Infrastructural contracts are often fraught with delays in completion, or breach of contract by the concessionaire or the authority. Supplementary Agreements (SAs) are commonly used in such cases to renegotiate the original contract and agree to new terms, or to waive claims against the other party. The terms of these agreements are often heavily in favour of the authority, particularly requiring the concessionaire to waive any or all claims it could raise against the authority under the original contract. This blog deals with SAs wherein the concessionaires agree, under economic duress, to waive existing or outstanding claims against the authority, or to accept a full and final settlement of a quantum lesser than their original claim. It discusses the factors the concessionaire needs to establish to demonstrate the presence of economic duress, and explores how the concessionaire can establish these factors. 


Though the Indian Contract Act does not explicitly lay down duress as a factor that vitiates free consent, the Delhi High Court has recognisedeconomic duress or economic coercion as a facet of undue influence under Section 16 of the Act. The Supreme Court has recognisedduress, includingeconomic duress, as a common law remedy applicable even when the parties do not have unequal bargaining power. The concessionaire will have a remedy if its decision to waive a claim or accept a lower settlement was vitiated by an undue pressure of financial distress, and where it had no practical alternative but to sign the SA.

Authorities like the National Highways Authority of India (NHAI)explicitly require the concessionaire to declare in the SA that it “voluntary, consciously and wilfully” waives any existing claim it could raise against NHAI in any court or arbitral tribunal, if that claim is with respect to issues that are the subject matter of that SA. However, this declaration still does not preclude the concessionaire from bringing and establishing a claim it has waived, if it did not freely consent to such a waiver.

This blog charts the process of challenging the validity of an SA on the basis of economic duress, by broadly delineating the issue under two heads: establishing a prima facie case, and establishing economic duress on the merits of evidence on record. Both heads are further divided into relevant heads, to fully engage with possible counter-arguments and defences, and provide an exhaustive guide of the factors to be considered by the concessionaire while arguing economic duress.

A. Prima Facie Case

Concession Agreements almost always contain a clause referring the parties to arbitration in case of a dispute. If a dispute regarding the validity of an SA is referred directly to an Arbitral Tribunal, the Tribunal itself decides whether the SA can be disputed. However, if a party approaches the court to appoint arbitrators as per Section 11 of the Arbitration Act, the Chief Justice of the court or its designate mustfirst decide whether there is a prima facie case of economic duress.

A concessionaire must establish a prima facie claim of duress byplacing evidence on record. If the concessionairefails to establish a prima facie claim, or if theclaim does not seem credible, the court cannot refer the dispute to the arbitration tribunal. Additionally, the tribunal can rule on the question of duress only if the courtspecifically leaves this question to its discretion while referring the dispute. It is also important to note that though an arbitral tribunal must evaluate claims within the framework of the contract itself, duress is a factor that vitiates the validity of this contract, rendering the tribunal competent to examine the claim of duress.

Thus, the establishment of a prima facie claim may be further subdivided into two stages: placing evidence on record that is a prima facie indication of duress, and the concessionaire’s actions that establish the claim as a credible one.

1. Prima facie indications of duress

Establishing a prima facie case would require the concessionaire to establish that there exists sufficient evidence to merit a thorough examination of its claim. This section explores the kind of indications that the court has accepted as sufficient evidence to establish duress as a legitimate claim.

InNational Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., the Supreme Court held that a prima facie case may be said to be established when the concessionaire’s consent cannot be assumed to be voluntary. Such voluntariness may be considered vitiated if the authority only partially admits the concessionaire’s claim for payment, and refuses to release even the partial amount until the concessionaire issues a discharge voucher accepting this partial payment as full and final consideration. This illustration is especially applicable when, in addition to threatening not to release the partial amount, the authorityunilaterally reduces the concessionaire’s claim and does not furnish any reason for such deductions.

