New Delhi: India’s highways authority proposes to set up an independent high-level committee that can look into and resolve arbitration claims amounting to nearly Rs10,000 crore by road contractors.
The National Highways Authority of India (NHAI) suggests the panel include at least one member from the authority and be chaired by a former Supreme Court judge, said an official close to the development. He did not want to be named.
Long-pending arbitration cases often result in road projects being delayed, especially if the dispute is over payments for the early stages of construction, analysts say. The cases could also hurt cash flows for contractors, especially smaller ones who often use payments from one project to start financing another.
Slow track: A July photo of a flyover being built between Delhi and Faridabad, Haryana. Rajkumar / Mint
The NHAI official said the main reason for the piling up of arbitration cases was that highway authority officials often chose to contest all cases rather than be questioned by the vigilance department for approving the arbitration amounts.
“There is a need to make the committee’s decision binding,” he said. Under the current system, such cases are first referred to a dispute resolution board.
“There is a dispute settlement, after dispute settlement there is arbitration, after arbitration it goes to the courts. And this has to be resolved. Equitably resolved. You cannot have a system where everything is in court,” roads minister Kamal Nath had said in a 9 July interview with Mint.
He added that about Rs10,000 crore was tied up in arbitration cases. Highway authority officials say not all the claims may be justified, as developers sometimes inflate their claims to factor in delayed decisions and other costs.
Analysts, too, say the cases have piled up because highway authority officials, especially those at the lower level who act as the first step in the dispute resolution mechanism, are often unwilling to authorize payments even in valid cases, fearing questions from the vigilance department.
These cases are then escalated and referred to arbitration panels, and sometimes are dragged up to the Supreme Court if the highway authority decides to contest unfavourable decisions by lower courts.
“Obviously they like to play it safe... (However), there is a need to look at the cases more positively,” said another highway official, who too didn’t want to be named.
The biggest concern for road developers is the inconsistency in government policy on arbitration and dispute resolution, said Murali M., director general of National Highway Builders Federation, a trade body.
The government should create proper regulatory mechanisms by setting up an independent tribunal exclusively for handling these issues and whose decisions would be “full and final, and binding for all”, he added.
Siddhartha Das, an infrastructure analyst with audit and consulting firm Ernst and Young Pvt. Ltd, said making the decision of any such committee binding on NHAI would go a long way in reducing the number of cases. Road developers are hoping for a fast-track judicial or semi-judicial system that would ensure work is not delayed, he added.
“The private side will not go into litigation unless it is an extreme case, unlike the public side. All they have to do is to make it binding on the NHAI,” Das said.