Government Releases Draft Scheme For Settling Contractual Disputes
The scheme is expected to offer graded settlement terms, depending on the pendency level of dispute.
The Union government on Wednesday released a draft of a one-time settlement scheme that aims to quickly resolve contractual disputes and promote ease of doing business.
The Department of Expenditure, which comes under the Ministry of Finance, has circulated a draft of the "Vivad se Vishwas II" (no dispute, but trust) scheme for consultation with stakeholders.
The draft scheme and the draft settlement agreement between the litigating parties are available on the website of the department and open for comments till March 3.
It is expected to offer graded settlement terms, depending on the pendency level of the dispute.
The government has appreciated that special efforts are required to clear the backlog of old disputes and litigation. Such cases are not only holding back fresh investment, but also reducing the ease of doing business with the government, the ministry said in a release.
"Therefore, after due study of the past cases, the government intends to bring (a) one-time settlement scheme called 'Vivad se Vishwas II (Contractual Disputes)' to effectively settle pending disputes," it said.
The draft comes on the heels of the announcement of the voluntary settlement scheme by the Finance Minister Nirmala Sitharaman, during the budget last week.
In the 2020 budget, the government had announced the 'Vivad se Vishwas I' scheme for taxpayers, to settle direct tax litigation disputes, which were pending in courts—without paying any interest or penalty—subject to a payment deadline date.
The contractual disputes scheme is expected to be implemented through the Government e-Marketplace.
To settle contractual disputes of government and government undertakings, wherein arbitral award is under challenge in a court, a voluntary settlement scheme with standardized terms will be introduced. This will be done by offering graded settlement terms depending on pendency level of the dispute.From the 2023 Budget speech by Finance Minister Nirmala Sitharaman
Who Will Be Eligible?
The scheme will be applicable to the cases where one of the parties is either the Union government or its undertakings—such as autonomous bodies, central public sector enterprises and Union territories.
It will also be applicable to all agencies and central government organisations, like metro corporations, where it has a shareholding of 50%, unless the corporation decides to opt out following its board's approval.
Other Applicability Features Under The Scheme
Disputes where the claim for proceedings were submitted by the contractor on or before Sept. 30, 2022, and the arbitral tribunal/committee for conciliation for the specific case has been already notified by the 'procuring entity' or the project executing entity.
Cases where claims were raised against procuring entities along with some other party—state government or private party—shall not be eligible under the scheme.
Disputes with only financial claims against the procuring entities will be settled through this scheme.
Scheme will be open for all contractors and suppliers to submit their claims, even if the contractor or supplier is a CPSE.
The scheme will cover only domestic arbitration not international disputes.