NHAI Operationalises One-Time Settlement Framework for Contractual Disputes

The National Highways Authority of India (NHAI) vide Policy Circular bearing reference no. 2.1.90/2026 dated February 20, 2026 (the “Circular”), has issued a detailed the Standard Operating Procedure (SoP) for implementation of the Vivad se Vishwas-III (VsV-III) Scheme introduced by the Ministry of Road Transport and Highways (MoRTH). While the scheme represents a continuation of the Government’s structured dispute resolution mechanisms, this Circular represents an operational roadmap aimed at translating policy intent into administrative execution.

The VsV–III Scheme builds upon the Government’s earlier Vivad se Vishwas initiatives aimed at resolving prolonged contractual disputes and releasing locked capital. While the Vivad se Vishwas–II Scheme (2023) laid the foundational framework, MoRTH introduced a sector-specific adaptation for the highways domain. However, a substantial volume of disputes arising from arbitral awards and court orders falling outside the earlier eligibility timelines continued to remain unresolved. NHAI’s Circular now operationalises this policy objective by establishing a clear and executable settlement framework.

The Circular issued by NHAI reiterates and operationalises the eligibility thresholds prescribed by MoRTH:

1. Arbitral awards passed up to October 31, 2025.
2. Court Orders under Section 34 issued on or before November 30, 2025; and
3. Court Orders under Section 37 issued on or before November 30, 2025.

The Circular also prescribes that only the disputes involving purely monetary awards will qualify. Awards directing specific performance remain outside the scheme’s scope.

Monetary thresholds further refine applicability. As a rule, only awards up to Rs. 500 crores qualify. However, the Circular introduces an important flexibility mechanism, where the award exceeds Rs. 500 crores, claimants may still opt for settlement, with the payable amount computed as if the award were capped at Rs. 500 crores. This design balances fiscal prudence with dispute closure incentives.

The scheme excludes disputes already resolved through conciliation agreements, thereby avoiding overlap with concluded settlement processes. 

The Circular operationalises the scheme through a structured digital interface. Claims must be submitted via the Government e-Marketplace (GeM) platform within the prescribed window, culminating on 31 March 2026. Contractors must:

1. Register through authorised personnel.
2. Submit eligible disputes.
3. Await evaluation and settlement offer.

This digitized pathway significantly reduces administrative variability, a frequent source of delay in dispute settlement regimes.

Institutionally, the scheme establishes a clear administrative chain:

1. General Manager [GM (Legal)] is designated as the Nodal Officer.
2. Technical Division is responsible for settlement evaluation within one week.
3. GM (Finance) is tasked with financial scrutiny within three days of the receipt of the same from the Technical Divisions.
4. Concerned Member is empowered to approve settlement amounts.
5. Settlement offers are typically sent within two weeks.

Recognising the complexities inherent in arbitral awards, the Circular provides an important procedural safeguard prescribing that where interpretational issues arise, Technical Divisions must consult the advocate representing NHAI before the tribunal/court.

Once a settlement offer is issued on the GeM portal:

1. Contractors must accept within 30 days, and an acknowledgement email is sent to both the parties.
2. NHAI is permitted to modify the offer before the same is accepted by the contractor. Once the offer is accepted and e-mail is generated, NHAI cannot amend or withdraw the offer.
3. If the contractor does not accept the offer, the ongoing litigation process may continue.

Upon acceptance:

1. Contractors must withdraw pending litigation within 45 days.
2. Settlement Agreement executed thereafter within 30 days.

The Model Settlement Agreement annexed to the Circular ensures legal enforceability by granting settlement status equivalent to an arbitral award under the Arbitration & Conciliation Act, 1996.