Retired Justice Hima Kohli urges statutory protection for government PSU officers on disputed interim funds

In a pointed intervention that underscores a persistent bottleneck in India’s infrastructure sector, retired Supreme Court Justice Hima Kohli has called for the enactment of statutory protection for government officers tasked with releasing disputed interim funds. Speaking at a recent forum on public procurement and dispute resolution, Justice Kohli highlighted the acute hesitation among officers in public sector undertakings (PSUs) and government agencies to authorise interim payments during ongoing disputes, a hesitation that she attributed to the absence of institutional cover. Her remarks come at a time when stalled cash flows are delaying thousands of crores worth of projects across the country.

When Personal Liability Stalls Public Projects

The core of Justice Kohli’s argument rests on the personal exposure that officers face when they exercise commercial judgment on disputed claims. In the current framework, the decision to release money from the public exchequer during a contractual dispute falls squarely on the individual officer. This creates a powerful disincentive to take a commercial call, especially when the amount involved is substantial. As a result, many officers prefer to let disputes simmer in arbitration rather than risk accusations of impropriety or financial recklessness.

Justice Kohli noted that this behaviour is particularly pronounced in PSUs and government bodies, where accountability mechanisms are stringent. “Keeping in mind that 70% or more of Indian infrastructure involves government agencies and PSUs, statutory backing becomes essential,” she said. She elaborated that in the absence of a clear legal mandate, officers are left vulnerable to scrutiny from auditors, vigilance commissions, and even criminal investigations. “A statute provides statutory cover and institutional protection to these officers, mandating interim payments under a clear legal procedure rather than leaving them vulnerable to accusations of impropriety,” she added.

The Case for Statutory Cover

The retired judge’s proposal is not merely a call for administrative guidelines but for a binding legal framework that would compel and protect officers who release funds in compliance with prescribed conditions. Such a statute would, in her view, serve multiple purposes. First, it would remove the element of personal discretion and replace it with a rule-based mechanism. Second, it would ensure that project cash flows remain uninterrupted even when disputes are pending, thereby preventing the cascading delays that plague infrastructure development. Third, it would offer officers a defence in any subsequent inquiry, provided they have acted in good faith and within the statutory parameters.

This approach mirrors certain provisions in international procurement regimes, where interim payment orders are common and are backed by indemnity clauses for decision-makers. In India, however, the absence of such a shield means that even when a contractor has a strong prima facie case, the officer may still refuse payment to avoid personal risk. The result is a system that often prioritises risk aversion over commercial prudence.

Current Mechanisms and Their Limitations

Existing dispute resolution clauses in government contracts typically provide for arbitration, but the arbitration process itself can take years. Interim measures under the Arbitration and Conciliation Act, 1996—such as applications under Section 9—do exist, but they require a party to approach a court or arbitral tribunal, and the officer’s decision to comply with such an order is again subject to personal discretion. Moreover, many officers are wary of acting on court orders that direct payment without a corresponding statutory mandate, fearing that they may be held personally liable if the final award goes the other way.

Justice Kohli’s suggestion addresses this gap head-on. By creating a statutory duty to release interim funds when certain objective conditions are met—for example, when the claim is supported by bank guarantees or when the dispute is limited to a narrow issue—the law would remove the element of personal judgment from the equation. The officer would simply be following a legislative command, not making a subjective commercial decision.

Impact on Legal Practice and Arbitration

For legal professionals practising in the fields of government contracts and infrastructure arbitration, Justice Kohli’s proposal carries significant implications. If enacted, such a statute would reduce the number of Section 9 petitions filed for interim payments, as the obligation would arise automatically. It would also shift the focus of arbitration from cash flow disputes to substantive liability issues. Lawyers advising PSUs would need to familiarise themselves with the new statutory regime, and contract drafters would have to align payment milestones with the law.

At the same time, the proposal raises questions about the boundary between administrative law and contract law. A statutory mandate to pay during a dispute could be seen as interfering with the freedom of contract, but Justice Kohli’s framing suggests that the public interest in completing infrastructure projects justifies such an intrusion. The legal community will need to debate the appropriate safeguards—such as the requirement of a performance guarantee or a cap on interim payments—to prevent abuse.

Broader Implications for Public Infrastructure

The financial stakes are enormous. With over 70% of India’s infrastructure projects involving public money, delays in cash flow often lead to cost overruns, litigation, and ultimately a burden on taxpayers. Justice Kohli’s call is a practical recognition that the current system is not working. Without statutory protection, officers will continue to err on the side of caution, and disputes will fester.

The retired judge’s remarks also resonate with recent judicial observations on the need for efficiency in public procurement. The Supreme Court itself has, in several judgments, emphasised that interim payment mechanisms are critical to prevent the collapse of essential projects. However, judicial directions alone cannot substitute for a comprehensive legislative framework. The ball now lies in the court of Parliament and the executive.

Conclusion

Justice Hima Kohli’s intervention highlights a structural flaw in India’s public procurement ecosystem that has long been ignored. By advocating for statutory protection for officers releasing disputed interim funds, she has provided a clear roadmap for reform. For the legal profession, the message is equally clear: the days of relying solely on arbitration and court orders to keep projects afloat may soon be numbered. A shift towards a rule-based, protective statutory regime would not only empower officers but also accelerate the pace of infrastructure development in the country. Whether the government will take up this mantle remains to be seen, but the debate has now been decisively opened.