Conciliation helps NHAI resolve 66 cases of construction claims in 2 years

The National Highways Authority of India (NHAI) has settled 66 cases of highway construction claims through a conciliation process over the last two years. 

The exercise, in fact, has benefitted the authority as the conciliation process helped settle arbitration claims at a fourth of the demands raised by concessionaires.

NHAI is taking the lead in conciliating matters and working towards resolving disputes through conciliation. “We are asking all contractors or concessionaires to come for conciliation for faster settlement of claims,” a top NHAI official told Business Standard.

So far, 134 cases have been referred to the Conciliation Committees of Independent Experts (CCIE). Of this, 66 claims by contractors worth Rs 16,092.63 crore and counter claims by NHAI worth Rs 5,977.83 crore have been settled for an amount of Rs 5,642 crore during the last two years.

At the beginning of the year, arbitration claims worth Rs 70,000 crore were made by construction companies.

“Most of those claims were exaggerated but the actual claims are Rs 20,000 crore. Now, with the conciliation process, claims are happening at one fourth of the total demand,” said the official quoted above.

The net outgo for NHAI, under the conciliation process, will be Rs 20,000 crore. The authority claims that almost every concessionaire has agreed to arbitration as it leads to faster resolution and subsequent release of funds.

Experts feel that debt resolution, Covid-related liquidity concerns, and a long-drawn legal process are some reasons pushing firms to pursue conciliation. At present, HCC, Sadbhav Engineering, Ashoka Buildcon and Infrastructure Leasing & Financial Services (IL&FS) are pursuing this process.

Besides, conciliation is an easier and fairer process for companies that already face liquidity issues and cannot offer a bank guarantee to avail 75 per cent of arbitration awards at a later stage.

At the beginning of the calendar year, NHAI started the conciliation process by settling an arbitration claim worth about Rs 650 crore with IL&FS for nearly Rs 200 crore.

NHAI decided to settle the claim for less than 70 per cent of the Rs 800-crore demanded by the company through an arbitration process.

The authority had, in turn, asked for Rs 150 crore from the company, which worked out to a net outgo of Rs 650 crore.

The conciliation exercise is being conducted by the NHAI to deleverage its balance sheet.

In March 2019, the ministry of road transport and highways issued a set of guidelines for reviving stuck national highway projects.

According to the guidelines, a mutually-agreed pact between the parties for project awarded under the engineering, procurement, construction (EPC) mode — that qualify as stuck — could be reached in order to foreclose the disputes.