| Authored by R & D Law Chambers LLP
Ravish Bhatt | Advocate, Bar Council of Gujarat (G/504/2008) | Dual-qualified lawyer (India and England & Wales) | ADIT, CIOT, London | SRA (non-practising) Registration No. 492 477 Published: 29 September 2026 | Last reviewed: 29 September 2026 |
| This article states Indian law as at 29 September 2026: the Arbitration and Conciliation Act, 1996 as amended, and the decision of the Madras High Court in Chennai Metro Rail Ltd v Transtonnelstroy-Afcons JV, O.P. Nos. 569 and 570 of 2017, 2025:MHC:2549, decided on 7 November 2025. References to FIDIC are to the 1999 and 2017 editions of the Red, Yellow and Silver Books, and to the 1995 FIDIC conditions that governed the design-build turnkey contracts in that case. FIDIC forms are licensed documents, and what matters in any dispute is the clause as the parties signed it. |
| Short answer. Under the FIDIC General Conditions, a change in Laws made after the Base Date, 28 days before the tender deadline, entitles the Contractor to time and Cost. Indian EPC contracts routinely rewrite that allocation in the Particular Conditions, often rationing it against a price adjustment formula. The Madras High Court’s decision of 7 November 2025 in the Chennai Metro case shows two ways such a claim can fail: the clause excludes it, or the cost is never proved. |
Index of Topics
- The FIDIC Starting Point: A Change After the Base Date Moves to the Employer
- What Counts as a Change in Laws
- Why the Base Date, Not the Contract Date, Is the Line
- How Indian Particular Conditions Rewrite the Allocation
- What the Madras High Court Decided on 7 November 2025
- The Second Gate: Proving the Change Increased the Cost of Performance
- Time as Well as Money
- Section 28(3): Why a Tribunal Cannot Rescue a Badly Drafted Clause
- What to Settle at Tender, and What to Prove at Claim
- Frequently Asked Questions
- How R & D Law Chambers Works on These Matters
1. The FIDIC Starting Point: A Change After the Base Date Moves to the Employer
| Short answer. In the FIDIC General Conditions, a change in Laws made after the Base Date is the Employer’s risk. The 1999 Red, Yellow and Silver Books deal with it in Sub-Clause 13.7, the 2017 editions in Sub-Clause 13.6, and both give the Contractor time and Cost where the change affects performance. That is a default, and Indian contracts often change it. |
The standard forms fix a date at which the tenderer prices the law, and move later changes to the Employer. The 1999 editions carry the mechanism in Sub-Clause 13.7, Adjustments for Changes in Legislation. The 2017 editions carry it in Sub-Clause 13.6, Adjustments for Changes in Laws, which is considerably longer but keeps the same core: time and Cost for a change in Laws introduced after the Base Date.
The 1995 FIDIC conditions considered by the Madras High Court in Chennai Metro Rail Ltd v Transtonnelstroy-Afcons JV expressed the same idea in Sub-Clause 13.16: the Contract Price was to be adjusted for any increase or decrease in cost resulting from changes in legislation of the country made after the base date, and the Contractor was to give notice so that the Employer’s Representative could determine both the extension of time under Sub-Clause 8.3 and the amount of cost.
Everything in this article follows from one observation. The FIDIC allocation is where the analysis starts, not where it ends, because the clause that decides the claim is the clause the parties actually signed.
2. What Counts as a Change in Laws
| Short answer. Whatever the definition in the contract says. The 1999 editions define Laws as national or state legislation, statutes, ordinances and other laws, and the regulations and by-laws of any legally constituted public authority. Sub-Clause 13.6 of the 2017 editions also covers changes in permits, permissions, licences and approvals, and changes in the requirements for permits the Contractor must obtain. |
Under the 1999 editions, Laws is defined in Sub-Clause 1.1.6.5 to cover all national or state legislation, statutes, ordinances and other laws, and the regulations and by-laws of any legally constituted public authority. The 2017 Red and Yellow Books define Laws in Sub-Clause 1.1.49 more broadly, adding acts, decrees, rules, orders, treaties and international law. Sub-Clause 13.6 of the 2017 editions also extends the adjustment mechanism to certain changes affecting permits, permissions, licences and approvals, including changes in the requirements for permits, permissions, licences and approvals that the Contractor must obtain.
The contracts in the Chennai Metro case show how far Particular Conditions move from the standard wording. Condition of Particular Application 37 replaced Sub-Clause 13.16 and defined a change in law as the imposition of a new tax after the due date of submission of the tender that affects the Contractor’s cost, or a change in any law pertaining to the work having that effect. A change in the rate of an existing tax, if related to the work, counted as a change in law.
