Dispute Resolution in India – Everything you should know about the law
Construction Dispute Resolution in India – Know the Law!!
The intricacy of construction contracts coupled with long project lifecycles is the hotbed for disputes in the construction sector. Disputes may arise anytime during project execution or even after completion of the project. Construction disputes are highly technical, and if not resolved quickly & efficiently, may have a spilling effect on the project in terms of both time and money.
Construction Dispute Resolution Machinery in India
Construction contracts generally contain a dispute resolution clause to account for various disputes and the process to resolve them. It is in the best interest of all the parties that all disputes are resolved at the earliest, saving both time and costs. Keeping this in mind, construction disputes resolution in India has evolved over the years, with most parties favoring Alternate Dispute Resolution (ADR) techniques like negotiations, mediation, and adjudication to save time & costs. Litigation is generally avoided and is often resorted to as the last option for dispute resolution.
Here are the various types of dispute resolution machinery for resolving Construction claims and disputes:
Negotiation
Often mentioned as ‘amicable settlement’ in the contract, negotiations are the best way to settle petty disputes that keep arising at various stages of the contract. The negotiation process is a precondition for the parties before they begin the arbitration or litigation process. It is the most beneficial dispute resolution tactics, in terms of both time & money, for all stakeholders in the project.
Mediation
The mediation clause in a contract calls for an impartial third party to mediate and help bring about a fair resolution. The mediator supports the negotiations and facilitates decision making during the negotiations.
Conciliation
This is another form of third-party intervention where a conciliation board directs an officer to advise the disputing parties and make recommendations for fair resolution of the dispute. If the parties reach an agreement during conciliation proceedings, the same may be signed and become binding under the Arbitration and Conciliation Act 1996.
Expert Determination.
This method is the most useful when the dispute arises out of some technical or engineering issues. It involves bringing in a neutral specialist to assist in dispute resolution through his technical expertise. While not legally enforceable, expert determination process may help in reaching agreement and saving time & costs.
Dispute Review Boards
Dispute Review Boards are formed right after the contract is signed, comprising of one to three neutral, experienced & impartial individuals selected in agreement by the contracted parties. The boards are much informal, cost-effective, and time saving than arbitration or litigation. Based on the terms of the agreement between the parties, the decision of the Dispute Boards is binding unless it is challenged in arbitration or litigation.
Arbitration
This is one of the most followed methods for dispute resolution in the construction sector in India. It is a more efficient, cost-effective, and time-saving alternative to litigation. Based on the Arbitration and Conciliation Act 1996, this method allows flexibility & freedom to the parties to pick an arbitration tribunal based on the technical skill-set required for resolving the disputes. The parties may seek interim measures from the arbitration board during the process. Arbitration has a time limit of 12 months from the time of appointment of the tribunal and it may be further extended to another six months at the consent of all concerned parties. The process also calls for the losing party to bear the entire cost of arbitration. Thus, discouraging false claims & bogus disputes. The decision of the arbitration board is binding on both the parties, leaving very limited grounds for appeal in the courts of law. The tribunal may order any specific performance, award damages, injunctions, declarations, costs, and interest. The unsuccessful party may challenge the tribunal’s decision by filing an appeal within 3 months of the receipt of the award. This period may be extended by another 30 days at the discretion of the court. In such cases, the court has to give its decision within 12 months of filing such appeal. After that, the tribunal has the right to enforce the award like a court’s ruling.
Litigation
Litigation is usually the last option for all parties as it is heavy on both time & money. It involves a trial in the court law and may go on for several years, causing cost overrun, time overrun, and often cash crunch for the contractor. However, the Commercial Courts Act was introduced in 2015 to overhaul this process and set timelines for the same. Commercial Courts & Commercial Appellate Divisions were set up to handle disputes to the tune of Rs 10 million or more. The act has set various lines to expedite the process of litigation. Nonetheless, it is still the slowest and most expensive method of dispute resolution.
We, at Contract Square, are specialists at handling claims and disputes in the construction sector. Our team of experts, with an experience of a dozen successful settlements of over USD 70 million, would be happy to assist you in preparation & filing of claims and ensuring fair settlement without getting into the lengthy litigation. Reach us @ Contact Us for the most cost-effective and timely settlement of construction claims.
- Errors/Addition/Omission in contract documents.
- Failure to comply with the conditions mentioned in the contract by the contractor/client.
