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Road Minister asks wings to take quick steps to fix all disputes

Close on the heels of steps to revive construction sector, the road transport and highways ministry has asked all its wings to act quickly to resolve disputes ailing the industry, which includes a call for developers to transfer cases under the new Arbitration Act.

By: | New Delhi | Published: September 21, 2016 8:09 PM
The ministry has asked the National Highways Authority of India (NHAI), National Highways and Infrastructure Development Corporation (NHIDCL) and its agencies to expedite steps to resurrect the construction sector. (Reuters) The ministry has asked the National Highways Authority of India (NHAI), National Highways and Infrastructure Development Corporation (NHIDCL) and its agencies to expedite steps to resurrect the construction sector. (Reuters)

Close on the heels of steps to revive construction sector, the road transport and highways ministry has asked all its wings to act quickly to resolve disputes ailing the industry, which includes a call for developers to transfer cases under the new Arbitration Act.

The Cabinet last month, chaired by Prime Minister Narendra Modi, allowed contractors to move to the new speedier arbitration process, approved release of 75 per cent of the amount in dispute against bank guarantee and provided for a conciliation board comprising independent domain experts in new contracts.

The ministry has asked the National Highways Authority of India (NHAI), National Highways and Infrastructure Development Corporation (NHIDCL) and its agencies to expedite steps to resurrect the construction sector.

“In case of contracts/concessions where the process of arbitration was initiated under the pre-amended Arbitration Act, the implementation agency may seek the consent of the contractor/concessionaire to transfer the pending cases under the amended Arbitration Act, wherever possible,” the ministry has said in a communication to its wings.

The shift to the amended Act is expected to make the arbitration process more cost effective and help in settlement of the disputes in a timely manner.

It said that in case of claims where the implementation agency has challenged the arbitral award already announced, 75 per cent of the award may be paid by it to the contractor or concessionaire against bank guarantee without prejudice to the final order of the court in the matter under challenge.

“The payment may be made into a designated escrow account with the stipulation that the amount so released will be used, first for payment of lenders’ dues, second for the completion of the project and then for completion of other projects of the same implementation agency, as mutually agreed or decided,” the communication said.

Any remaining balance in the escrow account subsequent to settlement of lenders’ dues and completion of the projects of the implementation agency may be allowed to be used by the contractor or concessionaire with prior approval of the lead banker and the agency, it said.

It said that in case the subsequent court order requires refund of the money paid by an executing entity against a bank guarantee, the amount shall be refunded by the developer along with appropriate interest.

Steps taken by the government to revive the construction sector will likely release Rs 39,366 crore to contractors and concessionaires, the NITI Aayog that operationalised the measures announced by the Cabinet Committee on Economic Affairs (CCEA) has said earlier this month.

On August 31, CCEA has allowed contractors to move to the new speedier arbitration process, approved release of 75 per cent of the amount in dispute against bank guarantees and provided for a conciliation board comprising independent domain experts in new contracts.

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