Key legal issues and legal developments
The construction industry in India is regulated by various labour regulations, general laws, specific legislations like the Building and Other Construction Workers Act, 1996 (BOCWA) and other rules and regulations by various bodies from time to time. Despite being a highly regulated sector, the multiplicity of regulatory authorities governing the procedures and regulations has led to complicated and time-consuming procedures for approvals, licenses and clearances.
The new Single Window Clearance Systems offers a streamlined alternative, however manual follow up is yet to be eliminated.
Scattered legislation - States having their own rules and regulations, inconsistent interpretation, lack of standardised contracts and independent forums have also led to an insufficient framework of rights. Delays in payments to contractors are ubiquitous even when cash flow is consistent. Section 73 and 74 of the Indian Contract Act, 1872 provides for recovery of damages for such contractual breaches. However, unfair terms and conditions in construction contracts and clauses which bar contractors from claiming compensation for employer-caused delays, exclusion liability clauses, time-bar clauses (limiting the period under which relief may be sought), etc. limit the remedies available to aggrieved contractors. While ad-hoc arbitration is often the chosen method for construction dispute resolution, there is an immense backlog of arbitration and litigation disputes. Enforcement of arbitral awards is also irregular. While the Arbitration and Conciliation (Amendment) Act, 2019 seeks to expedite the process through time-barred dispute resolution, further reform is vital.
A central, specific legislation, consolidation of regulatory authorities, standardised contracts, independent forums and effective dispute resolution mechanisms are therefore the need of the hour. While the increasing number of accidents and health hazards in construction projects are yet to be addressed in a comprehensive manner, legislations like the BOCWA and the Occupational Safety, Health and Working Conditions Code, 2020, are steps in the right direction.
For further information contact: Bomi Daruwala, Partner, Vaish Law - India