Requiring the concessionaire to issue ano claim certificate even before it completes its work and the authority measures this work is a prima facie indication of duress, especially because the authority often delays payments unless the concessionaire issues a discharge certificatein advance. When the authorityfails to prepare bills before the SA is executed, or where bills cannot be prepared because the price index is not available, the court has concluded there to be a prima facie case. The court has also held that releasing the security deposit and bank guaranteeonly after the concessionaire signs an SA and an unconditional no claim certificate is grounds for a prima facie case of duress.

Additionally, when thefull and final settlement is itself disputed, and when a proper examination of the evidence on record is necessary to determine the validity of the SA, the dispute can be admitted to the tribunal.

2. Concerns about the credibility of the claim

The Court has recognised that once a contract has been validly accepted, it is unfair to allow a party to wriggle out of itwhen the contract is no longer beneficial to it in the prevailing facts and circumstances. Thus, to protect the sanctity of contracts and prevent frivolous claims from entering lengthy and expensive proceedings, the courts have devised a second prong that needs to be satisfied for the concessionaire to establish a prima facie claim. This prong requires the concessionaire to establish that its claim is credible, and not merely an afterthought or an attempt to stall the proceedings. This section explores actions that hurt the credibility of the concessionaire’s claim.

The court has ruled that a concessionaire’s claim would lack credibility if it approaches the court with a claim for expenses incurred during the execution of the contractmuch after the final bill is settled, and unsupported by other evidence. When the concessionaire raises a claim of duressonly during oral arguments, fourteen months after the last payment, the court believes the claim to be lacking credibility. If the concessionaire attempts to conceal the existence of the SA from the court, and takes a plea of duressonly when the authority brings the SA’s existence to light, despite not having protested to the SA until then, its claim will be held to lack credibility.

However, the establishment of this prong may not be strictly necessary. In a case where the concessionaire raised the claim of duressonly in the rejoinder, thus hurting its credibility, the court still proceeded to examine the tenability of the claim on its merits. In another case where the concessionaire alleged economic duressonly in its Statement of Claim, the tribunal nevertheless permitted it to proceed with the claim because the concerned authority had allotted the concessionaire’s work to another party before foreclosing the original contract with this concessionaire.

Thus, while establishing a prima facie case of duress, the concessionaire must establish credible indications that its consent to the SA was vitiated by economic duress.

B. Merits of the Evidence on Record

Once a prima facie case has been established, the court or tribunal examines the validity of the claim of duress on its merits, using factors established under English common law.

Indian courts follow the test laid down inUnikol Bottlers Ltd. v. Dhillon Kool Drinks, as per which four factors must be considered while determining the voluntariness of the concessionaire’s consent while signing the SA:

1. Whether the concessionaire protested before or soon after the agreement;

2. Whether the concessionaire took any steps to avoid the contract;

3. Whether there was any alternative course of action or alternative remedy the concessionaire could practically have pursued, and whether it did in fact pursue or attempt to pursue this action or remedy; and

4. Whether the concessionaire conveyed benefit of independent advice.

Part B examines these factors in detail. However, since a claim of economic duress falls under undue influence, a concessionaire must primarily provide proof of its financial distress, and evidence that it consented to the SA as a direct result of the authority’s undue pressure.

1. Proof of the concessionaire’s financial distress

This section explores various factors the concessionaire may use to prove that it was facing severe financial difficulties that made him vulnerable to the power of the authority.

A concessionaire can indicate its financial distress by repeatedly sending reminders to the authority to release outstanding payments, and by issuing a no claim certificate only withthe disclaimer that the issue is under duress because it cannot afford to liquidate its dues in such a manner. When a prima facie case of duress is established and the concessionaire supplies further evidence to establish its claim, but when the authority refuses to engage with this evidence or furnish documents it has been directed to furnish, the court or tribunal may drawadverse inferences on the facts and circumstances of the case. It may thus hold the concessionaire’s claim of duress to have been established.

When the authority approves the final bill more than three years after the completion of the work, and simultaneously asks the concessionaire to issue a no claim certificate, the Court maytake this delay as proof of the concessionaire’s great financial distress. This evidence of duress may be corroborated by the fact that the concessionaire withdrew its no claim certificate at the first opportunity to do so after receiving the balance amount.

