NHAI Strengthens Dispute Resolution Process for Effective Project Execution

The National Highways Authority of India (NHAI) has introduced a revised Standard Operating Procedure (SOP) for resolving disputes arising from highway projects, replacing the previous guidelines issued on April 9, 2021. The new SOP, approved in the Executive Committee (EC) meeting on January 10, 2025 (Agenda Item No. 648.01(xix)), was officially issued under Policy Circular No. 2.1.80/2025 on February 13, 2025. The move aims to enhance efficiency, reduce litigation, and ensure timely resolution of disputes, thereby preventing delays in project execution.

NHAI had earlier established a Conciliation Committee of Independent Experts (CCIE) under Policy Circular no. 2.1.23/2017 dated June 02, 2017, to resolve disputes. The process was later refined through multiple circulars, including the modified SOP issued on April 9, 2021, and a timeline framework introduced on May 26, 2021.

As per Articles 26, 38, and 44 of the Standard Agreements for EPC, HAM, and BOT (Toll) projects (applicable post-September 2020), disputes must first be referred to the Dispute Resolution Board (DRB). If either party is dissatisfied with the DRB’s decision or if the DRB fails to resolve the dispute, conciliation through CCIEs is mandatory before arbitration.

Recognising that multiple disputes decided at the DRB level are being referred for conciliation, NHAI’s revised SOP issued under Policy Circular no. 2.1.80/2025 dated February 13, 2025, now allows each DRB decision to be addressed individually rather than requiring contractors to consolidate multiple disputes before seeking CCIE intervention.

The key steps in the conciliation process are as follows:

1. Contractors must 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 fee. If NHAI is the claimant, the concerned GM (Tech) will submit the proposal to GM (CMD) with similar documents.
2. The GM (Tech) will examine and forward the contractor’s submission to GM (CMD) within 35 days for referral to the CCIE.
3. 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 by Day 41.
4. The GM (CMD) will issue the referral note by Day 44, after which CCIE meetings are scheduled within 44 days of the initial referral.
5. 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.

Financial Aspects and Additional Provisions: Contractors must deposit Rs. 5 lakh as a conciliation fee, while NHAI will bear all conciliation expenses, including fees for conciliators, office space, expert assistance, and incidental costs. The CCIE has discretion over procedural matters and can review the SOP periodically based on practical experience.

The updated SOP is expected to streamline the dispute resolution process, reduce litigation, and promote faster settlements in highway project contracts. By handling each dispute or recommendation from the DRB individually, the new guidelines facilitate a more focused and effective resolution process, thereby minimising delays in project execution and ensuring that disputes are resolved in a fair and transparent manner.