₹1 trillion in claims: Is NHAI’s dispute resolution system working as intended?
Highway authority has barred contractors from bypassing step-by-step grievance process amid rising conciliation cases and nearly ₹1 trillion in pending claims.
New Delhi: With arbitration claims nearing ₹1 trillion as of March 2025 and hundreds of disputes pending, the National Highways Authority of India (NHAI) is tightening its three-tier dispute resolution process. These claims account for roughly 40% of both NHAI’s total liabilities and its ₹2.5 trillion capex planned for FY25, highlighting the financial strain from unresolved conflicts.
In an internal order dated 12 June and seen by Mint, the state-run highway developer said some contractors were bypassing the Dispute Resolution Board (DRB) and directly approaching the Conciliation Committee of Independent Experts (CCIE), violating contract terms.
Going forward, NHAI will not consider CCIE conciliation requests unless the DRB has either ruled on the matter or failed to resolve it.
The directive comes amid concerns over the effectiveness of NHAI’s step-by-step framework, introduced in September 2020 to reduce arbitration and encourage early settlements. While some disputes have been resolved through conciliation, experts say results are mixed.
Under the framework, contractors must first raise grievances with the Authority Engineer or Independent Engineer (AE/IE), then approach the DRB. If that fails, they may seek CCIE conciliation before moving to arbitration.
Meanwhile, disputes have slowed NHAI’s pace of highway awards and shrunk the overall project pipeline. Annual awards have dropped from 6,300 km in FY22 to an estimated 4,000 km in FY25. Construction has also declined—from over 6,600 km in FY24 to about 5,600 km in FY25.
A system under strain
The system was meant to enable early, mutually agreed resolutions before arbitration, said Nilava Bandhopadhya, senior partner at S&A Law Offices.
It also helps reduce arbitration costs and caseloads, added Chirag Gupta, associate partner at Alpha Partners.
But legal experts say it doesn’t always work as planned.
Disputes rarely get resolved at the AE/IE stage, said Bandhopadhya. “(And) NHAI itself does not agree with the DRB’s decision in most cases."
By contrast, he said, CCIE settlements are more likely to be accepted by all parties.
NHAI has about 100 DRBs, each with three independent experts from an approved panel. Setting up a DRB typically takes about a month, officials said.
DRBs help clarify facts and lay the groundwork for further resolution, according to Nitin Jain, partner at Agama Law Associates.
But others caution that procedural challenges often defeat the system’s purpose.
Delays and ambiguities in setting up or operating DRBs often create bottlenecks, said Gupta of Alpha Partners, adding that contractors skip the process to avoid deadlocks, defeating its purpose.
“CCIE has already shown an increase in the number of disputes being settled, thereby reducing the burden on arbitral tribunals and courts," said Jain. It has also enabled faster project execution.
A successful conciliation is typically accepted; if not, the matter proceeds to arbitration.
In FY18, a year after the CCIE was introduced, no cases were settled under it. However, the number of cases settled rose to 189 in FY23, involving claims worth ₹16,522 crore.
Still, with hundreds of disputes unresolved and core steps like the DRB often facing delays, experts say the system’s intent may be clear—but its execution remains far from ideal.
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