My talk focuses on how the Judiciary itself can become a fraught circumstance. Not an underdeveloped, intimidated, cowed down or controlled judiciary but a free, robust, independent and bold judiciary. For, in India the opposite is true.
Indian judiciary is perhaps the most empowered and activist judiciary in the world. It can strike down legislation. It can strike down governmental policies and indeed it is not unknown for it to mandate new policies or prescribe policies through judge made law. In a public address in 1998, Lord Woolf, the then Master of Rolls (England) expressed his "gasping admiration" for the work done in the immediate past by the Indian higher courts and added that attempts by the British judiciary to exercise control over the government "are nothing compared to the kind of work, the Courts in India have done."
This large jurisdiction of the court got even further expanded under a court developed (or self-created) jurisdiction which the courts have created for themselves which goes by the name of Public Interest Litigation (PIL). In exercise of PIL the superior courts of India entertain petitions from any activist, organization or individual espousing any public cause and in such cases courts do not insist on locus standi or procedural compliances and do not consider it to be an adversarial litigation (which is otherwise the norm in India).
To give you an idea as to how PIL has expanded and how the courts are getting more and more into areas which may rightfully belong to the executive or legislature let me refer to an article a journalist wrote. He compiled a list of issues and matters into which the High Court of Delhi had recently taken cognizance of. His list reads: Age and other criteria for nursery school admissions, unauthorised schools, number of free seats in schools, supply of drinking water in schools, number of free beds in hospitals on public land, use and misuse of ambulances, requirements for establishing a world class burns ward in a hospital, the kind of air Delhites breath, begging in public, the use of sub-ways, the state of buses, the legality of constructions in Delhi, the size of speed-breakers on Delhi roads, auto-rickshaw over-charging, growing frequency of road accidents and enhancing of road fines.
Hence PIL has become a catch all jurisdiction and is often accused of transgressing into areas which the judiciary is not meant to get into or not equipped to get into. Moreover, one of the major problems of PIL is that the Courts have not adopted a uniform and consistent approach in such matters. There are no clear guidelines as to when the court would or would not interfere and the extent of intervention. Indeed it can turn on the personal whims and fancies of the Judge and this is what makes it Fraught.
Let me expand this through two cases relevant to construction lawyers.
The Sethu Samudram Project:
This case has rather interesting facts (and can well be a fit case for study by students of jurisprudence). India is separated by a narrow sea from its neighbour, Sri Lanka but the passage between the two countries is not navigable. It has a draft of only 3 meters which means that no commercial sea trade can happen between the East and West coast of India. Vessels have to circumvent to all the way around Sri Lanka thereby adding about 36 hours to the journey time. This affects the entire connectivity of the country and even international trade. A project to open up a shipping route through dredging a canal in the Palk Strait has been under contemplation for decades and finally took off in the year 2005. (So we believed except for what came to follow). The project in short was to dredge or dig up and create two shipping channels totaling about 160 k.m. and increase the draft of the canal to about 11 meters. The project cost was 560 million dollars. After exploring several alternatives the Indian Government decided to go ahead with a route which would be feasible and at the same time would not impact a marine biological park in the area. As expected, one or two waves of PILs were immediately filed, chiefly around the issue of environmental compliances or threats and all of them were dismissed both at the High Court and Supreme Court level. When the project was more than half way through, a PIL was filed in the Supreme Court. This time the challenge was that the passage would cut across a mythological bridge which the God king Ram built to help his army cross from India to Sri Lanka. This is how it is described in the holy book Ramayan which is like a religious text in India and Ram is one of the main Gods worshipped by millions in India. Thus a new dimension came to be added viz sentiments of the people who believe in the literal version of Ramayan. It was contended before the Supreme Court that the religious sentiments of people would be hurt. The Supreme Court by a non-speaking interim order stopped all dredging works. This was some what unfortunate. The project had been cleared by all political parties of India (at various stages when they were in power) and had gone through innumerable expert committees who had presumably explored all options. Besides the Petitioner had approached the Court after undue delay when the project was more than 50% complete. The court rejected all these objections and stopped the work as mentioned above. The court then took upon itself the onus of setting up expert committees and working out alternative routes. Very interestingly the Government seemed happy with this arrangement for once the issue becomes socially explosive and politically costly, it is a good to let the Court bell the cat. So at some point of time the Government left it to the Court to do what it wanted without in any way supporting its own project. Now it is for the Court to choose between faith and environment or indeed between status quo and progress. In July 2008 arguments were heard and as on date the judgment is awaited. Thus, the project has already got delayed by over one year. From the developers point of view it is a total disaster for all cost calculations would gone haywire. Fortunately no private party was involved and the dredging work was being carried out primarily through a public sector undertaking - so it is only tax payers money which is suffering. Otherwise it could have been very embarrassing for the country - specially if foreign companies were involved.
