NHAI Issues Clarification on DRB and Conciliation Sequence

In a move aimed at preserving the integrity of contractual dispute mechanisms and ensuring timely resolution of conflicts in infrastructure projects, the National Highways Authority of India (NHAI) has issued a clarification via Policy Circular No. 2.1.84/2025, dated June 12, 2025. The circular reiterates strict adherence to the prescribed procedural hierarchy for dispute resolution under standard agreements governing Engineering Procurement Contracts (EPC), Hybrid Annuity Model (HAM), and Build-Operate-Transfer (BOT) (Toll) highway projects.

This clarification comes amid a rising trend of contractors and concessionaires bypassing the Dispute Resolution Board (DRB) and directly approaching Conciliation Committees of Independent Experts (CCIEs) in pursuit of quicker outcomes. NHAI has firmly stated that such deviations are incompatible with the multi-tiered dispute resolution framework contractually agreed upon in its Standard Agreements.

NHAI’s standard agreements, specifically Articles 26 (EPC), 38 (HAM), and 44 (BOT-Toll), reflect a deliberate, progressive approach to resolving contractual conflicts. These provisions, first introduced via Policy Circular bearing reference no. 2.1.43/2020 dated September 4, 2020, establish a sequential approach to resolving disputes between the Authority and the Contractor/Concessionaire. The layered mechanism is as follows:

1. Mediation by the Authority Engineer/Independent Engineer (AE/IE): Either party may initiate mediation with the assistance of the AE/IE for amicable settlement.
2. Referral to the DRB: If mediation fails or is not pursued, the dispute must be formally adjudicated by the DRB.
3. Conciliation through CCIEs: Only if the DRB fails to resolve the dispute or if either party is dissatisfied with its decision, conciliation must be attempted through CCIE as mandated by the Authority.
4. Arbitration as a Last Resort: Arbitration can be pursued only if the CCIE-led conciliation fails.

This layered process is designed to facilitate early and efficient resolution of disputes, thereby reducing reliance on arbitration and minimizing delays in project execution.

Despite the clarity in contractual provisions, NHAI has observed an increasing number of instances where parties’ initiate conciliation proceedings even while the same dispute is pending before the DRB. Such parallel proceedings not only disrupt the procedural sanctity of the framework but also create administrative inefficiencies and potential jurisdictional conflicts.

To address this, the Authority has made it clear that no conciliation request will be entertained unless:

1. The dispute has already been decided by the DRB, and either party remains dissatisfied, or
2. The DRB is unable to resolve the dispute (i.e., no decision or failure to reach consensus).

This directive ensures that the integrity of the dispute resolution mechanism is preserved and that each tier is exhausted in its proper order before escalation. The intention is to prevent overlapping or premature conciliation efforts, which can cause procedural confusion, delay the overall resolution process, and dilute the effectiveness of each tier, particularly that of the DRB.

With the growing complexity of highway infrastructure contracts and multiple stakeholders involved, maintaining procedural discipline is crucial. By reaffirming the primacy of the DRB in the dispute resolution chain, NHAI seeks to bolster institutional frameworks, eliminate ambiguity in dispute handling, and ensure the smooth execution of national highway projects

The move underscores NHAI’s commitment to upholding the sanctity of contractual mechanisms while promoting efficient, predictable, and orderly resolution of infrastructure-related disputes.