The Ministry of Finance, Department of Expenditure, has recently issued an Office Memorandum announcing the introduction of a one-time settlement scheme known as “Vivad se Vishwas II (Contractual Disputes)”, aiming to efficiently resolve pending disputes.
Referring to Rule 227A of the General Financial Rules (GFRS), 2017 and the Department of Expenditure‘s (DOE’s) “General Instructions on Procurement and Project Management,” specifically dealing with dispute cases, the government emphasizes the need for effective resolution. Paragraph 16.4 of the “General Instructions” states:
“Statistics have shown that in cases where the arbitration award is challenged, a significant number of cases are decided in favor of the contractor. Consequently, the awarded amount, along with high-interest rates, often exceeds the Government’s cost of funds. This results in substantial financial losses for the Government. Therefore, it is in the public interest to take the risk of paying a substantial portion of the award amount, subject to the outcome of the litigation. Even in rare cases involving insolvency or other difficulties, recovering the amount upon success may pose challenges. Although instructions have been issued in the past, full compliance has not been achieved.”
Furthermore, NITI Aayog has established a Task Force on Conciliation Mechanism, which circulated a final report. The report highlights the importance of contracts between the Government and private entities. Such contracts not only promote a pro-business environment but also attract private investment to the country, encouraging long-term associations without apprehension.
However, it is evident that more efforts are necessary to clear the backlog of old litigation cases. These cases hinder fresh investment, impede the ease of doing business with the Government, tie up limited working capital, and indirectly reduce competition for newly floated tenders. In light of this, the Government has decided to implement the “Vivad se Vishwas II (Contractual Disputes)” one-time settlement scheme to effectively resolve pending disputes.
The scheme clarifies the applicability, eligibility criteria, amount payable, submission of claims and time periods and other additional provisions relevant to its implementation and resolution of disputes.
By introducing this scheme, the Government of India aims to expedite the resolution of pending disputes, remove obstacles to fresh investment, enhance the ease of doing business, optimize working capital, and foster healthy competition in newly floated tenders. The scheme aims to provide a fair and efficient mechanism for settling contractual disputes, benefiting both the government and private entities.
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