1. Road ministry to set up authority to resolve contract disputes

Road ministry to set up authority to resolve contract disputes

Dispute Settlement Authority to have adjudicatory functions and punitive powers

By: | New Delhi | Published: January 2, 2016 12:38 AM

Convinced that the current mechanisms to resolve contractual and other disputes in the highway sector are far from satisfactory, the ministry of road transport and highways (MoRTH) is setting up a Dispute Settlement Authority, which will also have adjudicatory functions and punitive powers.

The proposed body could consist of not less than four members and be headed by a retired judge of the Supreme Court or retired chief justice of a high court, an official source told FE.

Stating that the highway projects worth Rs 27,000 crore are stuck in disputes between developers and the National Highways Authority of India (NHAI), the source said the proposed authority would also define admissibility criteria of disputes and differences for adjudication. “The authority would pronounce awards that can only be challenged in the Supreme Court,” the source said.

The Kelkar Committee on PPP projects in the infrastructure sector had stressed the need for improving dispute resolution. “Dispute resolution mechanisms are slow and not very well developed, often derailing project timelines and freezing funds. An independent empowered regulatory mechanism is the need of the hour to address contractual disputes or help in arriving at a fair solution in case of changed circumstances, in an expeditious manner.”

The present dispute resolution framework in the MoRTH primarily consists of four stages — mediation, conciliation through dispute review board for EPC projects and through discussion between NHAI chairman and the chairman of the Board of Directors of the concessionaire for BOT projects, arbitration and courts of law.

Over and above this, in certain cases as per request of the concessionaire, contractual procedure for amicable settlement is also invoked for dispute resolution.

However, despite a mechanism for one-time amicable settlement involving the Independent Settlement Advisory Committee (ISAC), the three-CGM committee for the settlement of disputes at NHAI and the formation of a Society for  Affordable Resolution of Disputes (SAROD) for affordable arbitration, there has been only a partial success in addressing the needs.

Among the members of the proposed dispute settlement authority, at least one each having expertise in technical, administrative and finance areas, could be selected through institutionalisation of a search-cum-selection committee. The Chairperson would be vested with the power to invite one or more subject experts with specialised knowledge and experience in specific areas. “The decision of the authority by a majority of the members may be binding in case of any disputes,” the source said.

Another source said that all the proceedings of the authority may be deemed to be judicial proceedings as per the Indian Penal Code and the authority may be deemed to a civil court as per the extant code of criminal procedure.

Public private partnership projects in the highway sector are faced with many problems  including over-leveraged debt and paucity of equity. The Modi government has expedited project awards and implementation taking recourse to the conventional EPC model. It is also trying to revive investor interest in PPP projects by designing projects in a more investor-friendly manner and employing concepts like hybrid model where large parts of the project risk is with the government.

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