In a significant move aimed at strengthening financial accountability, the Delhi Government has directed key infrastructure departments, including the Public Works Department (PWD), the Water Department, and the Irrigation and Flood Control Department, to submit a comprehensive record of arbitration cases involving claims exceeding ₹1 crore, dating back 20 years.
The directive, issued to enhance transparency and ensure prudent use of public money, mandates year-wise and award-specific disclosures. Departments must report the number of arbitration cases, details of outcomes where the government was unsuccessful, the total quantum of compensation paid, and whether statutory appeals were pursued prior to disbursing any payment.
This review comes amid increasing concern over repeated government losses in arbitration proceedings related to infrastructure projects, resulting in substantial payouts to private contractors. The Delhi Government has noted that these settlements may have been made without exhausting available legal remedies, prompting the need for a systemic review.
In a policy shift, the government has also made it mandatory that no payment be released in any arbitration matter decided against the state unless all legal remedies have been pursued and prior approval has been obtained from the Law Department. This directive is intended to discourage premature settlements and promote more rigorous legal defence in disputes involving public expenditure.
Further, the Public Works Department has introduced a structural reform by removing arbitration clauses from all newly executed contracts. Under the revised policy, contractors aggrieved by government action will be required to initiate litigation through regular judicial forums rather than relying on private arbitration. The change is intended to deter opportunistic or inflated claims and subject contractual disputes to enhanced judicial scrutiny.
PWD Minister Parvesh Verma emphasized the seriousness of the review, stating, “Public funds are not to be treated casually. For years, departments have settled large claims through arbitration without contesting them fully in court. This practice will end. We are now auditing the arbitration history of the past two decades to identify lapses in legal diligence and assign accountability.”
This development marks a significant step towards reinforcing institutional discipline in the handling of legal disputes and protecting the public exchequer from unnecessary liabilities.
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