The practical question at tender is therefore not whether the contract is “FIDIC” but which events the definition actually captures: taxes only, or all laws; laws of the country, or laws of any jurisdiction touching the supply chain; and whether a change in the interpretation or application of an existing law is included.
3. Why the Base Date, Not the Contract Date, Is the Line
| Short answer. The FIDIC Base Date in the 1999 and 2017 editions is 28 days before the latest date for submission of the tender. Under the standard forms, a change in Laws after it can trigger the change-in-law mechanism; one before it falls outside, even if the contract is signed months later. Particular Conditions can move that line, and can use different reference dates for different categories of change. |
Sub-Clause 1.1.3.1 of the 1999 editions defines the Base Date as the date 28 days prior to the latest date for submission of the Tender. The 2017 editions keep that definition, in Sub-Clause 1.1.4 of the Red and Yellow Books and Sub-Clause 1.1.2 of the Silver Book.
The Base Date matters because tender periods, evaluation and negotiation often run for months. A law passed between the Base Date and the signing of the contract is, under the standard wording, still a change in Laws for which the Contractor is compensated if it affects the Contractor’s performance. A law passed before the Base Date is outside the clause, however recently it was enacted when the contract is signed.
Particular Conditions can move the line, and sometimes move it differently for different events. In the Chennai Metro contracts, CPA 37 defined a change in law as an event occurring after the base date, but its tax limb spoke of a new tax imposed after the due date of submission of the tender. Where a clause uses more than one reference date, each needs to be identified before the price is fixed.
4. How Indian Particular Conditions Rewrite the Allocation
| Short answer. By replacing the change-in-law Sub-Clause, adding a price adjustment formula, and then providing that recovery under one excludes or limits recovery under the other. In the Chennai Metro contracts, electing the price variation formula barred change-in-law cost except for customs duty, excise duty and output Tamil Nadu VAT, and only to the extent the formula did not cover them. |
The Chennai Metro contracts were design-build lump sum turnkey contracts under the 1995 FIDIC conditions, modified by Conditions of Particular Application. Under the General Conditions, Sub-Clause 13.1(b) did not permit price adjustment for changes in the cost of labour, materials or other matters, while Sub-Clause 13.16 permitted adjustment for changes in legislation. The Particular Conditions replaced both.
CPA 32 replaced Sub-Clause 13.1(b) with a price variation formula adjusting payments for changes in the cost of labour, steel, cement and fuel. CPA 37 replaced Sub-Clause 13.16 with five sub-clauses. Sub-Clause 13.16.2 defined changes in law and provided for certification and payment of the resulting cost, expressly subject to Sub-Clause 13.16.5. Sub-Clause 13.16.4 provided that additional or reduced cost would not be separately paid if already taken into account under any other clause. Sub-Clause 13.16.5 provided that if the price variation formula in CPA 32 was adopted by the contractor, no addition or reduction in cost due to changes in law would be allowed except for changes to customs duties, excise duties and output TNVAT, and then only to the extent not covered by the price variation formula.
The structure has three parts: a price variation formula compensates market movement, a change-in-law clause compensates legislative change, and a coordinating provision decides what happens when both could apply. The coordinating provision is the one that decides the money.
5. What the Madras High Court Decided on 7 November 2025
| Short answer. That once the contractor adopted the price variation formula, the change-in-law clause could not be used for any change other than the three named taxes. The majority awards reading Sub-Clause 13.16.5 as a mere anti-duplication provision were held to have virtually rewritten the contract, contrary to section 28(3) of the Arbitration and Conciliation Act, 1996, and were set aside under section 34. |
By a notification of 18 September 2012, the Government of Tamil Nadu amended rule 7 of the Tamil Nadu Minor Mineral Concession Rules, 1959 to make contractors liable for the cost of minerals in addition to seigniorage fees, retrospectively from 1 April 2012. The contractor claimed the additional mineral cost as a change in law under CPA 37. It had used the price variation formula under CPA 32 throughout, receiving close to Rs 130 crore and Rs 166 crore under the two contracts. Majority awards of 28 April 2017 and 3 June 2017 allowed the claims, reasoning that Sub-Clause 13.16.5 existed only to prevent duplication and that any other reading would make Sub-Clause 13.16.2 redundant.
In Chennai Metro Rail Ltd v Transtonnelstroy-Afcons JV, N. Anand Venkatesh J set both awards aside. The words “subject to Sub-Clause 13.16.5” made Sub-Clause 13.16.2 subordinate to it, so the general change-in-law entitlement applied only where the contractor had not adopted CPA 32. The mineral cost levy was not one of the three named taxes. The court held that the only possible interpretation was that a contractor who had claimed price variation under CPA 32 could not claim additional cost for a change in law except for those taxes (paragraph 32), that the tribunals had virtually rewritten Sub-Clause 13.16.5 in breach of section 28(3) (paragraph 33), and, applying Delhi Metro Rail Corporation Ltd v Delhi Airport Metro Express (P) Ltd, (2024) 6 SCC 357, that the awards were perverse (paragraph 36). The tribunals’ reliance on National Highways Authority of India v ITD Cementation India Ltd, (2015) 14 SCC 21, was misplaced because clause 70.8 in that case was not in pari materia with Sub-Clause 13.16.5 (paragraph 34). Costs of Rs 1,00,000 were awarded in each petition.
