Delhi govt's PWD removes arbitration clause from contract conditions to cut losses
New Delhi, The Delhi government's Public Works Department has deleted the arbitration clause from its general conditions of contract to reduce the increasing financial losses.
According to the new conditions, in case of any dispute between the PWD and a private contractor, the matter will be dealt with only in the courts.
"The arbitration clause has been removed from our new tenders. Originally the motive behind arbitration clauses was to fast-track any disputes instead of litigation, but in most of the cases that went for arbitration, the government was incurring heavy financial losses," PWD minister Parvesh Verma said.
In the Barapullah Phase 3 project, the government lost around ₹300 crore because the PWD did not make an appeal against the arbitration order and the private company benefited, he added.
Last year, LG V K Saxena had said that compared to the tender amount of ₹964 crore, the government would end up paying ₹1,326.3 crore for the Barapullah Phase 3 project.
The PWD has been dealing with several legal matters in the past few years, mostly deriving from delays in projects as the construction cost shoots up beyond the initial estimated cost, putting a liability on the government.
In 2023, former PWD minister Atishi also took notice of the increasing financial burden on the public exchequer due to the large number of arbitration cases in the department. She had directed officials to make changes in the working of the department to ensure such situations did not arise again.
Currently, the PWD has a panel of around half a dozen arbitrators empanelled to fight their legal cases. According to the rules, the empanelled arbitrator shall not have more than five cases of the PWD in hand at a time.
In India, arbitration is an alternative dispute resolution method where parties agree to settle their disputes outside of court by a neutral third party, called an arbitrator, who makes a binding decision. This process is governed by the Arbitration and Conciliation Act, 1996.
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