Enforcing timelines on government arbitration long overdue
Given that close to R1.5 lakh crore of private money is locked up in disputes with various arms of the government such as the National Highways Authority of India, the government has done well to work on a new public contracts dispute settlement Bill which, if all goes to plan, can be introduced as early as the winter session of Parliament. Early passage of the Bill is critical since most infrastructure players in the country are badly leveraged—so any chance they have of being able to invest more in new projects is largely contingent upon them being able to raise the necessary funds for their share of equity as well as to pay off existing bank debt. Since the biggest problem in any contractual dispute is the time it takes, the Bill seeks to put strict timelines for resolution. In an ideal situation, the arbitration and conciliation clauses in all contracts should be able to take care of the problem, but the mounting dues makes it clear this is far from happening. The main reason for this is that, more often than not, government departments simply refuse to appoint arbitrators for months to delay the process. When this happens, the only recourse for the private firm is to appeal to the courts, a process that can also take very long.
This is what the Bill is seeking to fix by constituting specialized benches in various cities whose job will be to ensure speedy adjudication of disputes in contracts involving the government and private contractors in their geographical areas. If either party, the draft Bill says, fails to appoint an arbitrator within 21 days of a notice for arbitration, the main tribunal or its benches—depending on where the case is filed—will appoint an arbitrator from its panel of arbitrators. While the arbitration panel is normally expected to hold daily hearings, a maximum of 90 days has been allowed for an arbitration award to be given from the day the original appeal was referred to it. Since it is likely one or both parties will challenge the award at the tribunal, a total of 180 days has been laid down for this process as well—180 days from the time the case was first referred for arbitration. Given the spirit behind the Bill as well as the fact that its contents are not as contentious as, say, the Bill to allow 49% FDI in the insurance sector, is to be hoped Parliament doesn’t dilly-dally over it, or the government in constituting the tribunals. Once that is done, all pending proceedings can quickly be transferred to various tribunals.