Layering Of Amicable Resolution Prior To Arbitration, A Solution?

Introduction

Disputes in the construction contract are inevitable due to its complex nature, long durations and involvement of multiple stakeholders. In India, we have seen a sudden surge in the infrastructure developments which demands speedy and cost-effective contracts laced with latest technology. However, this cannot be achieved when the grundnorm of the project, which is the clause of the contact, the type of contract executed and the timelines ensured are flawed or whimsical. With the current trends of construction contracts being executed by various Government Authorities for completion of Projects often leads to disputes.

To address these complexities, various Government bodies are adopting various methods to avoid lengthy litigation. Some Government Bodies have also gone skeptical of arbitration and hence are adopting various other roots to deflect arbitration proceedings. Does this question the efficiency and trust on arbitration in India or is going to be a complete game changer for infrastructure dispute, only time may answer this question. This also opens question to whether our Indian arbitration structure requires a remodeling or will succumb an exit from construction contracts.

Before we dwell in the deeper aspects of Indian Arbitration regime. It is important that we understand the trends, government bodies are adopting. One such recent development is National Authority of India adopting Dispute Resolution Board as a pivotal dispute resolution mechanism.

Scope of Dispute Resolution Board

A Dispute resolution Board ("DRB") is a panel of technical experts contractually appointed to adjudicate disputes during the subsistence of Contract. The DRB usually comprises of one or three independent experts appointed since the inception of the Project. The purpose of DRB is to speedily resolve disputes during execution of project. The role of DRB is advisory or binding depending on the contract. Next, we explore the key features of the Dispute Resolution Board

Instant addressal to the dispute: Since the DRB is constituted since inception of the Contract, it plays a huge factor as resolving dispute as an when it arises in the Contract leading to better clarity on issues and smooth execution of the Contract.
Independence and Neutrality: Since DRB is an independent body of experts, this further provides party autonomy along with an independent view of the technical issues.
Time and Cost efficient: In comparison to Litigation and Arbitration, the process of dispute resolution vide DRB is time bound and pocket friendly.

Evolution of Dispute Resolution in National Highway authority of India ("NHAI")

Historically, NHAI relied on a multi-tiered dispute resolution process, including negotiation, conciliation, and arbitration. In 2017, NHAI established the Conciliation Committees of Independent Experts (CCIEs) to facilitate amicable settlements. Over time, the process was refined through various policy circulars, with a focus on reducing litigation and expediting settlements¹.

With the adoption of new contract models—such as EPC (Engineering, Procurement and Construction), HAM (Hybrid Annuity Model), and BOT (Build-Operate-Transfer)—NHAI incorporated the DRB mechanism as a mandatory first step for dispute resolution in its standard agreements (post-September 2020)².

Recent Developments

TheearlierinstructionsannouncedonApril9,2021³,forresolvingdisputesarisingfromNH projects havebeenreplacedbyarevisedStandardOperatingProcedure(SOP)introducedbytheNHAI. The newSOPwasformallyreleasedonFebruary13,2025⁴,inaccordancewithPolicyCircularNo.2.1.82025afterbeingagreedattheExecutiveCommittee(EC)meetingonJanuary10,2025 ⁵.

The NHAI's revised SOP recognized that multiple disputes decided at DRB level are being referred for conciliation. The NHAI SOP offered a solution by giving Contractor's an option to approach CCIE without consolidating multiple disputes and each DRB decision can be addressed separately. The key steps in the conciliation process are as follows:

Once DRB conveys its decisions, any party aggrieved by the decision may submit their conciliation proposal to the General Manager (Technical) within 28 days of the DRB's decision, enclosing project details, DRB recommendations, preferred CCIEs, and proof of payment of Rs. 5 lakh conciliation fees.
Upon submission of the Conciliation proposal by the Contractor, The GM (Tech) will examine and forward the contractor's submission to GM (CMD) within 35 days for referral to the CCIE.
CCIE Allocation: If the preferred CCIE is available, GM (CMD) will allocate the CCIE within 38 days. If the preferred CCIE is unavailable, Member (CMD) will allocate an available CCIE and complete the process within 41 days. Thereafter, GM (CMD) will issue the referral note, after which CCIE meetings are scheduled within 44 days of the initial referral.
The CCIE will conduct meetings and provide recommendations for settlement under Section 73 of the Arbitration & Conciliation (A&C) Act. If conciliation succeeds, a final settlement report is submitted. If conciliation fails, the dispute may proceed to arbitration.

NHAI vide its recent circular dated 12.06.2025 has further crystalized dispute resolution tier. The tiers are as follows:

Reference of dispute to the Authority Engineer/ Independent Engineer
DRB referral which acts as a second tier with a time limitation.
Upon dissatisfaction from DRB, parties must then approach to CCIE (Conciliation Committee of Independent Expert).
It is only after the CCIE, if the party fails to reach any consensus, the parties can then approach Arbitration

The NHAI vide its circular on its pre-arbitral multi-layer Dispute Resolution has expressly provided that there cannot be any express bypass from DRB meaning whereby the aggrieved party has to necessarily go before DRB. The continued reassurance of DRB and formalization of the same speaks loudly of the NHAI's aim for an expert driven dispute management. The muti-tier level mechanism created by NHAI for its HAM, EPC, BDFOT projects etc. are a way to unburden arbitration and litigation proceedings.

Analysis

The introduction of DRBs in NHAI contracts represents a significant inclination in early, expert-driven dispute resolution, aiming to resolve issues before they escalate. While amicable settlement is the key to a successful dispute solution, creating multi layers as pre-arbitral process to such robust project will require multiple contingent factors to align together for DRB to be a successful tool for dispute resolution.

Upon further exploration of the pre-arbitral process as provided by NHAI, the key factor which will govern the effectiveness of DRB is parties' intent to cooperate and willingness to accept the recommendations made by DRB. Another aspect which remained blinded sided in the DRB pre-arbitral process is though technical expert may provide a better understanding of the project, however, may lack legal awareness to correctly interpret the intent of the Contract and the conduct of the parties. These factors are the key to any unbiased and efficient dispute resolution. The purpose of a pre-arbitral process is always to provide a non-formal setup which is cost effect and time efficient for resolving dispute. However, if this pre-arbitral process ends up creating multi-layer facet leading parties to ultimately rely solely on arbitration for finality of decisions, then DRB might turn from a knight in shining armor to a Contractor's worst nightmare.

Balancing efficiency, expertise, and fairness in infrastructure project disputes is tough thus a well-designed dispute resolution system leverages the strengths of both mechanisms, using DRBs for quick and early intervention and arbitration for ultimate resolution. India with this fast-paced development requires more refined amalgamation of technical and legal aspects. We have to agree that merely creating layers of adjudication prior to arbitration may not align well with today's robust demanding construction projects.

Footnotes

1 https://library.nhai.org/nhailibrary/Assets/Pdf/2.1.43.pdf

2 https://library.nhai.org/nhailibrary/Assets/Pdf/2.1.80.pdf

3 https://library.nhai.org/nhailibrary/Assets/Pdf/2.1.48.pdf

4 https://library.nhai.org/nhailibrary/Assets/Pdf/2.1.80.pdf

5 https://library.nhai.org/nhailibrary/Assets/Pdf/2.1.80.pdf

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