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.
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.
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.
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 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.
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 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.