Centre’s discussion paper to deal settlement of contractual disputes

NEW DELHI: In a bid to free up thousands of crores of rupees locked up in litigation and arbitration, the government will come out with a discussion paper on a scheme detailing the percentage of amount which could be paid for expeditious resolution of contractual disputes, Finance Secretary TV Somanathan said.

To begin with, the Department of Expenditure under the finance ministry will seek stakeholder suggestions on the quantum of percentage that could be offered for settling contractual disputes, besides other terms and conditions.

The scheme would cover disputes relating to government contracts which are currently under arbitration or litigation. Under the scheme, which would be voluntary, contractors can come forward for resolution of disputes by accepting a specified percentage of the contract value.

The percentage would be notified separately and will be ‘reasonable and fair’ so that many people take it, Somanathan said. “...if they’re willing to accept that percentage, it (disputes) will be settled and the cases will be withdrawn by both sides so that the contractor gets a substantial amount,” he said.

The top bureaucrat in the finance ministry said the scheme would be clean and transparent so that no individual officer has any discretion with regard to settlement of disputes. It will be up to the company to accept or reject the offer, he said, adding there will be no compulsion.

“If they want to continue with litigation they can continue to litigate. If they would like to close the matter, take cash and move on, that option we are giving them under the scheme,” Somanathan said.

Finance Minister Nirmala Sitharaman in her 2023-24 Budget speech announced that a voluntary settlement scheme with standardised terms will be introduced for settlement of contractual disputes.