Court Cannot Rewrite Contracts to Suit Contractor’s Convenience: Kerala High Court Upholds Termination of Road Work Under Risk and Cost Clause

“Having Signed the Agreement With Open Eyes, Petitioner Cannot Later Demand ₹3.5 Crores More” — In a crucial ruling impacting public infrastructure contracts, the Kerala High Court upheld the termination of a PWD road work contract under the ‘risk and cost’ clause, dismissing a writ petition filed by contractor Shibu M. George, who had challenged the termination, forfeiture of performance guarantees, and threats of blacklisting.

Justice N. Nagaresh, sitting in civil writ jurisdiction, held that once a contractor signs a detailed public works contract, he is bound to execute the work as agreed and cannot later seek judicial intervention to revise estimates or avoid contractual consequences.

“After signing the agreement agreeing to execute the work for ₹2,78,70,165.66, the petitioner cannot be heard to contend that an additional ₹3.5 Crores is required to complete the work,” the Court observed.

The ruling comes amidst mounting disputes in Kerala’s ambitious Rebuild Kerala Initiative (RKI) infrastructure programme and serves as a clear assertion of the limits of judicial review in contractual matters involving the State.

“Risk and Cost Termination Is Contractual Consequence for Persistent Delay, Not Arbitrary State Action”

The case arose from a road improvement contract awarded under the RKI in Mananthavady, Wayanad, where the petitioner, an A-Class PWD contractor, was awarded the work for a reduced tendered amount. Despite a 9-month deadline, and two extensions granted by the State, the petitioner failed to complete even 50% of the work, prompting authorities to invoke Clause 2116.2 of the PWD Manual, terminating the contract at the contractor’s risk and cost, and initiating recovery of ₹66,02,497.68, apart from forfeiting the Performance and Additional Performance Guarantees.

The contractor alleged that post-agreement site conditions differed materially from the Detailed Project Report (DPR), requiring additional retaining walls, revised culvert designs, and rigid pavements, with an estimated extra burden of ₹3.5 crores. He contended that design discrepancies, non-removal of electric posts, and administrative inaction were responsible for delays, not default on his part.

The Court was not persuaded.

“The petitioner has executed the agreement knowing fully well the scope of the work. Ext.P1 was executed consensually. It is the obligation of the petitioner to complete the work as required by the agreement,” held the Court, refusing to accept post-facto demands for revised scope or cost adjustments.

“Judicial Review Doesn’t Extend to Rewriting Commercial Terms” — High Court Cautions Against Using Article 226 to Escape Contractual Obligations

While the petitioner urged the Court to invoke Article 226 citing arbitrariness and violation of Article 14, the Court reiterated the well-settled principle that judicial review in contractual matters is limited, and unless State action is perverse or violates fundamental rights, courts will not interfere.

“Writ jurisdiction is not an avenue to rewrite contracts or adjudicate disputed facts unless State action is arbitrary or perverse,” Justice Nagaresh affirmed, citing Subodh Kumar Singh Rathour v. CEO, M.P. Power Management v. Sky Power Southeast Solar India, and Noble Resources v. State of Orissa.

The Court emphasised that the petitioner was not compelled to enter into the agreement and had opportunities to inspect site conditions, estimate quantities, and raise concerns prior to contract execution. Having failed to do so, he cannot now plead hardship due to alleged site challenges.

“Sanctioned Width Is 3.75 Metres — Contractor’s Claim of 6 Metres Based on Local Demands Has No Contractual Basis”

Rejecting claims that 24 electric posts blocked the construction due to an alleged requirement of 6–7 metre width, the Court noted:

“The petitioner is bound by Ext.P1 agreement and sanctioned estimate. The duty and obligation of the petitioner are to construct the road as per the agreed terms... Any demand from local citizens need not be heard by the petitioner.”

The Court recorded that the sanctioned width was only 3.75 metres, and the respondents had already shifted seven electric posts. The Court categorically stated that remaining 24 posts did not hinder construction within sanctioned specifications, and the contractor’s claims were an afterthought.

“Ext.P10 Site Report Was Only a Recommendation — It Did Not Alter the Contractual Scope”

A pivotal argument raised by the petitioner was based on Ext.P10—a site inspection report by officials indicating water-logging, need for rigid pavement, and additional retaining walls. The Court held that this document did not alter the agreement or create enforceable rights.

“Ext.P10 can be taken only as a recommendation or opinion given by the Assistant Executive Engineer... it does not absolve the petitioner of his contractual obligations,” the Court ruled.

Limited Relief Granted — Contractor Entitled to Hearing on Final Risk and Cost Liability

While the Court dismissed the writ petition, it granted the petitioner a limited procedural safeguard, holding that before finalising the contractor’s monetary liability under the risk and cost clause, the authorities must grant him an opportunity of hearing.

“While computing the cost element as per the risk and cost clause in the agreement, the petitioner will be given an opportunity of hearing,” Justice Nagaresh ordered.

The direction ensures minimum due process, without undermining the core principle that contractual discipline must be maintained, especially in public works with budgetary implications.

Date of Decision: 02 February 2026