Under the revised contract norms, disputes exceeding Rs 10 crore will now be resolved only through conciliation or mediation. If these mechanisms fail, the parties will have to approach civil courts for resolution.
The new rules will apply across all major highway contract formats, including Build-Operate-Toll-Transfer (BOT-Toll), Hybrid Annuity Model (HAM) and Engineering, Procurement and Construction (EPC).
The changes, according to TOI sources, follow a review of arbitration practices in the highway sector over the past 10 to 15 years. During the period between 2015 and 2025, there were nearly 2,600 arbitration awards in the sector, where contractors raised claims of about Rs 90,000 crore. Of this, arbitration awards amounted to a little over Rs 30,000 crore. In addition, highway developers have made claims of another Rs 1 lakh crore through arbitration proceedings, TOI reported.
The move is in line with guidelines issued by the finance ministry in June 2024, which advised against the routine or automatic inclusion of arbitration clauses in procurement contracts, particularly in large-value projects. “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). It 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.
The Times of India said that it has learnt that the government is examining ways to plug loopholes that allow contractors to secure favourable court orders after being blacklisted or barred from bidding by highway authorities for failures or non-performance.
(With TOI inputs)