The judgment also records that a Division Bench of the Madras High Court, in W.P. No. 22782 of 2013 and connected cases decided on 3 April 2025, made the rule 7 amendment prospective (paragraph 24). That did not affect the outcome, which turned on the contract.
6. The Second Gate: Proving the Change Increased the Cost of Performance
| Short answer. Entitlement is not enough. The Madras High Court held, as an independent ground, that even if Sub-Clause 13.16.2 applied, the contractor had to show that the new levy imposed after the base date affected its performance with increased cost, and that this was neither pleaded nor proved. A change-in-law claim fails on proof as readily as on construction. |
Paragraph 35 of the judgment dealt with the claim on a demurrer, assuming in the contractor’s favour that Sub-Clause 13.16.2 applied. To recover, the contractor had to show that the change after the base date impacted its performance with increased cost. That essential element had been neither pleaded nor proved, and the court treated this as a further ground on which the claim could not succeed.
This is the part of the decision most relevant to contractors whose clauses are more generous than CPA 37. The change in law is a legal event; the cost is a factual one. A claim that proves the notification and assumes the consequence has proved half of what the clause requires. The evidence that closes the gap is contemporaneous: the quantities of the affected input actually used after the change, the rate before and after, the invoices or demands showing that the contractor itself bore the new charge, and a calculation that separates the change-in-law effect from market movement already compensated by any price adjustment formula.
The last element is where the two gates meet. Sub-Clause 13.16.4 of CPA 37 barred separate payment of cost already taken into account under another clause, and most Indian contracts carry an equivalent. A contractor using a price adjustment formula must show that the formula did not already compensate the cost claimed as a change in law.
7. Time as Well as Money
| Short answer. The FIDIC General Conditions give time as well as Cost for a qualifying change in Laws, and the 1995 conditions tied the time entitlement to the extension of time Sub-Clause. Particular Conditions can remove that link silently. The modified clause in the Chennai Metro contracts, as extracted in the judgment, dealt with cost and made no provision for time. |
Under the 1995 conditions, Sub-Clause 13.16 required the Employer’s Representative, on notice, to determine both any extension of time under Sub-Clause 8.3 and the amount of cost. The 1999 and 2017 editions likewise provide for time and Cost. A contractor whose performance is delayed by a change in law therefore ordinarily looks to the change-in-law clause for time as well as money.
CPA 37, as set out in paragraph 10 of the judgment, spoke only of additional or reduced cost being certified and paid or credited. It contained no reference to extension of time. CPA 37 replaced Sub-Clause 13.16 (paragraph 14 of the judgment), so a contractor under a clause drafted that way has to look elsewhere in the contract for any time entitlement for this event.
Time matters because a change in law that delays completion, with no extension of time available for it, leaves the delay unexcused under the change-in-law clause, and exposed to whatever the contract provides for late completion.
8. Section 28(3): Why a Tribunal Cannot Rescue a Badly Drafted Clause
| Short answer. Section 28(3) of the Arbitration and Conciliation Act, 1996 requires an arbitral tribunal, while deciding and making an award, to take into account the terms of the contract and applicable trade usages. A tribunal that reads a restrictive change-in-law clause as if it were the FIDIC default is exposed to having the award set aside for patent illegality. |
The present text of section 28(3) was substituted with effect from 23 October 2015. It requires the tribunal, in all cases, to take into account the terms of the contract and the trade usages applicable to the transaction. The Madras High Court held that the majority tribunals had not merely preferred one plausible reading over another, but had given Sub-Clause 13.16.5 a meaning its words could not bear, which is what section 28(3) forbids.
The tribunals’ reasoning is a familiar one: a reading that leaves the change-in-law clause with little work to do cannot have been intended. The court’s answer was that the clause still had work to do, for the named taxes and for any contractor who did not adopt the formula, and that the words “subject to” settled the hierarchy. In this case, the argument from redundancy did not survive express words of subordination.
For employers, the lesson is that precise coordinating language is enforced. For contractors, it is that the moment to object to a clause like Sub-Clause 13.16.5 is the pre-bid query stage. The judgment records that one bidder’s query did produce an addendum, and that the addendum did not change the operative restriction (paragraph 26).
