could the project manager working in the public authority headquarters
be contacted and he was of the opinion that the cases submitted stated that the project is almost complete except for a particular
were not in proper shape and additional documents were required small stretch.
before the cases could be put before the judge. Similarly, the land
acquisition officer in charge of the case was of the view that the Case Study 5: Farakka–Raiganj, NH 34
cases were mostly filed on frivolous grounds. No other authority The project was upgrading from two lanes to four in the Farakka–
could be contacted. Raiganj section of NH 34 for the length of 103 km in the state of
West Bengal, under NHDP Phase III, using a DBFOT pattern and
Case Study 3: Indore–Dewas, NH 3 on a toll basis.
The project was upgrading from four lanes to six of the 45.05-km The project was awarded on July 19, 2010, and covered the
Indore–Dewas section of NH 3, executed as a BOT project in terms 103 km (approximately) of the highway that was to be upgraded.
of the design, build, finance, operation, and transfer (DBFOT) pat- The dispute resolution procedure in this agreement was identical to
tern. The dispute resolution procedure stipulated under Clause 44 the provisions in the other case studies discussed previously.
and its subclauses (44.1.1–44.4) is identical to the dispute resolu- In all, six cases related to land acquisition have been filed for
tion procedure for the settlement of conflicts in the CA of the afore- this project. Four cases are pending adjudication with the high court
mentioned projects, Bhubaneshwar–Puri and the Gwalior Bypass. of West Bengal at Calcutta and one case is pending with each of the
The project was awarded on May 17, 2010, for a concession civil judges of the courts of the senior and junior divisions at Malda.
period of 25 years. The conditions precedent (i.e., conditions to Three cases were filed in 2015 in the high court, and one in 2010.
be fulfilled by the public authority, NHAI, and the concessionaire The remaining two cases were filed with the civil judge in 2013 and

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 2015. All six cases were still pending with the courts in April 2016, related to collection of tolls in which the petitioners were a private
meaning that up to 4 years after filing these cases were yet to be bus owners association and other affected bodies. The remaining
resolved. The contentious issues were disputes pertaining to rights, three cases pertained to various aspects of land acquisition. In
titles and possession of the land parcels, nonpayment or wrongful two of the cases related to toll rates and the collection of tolls,
payment of compensation for the acquired land, and, in two cases, the high court at Madras ordered the Indian Roads Congress to
the petitioners were seeking directions to prevent the respondents form a team to carry out inspections of the roads, followed by
from demolishing a permanent structure belonging to the peti- the submission of reports. In one case filed with the high court
tioners (landowners). The petitioners were private people whose of Delhi by the concessionaire, the court adjudicated against the
land had been proposed for acquisition, and the respondents were NHAI, and restrained NHAI from cashing the performance guar-
the state government, union government, and district revenue antee. The cases related to the issue of toll collection are yet to
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authorities. This project is still incomplete in some intermediate reach finality. The general manager in charge of the project at the
stretches, where the preceding cases are yet to reach finality and headquarters of the public authority stated that though the perfor-
the land parcels remain to be acquired. Although the primary ob- mance guarantee has been cashed in terms of the provisions of the
jective of upgrading to four lanes serves the purpose of faster trans- contract, the court has unduly interfered and that the ruling by the
portation, the incomplete stretches continue to interrupt the smooth High court of Delhi was being processed.
