In a move that could reshape the contours of public contract dispute resolution, the Public Works Department (PWD) of the Government of NCT of Delhi has officially directed the removal of the arbitration clause from all future contracts. The decision, formalised through an office order, mandates the deletion of Clause 25 (Settlement of Disputes & Arbitration) from the General Conditions of Contract (GCC) with immediate effect.
As per the order, the standard arbitration clause shall be replaced with a jurisdictional clause stating that “any disputes arising between the parties to this agreement/contract shall be subject to the exclusive jurisdiction of Courts in Delhi only.” This change has been introduced with the approval of the Competent Authority.
The exclusion of the arbitration mechanism signifies a marked shift in the Department’s approach to dispute resolution, favouring traditional litigation over arbitration, which has otherwise been promoted as a preferred mode of alternative dispute resolution (ADR) by both the judiciary and the legislature in recent decades.
The move may have far-reaching implications for contractors and vendors executing works under the PWD, as it alters the dispute resolution matrix, removing the option of private adjudication and subjecting disputes to the formal judicial process. It also invites larger questions about the State's evolving stance towards arbitration, particularly in light of recent discussions surrounding the proposed Arbitration and Conciliation (Amendment) Bill, 2024.
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