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  1. Union Budget 2017 – infrastructure: Industry gives dispute resolution mechanism a thumbs-up

Union Budget 2017 – infrastructure: Industry gives dispute resolution mechanism a thumbs-up

Under the new norms, the government agreed to release 75% of amounts against margin-free guarantee in situations where awards have been given but have been contested by the authorities concerned.

By: | New Delhi | Published: February 2, 2017 8:58 AM
Union Funance Minister Arun Jaitley arrives at Parliament House to present the General Budget 2017-18, in New Delhi on February 1. Union Funance Minister Arun Jaitley arrives at Parliament House to present the General Budget 2017-18, in New Delhi on February 1.

The industry has given a thumbs-up to the government’s proposal to streamline institutional arrangements for resolution of disputes in infrastructure related construction contracts, public-private partnerships and public utility contracts.

Finance minister Arun Jaitley said on Wednesday that after extensive stakeholders’ consultations, the government has decided that the required mechanism would be instituted as part of the Arbitration and Conciliation Act 1996 and an amendment Bill will be introduced in this regard.

In an effort to resolve the grievances of private sector companies in infrastructure, the cabinet cleared the new arbitration guidelines in August last year, which were aimed at helping in quicker resolution of claims pending in arbitration for years.

Under the new norms, the government agreed to release 75% of amounts against margin free guarantee in situations where awards have been given but have been contested by the authorities concerned. Also, it was proposed that all the arbitration cases will be resolved within a year.

Industry watchers say, that the move to institutionalise the arbitration mechanism is a step forward from here. Abhaya Agarwal, partner and PPP leader, EY India said that across the world arbitration is always a separate institution with professional arbitrators and judges involved in the process.

“It is a fact-based mechanism and the advocates and judges presiding over the matters require technical expertise, this sort of an institutional approach lacks in India as a result of which dispute resolutions take years to finish and the outcomes often are either compromises or are further appealed in higher courts”.

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On the last count, the total amount under arbitration for the industry currently stands at R1 lakh crore. Nearly R70,000 crore has been disclosed by 28 public sector units as contingent liabilities in the Annual Report 2014-2015. Arun Lakhani, chairman and managing director, Vishvaraj Infrastructure said that the new dispute resolution mechanism for quick dispute settlements will improve the ease of investing in India and bring in efficiency.

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