When the authority was aware of the concessionaire’s financial distress and its obligations to other parties, and when the authority still fails to reimburse the concessionaire for bills or charges it has accepted as its responsibility to reimburse, despite repeated reminders by the concessionaire, and when the authority draws up the SA only after the issue of a show cause notice, there can beno doubt as to the validity of the duress claim.

However, when the concessionaire raises a dispute against the SA fifteen months after its execution, does not mention additional expenses and losses at the time of or immediately after settling the final bill, and producesno other evidence to back its claim, it cannot validly claim duress.

Here it is important to note that the mere fact that the concessionaire was having financial difficulties does not mean that the authority coerced him into entering a full and final settlement of a lower amount than the original claim. In such a scenario, if the concessionaire does not plead to the authority that it is signing the settlement under duress, if it withdraws its original claim without protest, and if it does not pursue a legal remedy despite having ongoing litigations with the authority,it cannot be said that it was operating under duress.

2. Direct causation between the authority’s undue influence and the concessionaire’s consent

When a concessionaire has established that it was in severe financial distress at the time of consenting to the SA, it must further establish that the undue influence exerted by the authority was directly responsible for its consent to the SA. it can establish this by supplying proof of its active protest to the agreement or its terms, and by demonstrating that it was left with no practical alternative but for consenting to the SA. Since these prongs constitute two of the four prongs needed to establish economic duress under English common law, they will be discussed in detail hereafter.

3. Protest against the SA

This prong requires the concessionaire to establish that it actively protested against the SA and its terms before, during, or soon after signing the agreement. Thetribunal considers protests raised at the time of execution of the SA, refund of the bank guarantee, preparation of the final payment statement, receipt of cheque, or even immediately after this receipt.

When a concessionaire accepts the partial amount from the authority, it often does so tooffset its liabilities towards banks and financial institutions. its quantum of investment is often so huge that it cannot afford not to take the partial amount. Thus, its acceptance does not imply free consent.

However, if the authority explicitly states that encashing the partial amount would amount to full and final consent, and asks the concessionaire to return the cheque if it does not find the settlement acceptable, a claim of duress may proceed only if the concessionaire communicates its protest or objectionbefore encashing the cheque. If it does not communicate its objection or protest before encashing the cheque, the court will assume that itchanged its mind only after consenting to the settlement. A situation where the authority merely writes a cheque in full and final settlement, without any instructions on its manner of acceptance, is different. Here,it is sufficient for the concessionaire to show that it did not pass a receipt in full satisfaction and prosecuted the authority to obtain the balance amount, and thus did not accept the cheque in full and final settlement.

Prima facie, it seems easy for the concessionaire to make protests to the terms of the SA before signing it. However, it is important to note that authorities ask for a supplementary agreement to ensure that the concessionaire waives its right to raise claims against the authority. If the concessionaire records its protests before signing the agreement, the authority would obviously note that the concessionaire is giving himself leeway to raise a claim later, and thus refuse to make the payments so necessary for a concessionaire facing a shortage of funds. A concessionaire would thusnot wish to incur a risk of losing even the partial amount offered, and would choose not to protest. Courts take these considerations into account and accept protests made even after the SA is signed or after the receipt of the cheque for the partial amount.

Additionally, courts accept proof of the authority withholding payment after the execution of the SA as a ground to establish duress to protect concessionaires. In a case where the concessionaire received full and final payment twelve days after the execution of the SA, the security deposit and earnest money twenty days after execution, and the FDR amount twenty seven days after execution, the Arbitrator used these delays ascorroborative evidence of duress. It is notable that these delays were in addition to the eighteen month gap between the completion of work and the execution of the SA.

Additionally, it is important to note that protests after the agreement is signed or after receipt of payment must be immediate or at the earliest possible instance. As discussed previously, when a claim of duress is raised only during oral arguments, fourteen months after the last payment, the court believes the claim to be anafterthought. If the concessionaire attempts to conceal the SA’s existence from the court, and pleads duressonly when the SA is brought to light, the court will hold the plea of duress to be an afterthought.

