NHAI and NHBF Join Hands to Lower Arbitration Costs

A dispute settlement committee set up by the National Highways Authority of India (NHAI) has resolved 124 arbitration claims on the authority at just 10% of the original claim value, saving both litigation costs and time for NHAI as well as private contractors. Out of the cases taken up by the committee, only 17 cases involving nine companies remained unresolved. Out of total disputes of over Rs 20,000 crore, the committee succeeded in resolving pending claims and financial disputes worth Rs 9,395 crore for just Rs 910 crore. 

Buoyed by the success of the committee, which was set up in December 2012, The NHAI and National Highway Builders Federation (NHBF), the developers’ body, have together floated another body – The Society for Affordable Redressal of Disputes (SAROD).

While the society would work largely within the principles of the current dispute resolution framework, such as the International Centre for Alternate Dispute Resolution (ICADR) mechanism and the Indian Arbitration Act, it would deviate while attempting to limit the expenditure on arbitration, according to M Murali, Secretary General, NHBF.

The present mechanism allows arbitrators to define their own fees and there are cases of arbitrators asking for exorbitant fees. In a recent case involving a dispute regarding the Panipat-Jalandhar national highway, the arbitrators structured their fees in such a way that the fee payable to each arbitrator a day could go up to Rs 8 lakh, according to NHAI, which has estimated that the fees to resolve this dispute, based on the ICADR framework, would be Rs 32 crore, while that through the SAROD framework would be below Rs 50 lakh.

Also, NHAI and road developers feel that disputes solved through ICADR do not incentivise faster decisions or provide disincentives for delayed decisions.