Gauhati HC shatters 50-year record: ₹17 crore arbitration award in rly contract case validated

GUWAHATI: In a milestone verdict which continues to echo across India’s infrastructure and legal circles, the Gauhati High Court’s 2022 verdict granting arbitration in a high-stakes railway contract case has led to a Rs 17 crore arbitral award—validated in its entirety despite initial protests by the Indian Railways.

The case arises out of a dispute between a private company (GSR Ventures pvt ltd) and the North-East Frontier Railways (NFR) over the construction of embankments and bridges under the Bairabi–Sairang Railway Project in the state of Mizoram. Tradition had it that arbitration of such disputes was thwarted by a controversial “20 percent ceiling” clause prohibiting the arbitration of any claim exceeding 20 percent of contract value.

In 2020, GSR terminated its contracts on the grounds of force majeure during the COVID-19 pandemic and sought arbitration for delay compensation and outstanding payments. The Railways opposed it, invoking Clause 47, hitherto invoked to protect the government against arbitration for high-value claims.

Nonetheless, in a historic 18th November 2022 dated decision, Justice N. Kotiswar Singh held that such restrictions could no longer be maintained in light of clear ambiguities in the contract. Mistakes regarding clause references and conflicting terms were conceded by the Railways themselves, prompting the Court to apply the doctrine of contra proferentem—interpretation of ambiguity against the drafter, which in this instance was the government.

Justice Singh also stressed minimal judicial intervention under Section 11 of the Arbitration and Conciliation Act, 1996, and designated Justice Anima Hazarika (Retd.) as the only arbitrator for GSR’s and connected contractor petitions.

In a damning turn of events this month, the arbitral award has been made in GSR Ventures’ favour, allowing Rs 17 crore in total damages for two contracts. The arbitrator overturned the Railways’ objection to the 20 percent cap, however, and held that inconsistencies in the contract and the moral right to fair dispute resolution took precedence over arbitrary limits.

Even with this judicial milestone, the Railways still have not paid the awarded sum, which has raised eyebrows and worries among legal professionals and infrastructure contractees. Sources privy to the issue confirm that GSR has submitted a petition under Section 36 of the Arbitration Act requesting enforcement of the award, lest the Railways resort to more delaying tactics.

This ruling not only shatters a five-decade-old legal barrier but also empowers contractors across India working under restrictive public-sector agreements.

Legal experts have praised the case as a textbook example of strategic legal interpretation, applying principles such as Odger’s Rule and contra proferentem to secure justice, Advocate (petitioner) Snigdha Bhattacharjee said.

As infrastructure projects become more complex and costly, the Indian arbitration jurisprudence passes a watershed moment with this case.

All eyes are on the Railways—will they honour the Rs 17 crore award or appeal again? The Gauhati HC ruling stands as a landmark for contractual justice.