4. Steps taken to avoid the SA

With respect to this factor, English courts examine whether the concessionaire challenges the validity of the SA in ongoing litigations before the termination of the claim. This factorwill not be fulfilled if it is evident that the concessionaire had no issues with the validity of the agreement before its termination, and till that point has taken full advantage of the contract. Thus, this factor is interconnected with the previous and the next factor, because raising protests against the validity of the agreement is an alternative course of action the concessionaire could pursue. 

5. Alternative courses of action

This prong is a manifestation of the but for test mentioned under the second subhead of this part. The but for test helps establish a causation with respect to duress, to the extent that the concessionaire would not have entered into the contract but for the undue pressure exerted on it by the authority. The concessionaire must establish here that there were no practical alternatives available to it, or alternative remedies it could pursue instead of signing the agreement.

The lack of availability of a reasonable practical alternative for the concessionaire means that it must intentionally submit to unfair contracts by the authority. Establishing a lack of practical alternatives but for signing the SA thus goes a long way in proving a claim of duress.

A concessionaire can prove that it did not have a practical alternative to signing the SA by establishing lack of access to independent advice, lodging protests to the SA, or by demonstrating its intention to pursue legal remedies to recover the amount under the original claim. In some cases, the concessionaire’s lack of such action will not act against it if its conduct indicates that its actions were only in pursuance of obtaining its claim as quickly as possible in a time-sensitive scenario.

The concessionaire must cogently establish that it had to pay off creditors who were pressing it for payment, andbut for the amount receivable from the authority, it would have been unable to do so. When the authority does not release payments for eleven months after the final bills are verified, and even then only after the no claim certificate is signed, the concessionaire can establish that it hadno alternative but for signing the certificate.

A concessionairewill be held to have a reasonable practical choice if it is acquainted with the activities that are the subject matter of the dispute, is aware of technical and procedural glitches it may face when working with governmental authorities, and has unequivocally stated its willingness to comply with the authority’s instructions despite unfavourable clauses. 

6. Benefit of independent advice

With respect to this factor, English courts have held that if the concessionaire is a flourishing concessionaire and has a number of contracts, it will be assumed that it had access to independent legal advice from the best professionals and therefore understood the practical implications of the contract, and if itthen did not raise any objections it cannot claim duress.  However, this factor cannot be an absolute requirement because mere access to legal advice does not increase the practical alternatives available to the concessionaire.


Establishing economic duress may be a lengthy process, but the steps demarcated by Indian courts ensure that a concessionaire with a legitimate claim can pursue and establish its claim in a court or arbitral tribunal, and obtain relief under Indian law.

The concessionaire must initially establish sufficient grounds of the presence of duress to merit an in-depth examination of its claim, and show that its claim is not an afterthought or uncredible in any other way. Once it establishes a prima facie case and causes its claim to proceed to a court or tribunal, the most important factors it must prove are that it was in financial distress, it had no practical alternative left to pursue but for consenting to the agreement, and that it actively took steps to protest and otherwise avoid signing the agreement. The threshold for such establishment is reasonable, and after such establishment, the onus lies on the authority to show that the concessionaire’s consent was not vitiated by duress.

The doctrine of economic duress is thus perhaps the most equitable doctrine in Indian infrastructural law.

About the Author  

Ms. Adya Bajpai is a 3rd Year Student at the West Bengal National University of Juridical Sciences, Kolkata.

Editorial Team  

Managing Editor: Naman Anand 

Editors-in-Chief: Jhalak Srivastav & Aakaansha Arya 

Senior Editor: Muskaan Singh

Associate Editor: Abhinandita Biswas

Junior Editor: Tisa Padhy 

Preferred Method of Citation  

Adya Bajpai, “Charting the Scope of Economic Duress in Supplementary Agreements” (IJPIEL, 21 January 2022).  


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