Road ministry to do away with arbitration for disputes in NH sector which are for over Rs 10cr

NEW DELHI: Seeking to end alleged malpractices in high-value arbitration cases, including concerns over undue influence to obtain favourable rulings, the road transport ministry will do away with the provision of arbitration for disputes in the highway sector which are over Rs 10 crore.

As per the finalised changes in contract norms, disputes valuing more than Rs 10 crore will be dealt only through conciliation or mediation. In case of no resolution, parties can take the matter to civil courts. The new norm would be applicable for all types of contracts - Build-Operate-Toll-Transfer (BOT-Toll), Hybrid Annuity Model (HAM) and Engineering, Procurement and Construction (EPC).

The changes in the contract conditions are being made based on a study of arbitration practices in the past 10-15 years. People familiar with the issue said that between 2015 and 2025, there were nearly 2,600 arbitration awards in the highways sector where contractors had raised disputes of around Re 90,000 crore and the arbitration award was little over Rs 30,000 crore in these cases. In addition, highway builders have made claims of another Rs 1 lakh crore through arbitrations.

The finance ministry in June 2024 had issued guidelines stating that arbitration as a method of dispute resolution should not be routinely or automatically included in procurement contracts and tenders, especially in large contracts. "As a norm, arbitration (if included in contracts) may be restricted to disputes with a value less than Rs 10 crore. This figure is with reference to the value of the dispute (not the value of the contract, which may be much higher). lt may be specifically mentioned in the bid conditions/ conditions of contract that in all other cases, arbitration will not be a method of dispute resolution in the contract," the guidelines said.

TOI has also learnt that govt is looking at monitoring loopholes in the system due to which contractors get favourable orders from courts after highway authorities blacklist or ban them from bidding for failures or nonperformance.
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