flow of traffic. The project manager when contacted over telephone
stated that the grounds for the court cases are without any sound
basis and have mostly been filed with a view to obtaining enhanced Discussion
compensation. No representative from the concessionaire could be
contacted. A lack of proper and well-informed framing for CAs by capable
transaction advisors and consultants is a major concern. The pro-
Case Study 6: Raiganj–Dalkhola, NH 34 visions of a concession agreement need to be flexible in terms of
The project was upgrading to four lanes in the Raiganj–Dalkhola the optimal and equitable sharing of risks by the public and private
section of NH 34 (except the Dalkhola bypass) for a length of authorities, and this needs to be supplemented with adequate, time-
54.75 km in the state of West Bengal, under NHDP Phase III using bound, equitable, and justified contract management. Professionals
a DBFOT (toll) pattern. with domain expertise need to be engaged as IEs and professionals
The agreement for this project was executed on June 28, 2010. related to contract management should be employed. The decisions
The dispute resolution mechanism stipulated in the agreement is made by public authorities are required to be strictly merit-
identical to those for the preceding projects. Three cases have been based and exclusively in consonance with the stipulated contract
filed with the high court of West Bengal at Calcutta in 2011, 2013, provisions.
and 2014. The contentions raised by the petitioners are first that the Aspects related to land acquisition, granting of environmental
gazette notification was not proper, and no opportunity was pro- clearance, and approval for the diversion of forest land have proven
vided to the petitioners for lodging objections, if any, and second to be the main hindrances leading to time delays and cost overruns.
that the publication of notice for land acquisition under the provi- Furthermore, most projects also give rise to several court cases that
sions contained in the relevant orders bearing numbers 3A and 3D are primarily related to issues such as the payment of fair compen-
meant for land acquisition were published in Bengali and English, sation in lieu of land acquired. Urgent legislation needs to be
whereas the petitioners were only familiar with Urdu. Bengali is enacted to introduce regulations and legal frameworks for future
spoken in the state of West Bengal and the adjoining areas and PPP projects.
is a language with a completely different script from Urdu. The On perusal of the status of the court cases and interaction with
petitioners pleaded that they did not understand the notice and concerned legal authorities working with the public partner are al-
therefore could not lodge any objections to the proposed land ac- most unanimous in their views that the grounds for filing of cases
quisition. The petitioner in the third case contended that they had are simply baseless and without any legal standing. Further, they
not received a copy of the petition, even a year after having filed it felt that the sole aim for filing the cases was to obtain enhanced
with the court. As such, they were unable to file any objection to the compensation for the acquired land.
acquisition of their land. The representative of the concessionaire A strong legal framework and team are prime requirements for
(engineer) stated that they have been unduly harassed on account PPPs to proceed smoothly. The agreements must be specific, sim-
of the nonavailability of unencumbered land. The project manager ply worded, and unambiguous, leaving no space for alternative in-
expressed his unwillingness to give comments, stating that the terpretations of the intention of the respective clauses or provisions.
cases are sub judice. Once it enters the litigation phase, a dispute needs to be dealt with
by competent personnel, and the cases must be argued strongly in
Case Study 7: Walajahpet–Poonamallee, NH 4 arbitration tribunals and the courts by well-informed lawyers.
The project was upgrading from four lanes to six over 93 km of the Frequent and continuous transparent interaction with landowners
Walajahpet–Poonamallee section of NH 4, for a length of 93 km, in who are basically farmers should be adopted. The landowners
the state of Tamilnadu under NHDP Phase V using a BOT (toll), should be dealt with the authorities who are capable of making
DBFOT pattern. the owners aware of the laws and who are capable of interacting
The date appointed in the concession agreement for construction and creating a congenial atmosphere.
to commence was June 1, 2013, and the period for project comple-
tion was stipulated as 36 months. The project formed part of the
Golden Quadrilateral scheme to connect the four older metropolitan Conclusions
cities of New Delhi, Chennai, Kolkata, and Mumbai.
The project gave rise to seven cases, five of which were filed The government of India has adopted the PPP approach in the trans-
with the high court at Madras and two with the high court of port sector since the mid-1990s. Going by the number of projects,
New Delhi. The latter two cases sought orders from the court the PPP mode of procurement has permeated the road sector more
restraining the respondent (NHAI) from cashing bank guarantees extensively then the other subsectors of ports, railways, and air-
submitted by the concessionaire. Two cases comprised issues ports. In the absence of PPP-specific policies and laws in India,

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