The Government of India, Ministry of Finance, Department of Expenditure, Procurement Policy Division has issued Office Memorandum vide No.F.1/7/2022-PPD dated May 29, 2023 has decided to implement a one-time settlement scheme called "Vivad se Vishwas II (Contractual Disputes)" to effectively settle pending disputes.
The undersigned is directed to refer to Rule 227A of the General Financial Rules (GFRS), 2017 and Department of Expenditure’s (DOE’s) "General Instructions on Procurement and Project Management" containing instructions to deal with dispute cases. Para 16.4 of the "General Instructions" is reproduced below:
Statistics have shown that in cases where the arbitration award is challenged, a large majority of cases are decided in favour of the contractor. In such cases, the amount becomes payable with interest, at a rate which is often far higher than the Government’s cost of funds. This results in huge financial losses to the Government. Hence, in aggregate, it is in public interest to take the risk of paying a substantial part of the award amount subject to the result of the litigation, even if in some rare cases of insolvency etc. recovery of the amount in case of success may become difficult. Instructions have been issued in this matter in the past but have not been fully complied with.
NITI Aayog had also established a Task Force on Conciliation Mechanism, and had circulated the final report of the Task Force. Following excerpt from the final report is highlighted:
A consideration of even more importance with respect to contracts between Government and Private entities. The same being critical not only to facilitate an overall pro-business environment but also to attract private investment in the country, to encourage private investors to establish and continue short-term and long-term contractual association with the Government, and not be wary of it.
It is understood, however, that more efforts are required to clear the backlog of old litigation cases. Such cases are holding back fresh investment, reducing the ease of doing business with the Government, tying up scarce working capital and indirectly reducing competition for newly floated tenders. In this context, after due study of the experience in past cases, Government has decided to implement a one time settlement scheme called "Vivad se Vishwas II (Contractual Disputes)" to effectively settle pending disputes.
Complete Office Memorandum can be accessed from the attached file