Contract Dispute Management

Construction contract dispute management in India involves various methods to resolve disputes efficiently, given the complex and time-sensitive nature. In India it relies heavily on ADR methods, with arbitration being the most favoured due to its efficiency and expertise. Recent legislative reforms aim to enhance the speed and effectiveness of dispute resolution processes.  Here’s an overview of the key mechanisms and strategies used:

Alternative Dispute Resolution (ADR):

Arbitration:

This is the most preferred method for resolving construction disputes in India. It is governed by the Arbitration and Conciliation Act, 1996, which has been amended several times to enhance efficiency. Arbitration allows for the selection of industry experts and offers a faster resolution compared to litigation.

Mediation and Negotiation:

These methods are gaining traction due to their informal and cost-effective nature. The Mediation Act, 2023, provides a statutory framework for mediation, encouraging its use in commercial disputes.

Conciliation:

Though less common, it is another form of ADR used in construction disputes.

Litigation:

While available, litigation is generally considered a last resort due to the lengthy and complex nature of court proceedings in India. The Commercial Courts Act, 2015, aims to expedite commercial disputes, but its effectiveness is limited by infrastructure challenges.

Dispute Review Boards (DRBs):

Modelled on FIDIC provisions, DRBs are used in some construction contracts, particularly in road projects. They require impartiality and independence from the parties involved.

Engineer’s Role:

Although the FIDIC Red Book assigns a significant role to the Engineer in dispute resolution, this role is limited in India due to perceived bias towards the Employer.

Legislative Reforms and Initiatives

Vivad Se Vishwas II Scheme:

This scheme aims to settle long-pending disputes involving public sector infrastructure projects by offering contractors the option to settle claims at discounted rates.

Commercial Courts Act, 2015:

Established to fast-track commercial disputes, including construction-related ones.

Mediation Act, 2023:

Encourages mediation as a mandatory step before litigation in non-urgent cases.

Managing Risks in Construction Projects

Proactive Risk Management:

Essential for minimizing disputes. This includes drafting robust contracts with clear dispute resolution clauses and ensuring compliance with relevant laws like the Indian Contract Act, 1872.

Multi-Tiered Dispute Resolution Clauses:

Many contracts now include clauses requiring parties to attempt negotiation or mediation before proceeding to arbitration or litigation.

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