9. What to Settle at Tender, and What to Prove at Claim
| Short answer. At tender, identify the reference date, the definition of change in law, any link to a price adjustment formula, and whether time is available. At claim, prove the change, its date against that reference date, the cost actually borne, and that no other clause already paid for it. Several of these questions mirror grounds on which the Chennai Metro awards failed. |
| Stage | Question | Why it decides the claim |
|---|---|---|
| Tender | Which date is the reference point, and is it the same for every limb? | A change before the reference date falls outside the clause |
| Tender | Does the definition cover all laws, taxes only, or a closed list? | Only captured events can be claimed |
| Tender | Is change-in-law recovery excluded or limited if a price adjustment formula is used? | The coordinating provision decided the Chennai Metro claims |
| Tender | Does the replacement clause give time, or only cost? | Without time, delay damages may exceed the compliance cost |
| Claim | What was the change, and when did it take effect? | Establishes the event against the reference date |
| Claim | What cost did the contractor itself bear because of it? | The element found neither pleaded nor proved in paragraph 35 |
| Claim | Has any other clause already compensated that cost? | Double recovery is barred by clauses like Sub-Clause 13.16.4 |
The notice requirements that attach to a change-in-law claim under the FIDIC claims procedure are a separate subject and are not addressed here. The point for this article is that notice preserves a claim that the clause allows and the evidence proves; it cannot create one that the clause excludes.
10. Frequently Asked Questions
Does a FIDIC contract automatically compensate the contractor for a change in Indian law?
Only if the contract as signed still says so. The FIDIC General Conditions give time and Cost for a change in Laws after the Base Date, but Indian EPC contracts frequently replace or qualify that Sub-Clause in the Particular Conditions. Section 28(3) of the Arbitration and Conciliation Act, 1996 requires the tribunal to take the signed terms into account, and the Madras High Court set aside awards that departed from them on 7 November 2025.
What is the Base Date in a FIDIC contract?
The date 28 days before the latest date for submission of the tender. It is defined in Sub-Clause 1.1.3.1 of the 1999 Red, Yellow and Silver Books, and in Sub-Clause 1.1.4 of the 2017 Red and Yellow Books and Sub-Clause 1.1.2 of the 2017 Silver Book. A change in Laws after that date can trigger the change-in-law clause; one before it falls outside the clause.
Can a contractor claim both price variation and change-in-law cost?
It depends on the coordinating clause. In the Chennai Metro contracts, Sub-Clause 13.16.5 provided that once the contractor adopted the price variation formula, change-in-law cost was recoverable only for customs duty, excise duty and output Tamil Nadu VAT, and only to the extent the formula did not cover them. The Madras High Court held that to be the only possible reading and set aside awards that allowed a mineral cost levy.
Does a change in law entitle an EPC contractor to an extension of time?
Under the FIDIC General Conditions it can, because the change-in-law Sub-Clause provides for time as well as Cost. Particular Conditions can remove that. The replacement clause in the Chennai Metro contracts, as extracted by the Madras High Court, dealt with cost only. Where the time entitlement is absent, the contractor must find it elsewhere in the contract or bear the delay.
What must a contractor prove in a change-in-law claim in India?
That a qualifying change occurred after the contractual reference date, that it increased the contractor’s own cost of performance, how much, and that no other clause has already paid for it. In the Chennai Metro case the Madras High Court held, as an independent ground, that the impact on the contractor’s cost had been neither pleaded nor proved, so the claim failed even on the contractor’s own reading of the clause.
Does the 2017 FIDIC change-in-law clause cover changes in permits?
Yes. Sub-Clause 13.6 of the 2017 Red, Yellow and Silver Books extends the change-in-law mechanism to certain changes affecting permits, permissions, licences and approvals, including changes in the requirements for those the Contractor must obtain. The 1999 editions did not. Whether an Indian contract based on the 2017 forms keeps that extension depends on its Particular Conditions.
11. How R & D Law Chambers Works on These Matters
R & D Law Chambers LLP is an Ahmedabad law firm. We advise on Indian law only, for businesses anywhere, wherever a matter has an India connection.
The practice advises employers and contractors on change-in-law and price adjustment provisions in EPC and FIDIC-based contracts, from pre-bid queries and Particular Conditions to claims, arbitration and challenges to awards under section 34 of the Arbitration and Conciliation Act, 1996. That work sits within the firm’s EPC contract advisory and dispute resolution practice.
Related services and reading
- EPC Contract Lawyers: Advisory and Dispute Resolution Across India: drafting, execution-phase notices and disputes on EPC contracts.
- International EPC Advisory: FIDIC book selection, Particular Conditions and cross-border EPC disputes.
| This article is for informational purposes only and does not constitute legal advice. It states the position as at 29 September 2026. Outcomes in change-in-law disputes turn on the wording of the particular contract and the evidence. Specific matters should be referred to qualified advisers. |