Abstract
The doctrine of Pacta Sunt Servanda revolves around the necessity of ensuring that reliable promises are made; and that any defaults by either party are properly evaluated and addressed during adjudication of contractual disputes. As an international best practice, this doctrine is always applied strictly with very few permissible exceptions; and in certain cases of public contracts, additional theories of exceptionalism operate so as to protect public interest even in case of omissions by public officials vis-h-vis important requirements of public procurement policy. India, on the other hand, recently witnessed certain orders by its premier regulator in the electricity sector, where the Pacta Sunt Servanda doctrine was substantially derogated from, potentially resulting in misallocation of risk and liability. This short academic paper examines in detail certain procedural and substantive deviations by the Indian regulator, either expressly or impliedly, and concludes with suggestions for restoring the balance in public contracts, with a view to ensuring reliability of contractual promises made in public domains."Exceptionalism" is a key defining construct of the legal framework for government procurement in the United States-one that recognises a special status for the State in its public contracting activities by reducing the obligations or expanding the power of the US Government as a contracting party, as compared to purely private contracts2 . To the extent that the State is also a custodian of public interest, the exceptionalism doctrine therefore implicitly recognises a special status that safeguards cumulative pubic interest of US citizens as well. Relevant instances in this regard are special constitutional rights of the State not to be sued without its consent or without express waiver of its immunity3 in the US, with the outcome that contractors, regulators and courts can go only upto certain limits and no further while claiming relief or while passing orders against the State. Similarly, the US Government cannot be enjoined from further unauthorised use of third-party intellectual property rights, or be subjected to enhanced damages for their willful infringement during the performance of a government contract 4 , thereby granting primacy to the rights of US citizens to uninterruptedly avail public goods and services over competing claims for third-party IPR protection. Yet another instance of exceptionalism operating in favour of public interest in the US is the "Christian" doctrine, which permits the incorporation by operation of law, of mandatory contract clauses that express a significant or deeply ingrained strand of US public procurement policy, if procurement policies are being avoided or evaded, either deliberately or negligently, by lesser officials. In some cases, it has also been applied to incorporate less fundamental or significant mandatory clauses if they were not written to benefit or protect the party seeking the incorporation 5 . Thus, even if a public procurement contract in the US fails to specifically provide for an important clause, either because of omission or collusion by/of officials, the clause can be "read into" the public contract if it represents a significant, deeply-ingrained strand of US public procurement policy. Simultaneously, certain evolving legal developments in the EU seem to indicate an even harsher type of the Christian doctrine, where for the first time in 2004, the Regional Court of Munich stated an exception from the dogma that there could not be any detraction of concluded public procurement contracts because of an infringement of (European) Public Procurement Law6 . The Court essentially held that under special circumstances, there could be a right for a public authority to terminate a contract as ultima ratio (a means of last resort) where there was an infringement of EU procurement law. India, on the other hand, has a large number of cases where the State is usually at the receiving end, with little recognition of underlying public policy implications of such adversarial pronouncements: that undue financial hardship or injunctions against the State and against state/ public utilities amount to, in effect, undue financial hardship and injunctions against Indian citizens who are the ultimate financers and consumers of relevant public goods and services. Realistically speaking, the negotiating authority of consumer/citizen stakeholders is too dispersed for them to effectively match strong litigation resources available with private parties making claims against the State or against state public utilities; and it therefore stands to reason that public fora tasked with adjudicating upon disputes involving such stakeholders may need to exercise some basic degree of caution and due diligence in the interest of meaningful and fair resolution of disputes relating to public contracts.
Recommended Citation
Verma, Sandeep
(2015)
"Making Tom, Dick and Harry Pay for Paul's Follies,"
National Law School of India Review: Vol. 27:
Iss.
1, Article 11.
Available at:
https://repository.nls.ac.in/nlsir/vol27/iss1/11
