Government proposes quick settlement of contractual disputes to promote ease of doing business as announced in Union Budget 2023-24

Circulates scheme for graded settlement terms for stakeholder consultation

Posted On: 08 FEB 2023 5:20PM by PIB Delhi

The Ministry of Finance today circulated a draft scheme for consultation with stakeholders.  The scheme is aimed at bringing quick finality to certain contractual disputes in which Government of India or its agencies is a litigant. The draft scheme is available on the website of the Department of Expenditure (https://static.pib.gov.in/WriteReadData/specificdocs/documents/2023/feb/doc202328158601.pdf) as well as on the MyGov.in Portal.

The draft scheme has been framed in accordance with the announcement made by the Union Finance Minister in the Union Budget 2023-24.  In Para 67 of the Union Budget Speech, Smt. Nirmala Sitharaman had announced that:

To settle contractual disputes of government and government undertakings, wherein arbitral award is under challenge in a court, a voluntary settlement scheme with standardized terms will be introduced. This will be done by offering graded settlement terms depending on pendency level of the dispute.

The Government has appreciated that special efforts are required to clear the backlog of old disputes and litigation. Such cases are not only holding back fresh investment but are also reducing the ease of doing business with the Government. Therefore, after due study of the past cases, the government intends to bring one time settlement scheme called “Vivad se Vishwas II (Contractual Disputes)” to effectively settle pending disputes.

The salient features of the proposed scheme are as under:

1. 1. 1. The scheme will apply to disputes where one of the parties is either the Government of India or its following bodies:
2. All Autonomous Bodies of the Government of India;
3. Public sector banks and public sector financial institutions;
4. All Central Public Sector Enterprises;
5. Union Territories, National Capital Territory of Delhi and all agencies/ undertakings thereof; and
6. All organisations, where Central Government like Metro Corporations, where Government of India has shareholding of 50%; however, these bodies can opt out of the scheme at their discretion, with approval of the Board of Directors.

1. Only disputes involving above entities where the claim for proceedings (either to Court or for Arbitration or Conciliation) were submitted by the contractor on or before 30.09.2022 and Arbitral Tribunal/ Committee for Conciliation etc. for the specific case has been already notified by the procuring entity shall be eligible for settlement through this scheme.
2. Disputes, where claims are raised against procuring entities as above along with some other party (State Government or private party), shall not be eligible under the scheme.
3. Disputes having only financial claims against the procuring entities will be settled through this scheme.
4. The Scheme will be applicable to all contractors/ suppliers who wish to participate. In case Central Public Sector Enterprises (CPSEs) etc. are the contractors/ suppliers in a particular contract, they are also eligible to submit their claims under the scheme.
5. The Scheme proposes a graded settlement terms depending on pendency level of the dispute.
6. It is proposed to cover only for cases involving domestic arbitration and cases under international arbitration are not eligible to be settled under this scheme.

The scheme will be implemented through Government e-Marketplace (GeM), which shall provide an online functionality for the same. The draft scheme document also provides a broad functionality that the GeM portal shall provide to implement the scheme.

The draft scheme also contains a draft settlement agreement between the litigating parties to bring finality to the contractual dispute settlement.