Why National Highway Builders strongly oppose to Mediation and Conciliation as only dispute resolution mechanism for all projects?
The National Highway Builders Federation (NHBF) is apex organisation comprising of all contractors and builders of highways and bridges working actively for welfare of builders.
VIVAD SE VISHWAS II (Contractual Disputes) is a scheme enacted by Ministry of Finance, Government of India due to increased need of expeditious dispute resolution between Procurring entities (government bodies & organisation where government owns 50% or more shareholding) and Contractors. This scheme was made binding on procuring entities subject to condition that claim amount is up to Rs. 500 crores. The scheme sounded advantageous in many ways like it was effective contract dispute resolution mechanism, reduced litigation expenses and provided a healthy and transparent business friendly environment to all entities. But the only drawback was that scheme was effective only for a limited period of time.
Nowadays the Federation is strongly opposing to mandatory means of Mediation and Conciliation as only dispute resolution mechanism for all highway projects. Due to following reasons, NHBF is requesting for arbitration and is against mediation and conciliation –
- Quick and Enforceable dispute resolution – Mediation and Conciliation does not sound too practical for quick and enforceable dispute resolution which is essential in case of long term, huge investment and high borrowing highway projects.
- Non-binding – Another concern is that mediation and conciliation are non-binding in nature. In most appreciable situation even if parties reach to settlement, it may not be effective and enforceable in same manner as Arbitration Award.
- Complex matters – Mediation and Conciliation may not be effective in resolving complex matters involving disputes in projects having technical issues, changes in scope and termination related matters.
- Financial Viability – Replacing Arbitration by Mediation and Conciliation increases risk for banks and lenders leading to higher cost of capital, stricter loan conditions and reduced willingness for financing projects.
- Cash Flow – Speedy dispute resolution is very important for smooth functioning of projects. Any delay in dispute resolution can disrupt cash flow resulting in loan covenant breaches, problems in refinancing and increased risk of default. Federation also raised issue that making Mediation and Conciliation mandatory for all projects ignores sector-specific needs of highway industry
Budget 2026 Impact:
As the upcoming Union Budget 2026 is on its way, NHBF has made representation to Finance Minister, requesting Government to revive Vishwas II contractual dispute scheme in order to resolve large backlog of unresolved disputes with authorities such as NHAI AND MoRTH because earlier when arbitration favouring scheme was in action, it provided for structured settlement in a time bound manner.
Conclusion:
National Highway Builders Federation is not against Mediation and Conciliation conceptually. Federation is of view that Mediation and Conciliation even though stand strong conceptually but fail to give effective redressal in highway projects. Furthermore, it believes that Arbitration should remain as one of options of dispute resolution to all the builders, especially for high value, technical and complex disputes in order to ensure fairness and financial stability in highway industry of our nation.
By,
Sneha Singh
(Law Student and pursuing Company Secretary)
Prayagraj
Disclaimer:
This article is intended solely for academic and professional discussion. It does not constitute legal advice or a formal opinion. The views expressed are personal and based on the author’s understanding of the statutory provisions, Company law, rules and judicial precedents as on the date of writing. Readers are advised to consult the relevant statutory provisions and professional advisors before acting on the basis of the aforementioned article.
