NHAI to institutionalize arbitration process

October 30, 2013

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The arbitration process for disputes arising between the National Highways Authority of India and national highway developers is all set to get institutionalized.

With a view to ensure that disputes with highway developers do not drag on indefinitely and also to regulate the fee charged by arbitrators in such cases, the nodal agency for development, maintenance and management of national highways recently registered a society under Societies Registration Act, 1860.

The decision to institutionalize the arbitration process has been taken in accordance with the recommendation of a one-man committee that was constituted earlier to look into the issue of dispute resolution in the highway sector.

Development of National Highways – Target & Achievement
Year	Physical (in KMs)		Financial (Rs Crore)
2010-11	7840.97	6464.62	25526.80	19617.34
2011-12	7496.00	7523.00	31869.19	29605.00
2012-13	7566.60	8060.79	29438.05	19499.76

The recently formed entity, named ‘Society for Affordable Redressal of Disputes’, will function under a governing council consisting of four members each from the NHAI and the National Highways Builders Federation. In addition to laying down comprehensive guidelines for conducting arbitration proceedings at a reasonable cost, it will aim to speedily resolve disputes between the NHAI and highway developers through various ways and means including engagement of experts in the field.

Dispute redressal at NHAI so far

Usually dispute redressal mechanism for settlement of claims of private contractors involved in the National Highway projects in the country is included in the concession agreements between the concessionaire and the National Highways Authority of India (NHAI). As per provisions of the concession agreements the disputes are resolved through conciliation, Dispute Resolution Board (DRB) and Arbitration Tribunal (AT). For faster resolution of disputes pending in NHAI, an Independent Expert Group (IEG) headed by former Chief Justice of High Court has been constituted by the NHAI on the recommendations of the BK Chaturvedi Committee. The IEG has started functioning since April, 2012 and has issued recommendation in 34 cases.

Till March 2013 a total number of 135 cases are pending before Arbitral Tribunal involving an amount of Rs. 8658.87 crores claimed by the Contractors/Concessionaires and ` 1094.79 crores, as claimed by the National Highways Authority of India (NHAI) respectively. Another 79 cases pertaining to Arbitration Awards are pending before various Courts of Law involving an amount of ` 2305.71 crores claimed by Contractors/Concessionaires and ` 99.78 crores claimed by NHAI, respectively.

The arbitration process followed at present leads to undue delays in dispute resolution placing heavy burden both on the NHAI as well as highway developers. There is also no cap on the fee that can be charged by arbitrators.

With the number of disputed claims steadily increasing in case of completed highway projects, the amount is likely to reach Rs. 60,000 crore in the next three years. It is expected that institutionalizing the arbitration process and inclusion of a clause to this effect in concession agreements and contracts will help effectively and expeditiously resolve disputes between the NHAI and highway developers.

Once the institutionalized arbitration process is adopted, disputes arising in future projects will be channeled through the society for arbitration. The terms and conditions in the contracts and concession agreements have to be amended accordingly for the purpose. For contracts and concession agreements already signed, going through the society for arbitration will be optional.