Move to end Arbitration in big Highway Disputes draws pushback from Builders

The National Highway Builders Federation (NHBF) has formally opposed the road transport ministry’s decision to discontinue arbitration in highway disputes involving claims of Rs.10 crore or more, warning that applying the policy to ongoing projects could destabilise project financing and deter investment across the sector.

The objection follows a January 12 circular issued by the road transport ministry, aligned with a 2024 finance ministry directive, mandating that high-value disputes will no longer go to arbitration and must instead be resolved through conciliation. NHBF has challenged the proposal’s application to live and contracted projects where arbitration has not yet been invoked, arguing that it rewrites agreed dispute resolution terms midstream.

In representations to the road transport secretary and the finance minister, the federation flagged risks ranging from impaired cash flows and delayed execution to heightened lender anxiety, noting that highway projects are typically long-term, highly leveraged, and reliant on predictable dispute resolution frameworks.

While no judicial ruling is involved at this stage, NHBF’s critique centres on the legal and commercial fallout of the revised framework. The federation cautioned that enforcing the new regime on existing projects runs contrary to settled contracting norms and could transmit stress to the banking system.

Emphasising the sector’s financial sensitivity, NHBF stated that “dispute resolution mechanisms for highway projects require sector-specific calibration,” and urged the government to either withdraw the changes for ongoing projects or issue clarificatory guidance to ring-fence existing contracts.

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