The Cogentrix case
India due to its socialist political ways (which are thankfully mostly in the past) suffers from very poor infrastructure. Amongst others, the power sector which was a State monopoly had almost broken down. In these circumstances in the early 1990's privatisation was embarked upon and in the process the State Government of Karnataka invited a US power company, Cogentrix to set up a 1000 MW power project. Unfortunately no public tendering took place. Instead the Chief Minister along with a team of senior bureaucrats visited Europe and USA, took presentations from 14 power companies and through this process selected Cogentrix to enter into an MOU for the project. In order to attract the company and in order to make the Project bankable, the Government of India gave a sovereign guarantee in support of State obligations under the contracts with Cogentrix. The Power Purchase Agreement had a "Take or Pay" clause. The project was cleared by both the Central and the State Governments. It went through all the statutory authorities and was a rather prestigious over half a billion dollar project. When the project was on track for achieving closing, an individual describing himself as a public spirited citizen wishing to espouse public interest, filed a writ petition in the High Court of Karnataka stating that there were very suspicious circumstances surrounding the contract. He contented that Cogentrix was relatively an unknown company even in the USA and did not have the financial wherewithal or experience or expertise to take on such a large project. He said that the project had been window dressed in order to attract the Government of India. Cogentrix had a history of setting up and selling projects i.e. it is only going to trade in the project and make a huge profit for itself etc. etc. The arguments appealed to the High Court Judges and even though it could have been argued that this is a pure matter of commercial decision for the executive to take, the court felt that the circumstances surrounding the contract were so suspicious that it warranted a criminal investigation to establish if there was bribery or corruption. The High Court directed the Central Bureau of Investigation to depute a very senior officer to investigate the matter and to complete the investigation within one year. Further it directed that monthly progress reports be filed in the High Court in a sealed cover.
Cogentrix took the matter up in appeal to the Supreme Court which came to the opposite conclusion. It held that the High Court had proceeded on surmises and conjectures and "flights of fancy" that some crime might have taken place some where by some body. The court said that this is nothing but like a blind shot fire in the dark. It went on to say the High Court had approached the matter with a jaundiced eye. Very strong words indeed. The Supreme Court no doubt tried to undo the damage done by the High Court but almost two years had lapsed between the High Court and the Supreme Court Judgment and about 7 or 8 years had lapsed since the project was initiated. All this discouraged Cogentrix so much that it decided to walk out of the project and all the time and energy which had gone into attracting, examining and sanctioning the project came to naught.
While PIL has come in for some criticism as it is seen as a transgression of powers by the judiciary into areas not meant for it, it is here to stay and there is general acceptance that we do need an interventionist and activist judiciary and even if in the process there is judicial overreach, it is justified due to legislative and executive underreach. The problem is that it brings in its wake judicial excesses and uncertainty or even if the defendant were to prevail there would be sheer delay which the project may not be able to tolerate and therefore this becomes a fraught circumstance.
Recommendations for avoiding failure / cost and time overruns.
If I have to give one single recommendation, I would say that the project developer must keep its ear to the ground. You have to keep the people in mind. You have to be in tune with the local sensitivities. It is of course very good to look for "single window clearance" and to have the green signal from the top executives or politicians but in a multilayered democracy all this gets diluted. Everything is not legal compliances or having a water tight contract signed off.
Large projects tend to attract attention and larger the project the greater the attention it will attract. Large projects also are likely to impact vast sections of the people and in such situation, public sentiments and public interest come into play. In a multilayered democracy problems can crop up at any time and well into the contract execution stage. In such situation, if the project if subjected to judicial scrutiny, it must be able to stand on its own feet. There should be no issues of transparency; of environmental threat or huge human cost.
Before parting I may stress that this is not a bleak scenario. In fact a strong and independent judiciary is also the best comfort a foreign developer can have while entering into unknown shores.
The comfort one can draw from the Indian judiciary is that though it may be inquisitive and interventionist, it is not unfair. There is no anti-foreigner bias and if the project is good justice will prevail.
* Transcript of talk delivered at the International Bar Association Annual Conference at Buenos Aires in October 2008.
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