Liquidated Damages In Public Infrastructure Projects: Legal And Procedural Challenges In India
- IJLLR Journal
- Jul 2
- 1 min read
Dr Ram Kishan Rao Chilappagari, Engineer-in-Chief (R&B) (Retd.)
Ananta Koti Padmanabha Rao Vadladi, Deputy Chief Engineer (R&B)
Venkateshwar Reddy Gajjala, Advocate
ABSTRACT
India’s aspiration to emerge as the world’s third-largest economy by 2028 is underpinned by substantial infrastructure investments by both Central and state governments. However, persistent delays in project execution remain a systemic concern. Air Chief Marshal Amar Preet Singh aptly observed that “not a single project that I can think of has been completed on time,” characterising the situation as unacceptable.1 If this is reflective of defense procurements, civil infrastructure projects are unlikely to fare better.
Major public infrastructure contracts typically contain liquidated damages clauses, enabling the government to recover pre-estimated damages in the event of delay or breach. However, enforcement frequently gives rise to disputes, invoking arbitration provisions. The arbitral award is often challenged under Section 34 of the Arbitration and Conciliation Act, 1996, followed by an appeal under Section 37, and, in some cases, a Special Leave Petition before the Supreme Court.2 Such litigation is costly, time- consuming, and exacerbates judicial pendency.
This article offers a focused analysis of liquidated damages in the context of public infrastructure contracts. It examines standard contractual formulations, outlines the legal conditions for their enforceability, and reviews judicial precedents. The study identifies recurring grounds of contestation and concludes with practical recommendations for stakeholders, including a proposal to amend Sections 55 and 74 of the Indian Contract Act, 1872,3 and a model liquidated damages clause to be incorporated in bid documents.
Keywords: Contracts, Delay, Extension of Time, Liquidated Damages, Penalty, Reasonable Compensation.
