Clearing the highway logjam

There is a need for an independent third-party dispute resolution mechanism to reduce pendency of cases

Expressing concern over the long-pending disputes in the highway sector, the Kelkar Committee has underlined the need for an independent third-party resolution of disputes in a time-bound manner.

The move is likely to reduce the high amount of risks, resulting from the current impasse between the concessionaires and the National Highways Authority of India (NHAI).

The committee, headed by former finance secretary Vijay Kelkar, was tasked with finding solutions to the long-pending disputes arising in public-private partnership projects and kick-start investments in infrastructure.

It has recommended an independent empowered regulatory mechanism for addressing contractual disputes and helping in arriving at fair solutions. The proposed mechanism will also have adjudicatory functions and punitive powers. Experts advocate the need for all proceedings of the authority to be deemed judicial according to the Indian Penal Code and that the authority be deemed a civil court. They also advocate that the decision of the authority be made binding in case of any disputes. The current mechanism for a one-time amicable settlement involving the Independent Settlement Advisory Committee (ISAC) has only been a partial success, say legal experts. In certain cases, the amicable settlement is invoked by the concessionaire even as it pursues the legal course by going back to the court.
 
The Kelkar Committee, too, points to the concerns expressed by the developers that settling of disputes at an amount far lower than originally claimed is often driven by their desperation to reach a conclusion and unblock stuck investments. According to industry players, there are a number of pending claims, arbitration matters and litigations before various courts in respect of disputes raised by contractors and concessionaries of EPC (engineering, procurement, construction) and BOT (toll) projects against the NHAI. Some are even over a decade-old.

STAGES IN DISPUTE RESOLUTION
Provision in EPC contract Dispute is resolved by mediation by supervision consultant of the project If the engineer concerned fails to resolve the dispute, it is transferred to a dispute review board If the recommendation is not acceptable, it is referred to the arbitration tribunal If the arbitration award is not acceptable to either party, it may be challenged in court	Provision in BOT contract It is settled by mediation of an independent engineer If the independent engineer fails, it may be referred to respective chairman of NHAI and the concessionaire If the dispute is still not resolved, it is referred to the arbitration tribunal If the arbitration award is not acceptable to either party, it may be challenged in court

In a reply to the Lok Sabha in April last year, minister of state for road transport and highways Pon Radhakrishnan said road projects worth Rs 25,399 crore were stuck in disputes between developers and the NHAI. According to the provisions of the contract or concessions agreements, the settlement of disputes is done through the dispute resolution board (DRB) or the disputes resolution expert (DRE) mechanism at the initial level and finally by arbitration under the Arbitration and Conciliation Act, 1996.

The award of arbitral tribunals (AT) is often challenged before the courts of law, resulting in pending adjudication. Consequently, the pendency of disputes and delay in settlement of the claims result in huge financial liabilities on the NHAI, including substantial interest component awarded by the ATs in their awards.

Keeping in view the huge pendency and for speedy redressal of complaints, the NHAI constituted ISAC in 2013, a settlement process involving three steps. In less than two years - till December 2015 - it has resolved 102 cases, and the settlement amount was Rs 17,000 crore. Further, it has received requests for redressal of around 100 cases from concessionaries.

However, Ramesh Vaidyanathan, managing partner, Advaya Legal, says, "The current mechanism is not independent and the decision is not binding. There are instances where the concessionaries on being unsatisfied by the decision, go back to the courts and pursue the litigation. So, the need of the hour is to set up an independent mechanism for speedy redressal of disputes."

The ISAC is serviced by the legal cell. Initially, the aggrieved party or the concessionaire has to make a request before the NHAI that it wants her case to be pursued before the ISAC, even if the matter is pending before the court.

Once the request is made, a committee comprising three chief general managers of NHAI, nominated by the chairman, carries out the negotiations. The matter is then placed before the ISAC consisting of a retired high court judge and two other members having sufficient experience in administration, finance and technical fields.

The ISAC can agree with the three CGMs committee or can call the contractor or concessionaire for clarification and negotiations. It also examines the technical and financial aspects of each case for arriving at an amicable settlement. The ISAC may also seek clarifications and negotiate with the parties on any specific claim.

The recommendation of the ISAC is placed before the board of the NHAI for approval. If no negotiable settlement is arrived at, the matter is pursued legally according to the contract.

To facilitate ISAC operations, the technical divisions at the headquarters examine and evaluate the cases, which are referred to the three CGMs committee.

The decision of the authority by a majority of the members is considered binding in case of any disputes.

Since NHAI has recently allowed extension of concession period for all the BOT projects that have been languishing during the construction period due to causes not attributable to the concessionaire, officials expect the number of cases to fall in near future.