Making Peter, Tom, Dick and Harry Pay for Paul's Follies: Regulatory Exceptionalism to Pacta Sunt Servanda During Performance of Public Contracts in India

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-à-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.

Keywords: India, Public Contracts, Public Procurement, Regulation, Negotiation, Renegotiation, Electricity Act, Contract Act

JEL Classification: K12, K23