Contracts Carved In Stone: SEPCO And The New Era Of Arbitration In Indian Infrastructure
- IJLLR Journal
- Oct 7
- 2 min read
Aviral Singhai, National Law Institute University, Bhopal.
Rohit Misra, National Law Institute University, Bhopal.
Isharth Kumar, National Law Institute University, Bhopal.
ABSTRACT
The Supreme Court of India's September 2025 judgment in SEPCO Electric Power Construction Corp. v. GMR Kamalanga Energy Ltd. marks a significant turning point in Indian arbitration, particularly for the infrastructure and construction sector. The Court set aside a substantial ₹995 crore arbitral award on the ground that the tribunal had "rewritten" the contract by finding an implied waiver of a notice requirement. This finding directly contradicted an express No Oral Modification (NOM) clause.
The ruling emphatically reaffirms the principle that arbitrators must not deviate from the clear, explicit terms of the contract, as mandated by Section 28(3) of the Arbitration and Conciliation Act, 1996. Furthermore, the Supreme Court found a "glaring" violation of Section 18 (equal treatment of parties) because the tribunal waived the notice requirement for one party (SEPCO) while strictly enforcing it against the other (GMR). This unequal application was deemed so perverse that it "shocked the conscience" of the court.
By insisting on literal adherence to contract stipulations and strictly enforcing NOM clauses, the decision strongly tilts the balance toward pacta sunt servanda (agreements must be kept). This creates a more rigid environment, where procedural non-compliance (such as missing notice deadlines) can lead to the total forfeiture of otherwise valid claims.
For the domestic and international infrastructure industry, the judgment signals a retreat from flexible, equity-based arbitration toward a formalist, contract-centric approach. International contractors, accustomed to more pragmatic resolution in other jurisdictions, may face unexpected risks, potentially leading foreign investors to insist on non-Indian arbitration seats. The challenge now is to develop a framework that preserves contractual discipline without undermining the commercial realities of complex projects.
