Ministry Appoints Conciliation Committees to Resolve Power Project Contract Disputes

The Ministry of Power (MoP) has introduced a conciliation mechanism for settling contractual disputes regarding power projects implemented by central public sector undertakings (CPSUs) and developers under the administrative control of MoP.

As a part of this mechanism, the ministry constituted three Conciliation Committees of Independent Experts (CCIEs), chosen through a bid issued to seek eligible candidates in January this year.

Why the new Committee

The mechanism was devised as CPSUs, and developers had concerns that the present resolution modalities are inadequate to address the disputes expeditiously and effectively between the developer and the contractors. The delay in resolving such contractual disputes has been identified as one of the major reasons impacting the timely completion of power sector projects.


The existing resolution mechanism through Dispute Resolution Boards or Arbitration Tribunal often takes considerable time, which leads to less-than-optimal cash flow for the contractors and time and cost overrun of the projects.

A committee of board-level officers of CPSUs was constituted to study the field-level issues and the difficulties in resolving the issues. After deliberating upon the report submitted by the board-level officer’s committee, the Ministry, in consultation with Central Electricity Authority and the CPSUs, noted that several disputes have arisen under the contracts.

The formation of CCIE intends to address these issues and avoid any delays in the commissioning of the projects.

Tenure

The panel of the independent experts in these committees will have a tenure of three years from the date of formation, which can be extended to a maximum of five years. Depending on the response from the contesting parties and the workload, the number of panels can be increased from time to time.

Procedure of dispute resolution

On receiving a reference from the contractor dispute conciliation, the developer should send a communication within seven working days inviting the contractor to depute a team of their representatives to interact with the developer. The developer should obtain details and examine the correspondence of either party regarding the dispute within 30 days.

Once a conciliation request has been raised by the contractor, within 30 days, the same should be referred to the CCIE if the matter remains unresolved internally. The developer can decide a fair amount below which it would not go into the exercise of conciliation after weighing the nature and quantum of disputes.

The developer will also be free to suggest the option of resolution of disputes by conciliation in case a dispute is raised. The contractor may select any of the three CCIEs except those unavailable due to workload or other reasons. A CCIE will generally be considered unavailable if it is handling cases to such an extent that there would be an avoidable delay in the event of more cases being taken up.

In case of any disagreement during contract execution, the parties must first resolve the matter with a dispute avoidance mechanism. If this fails, then the parties can approach CCIEs.

After the successful conclusion of proceedings, the parties must undertake and complete all necessary actions to implement the terms of settlement within 30 days, unless a different timeline not exceeding 60 days is agreed upon in the settlement agreement. In connection with the dispute, all pending claims of parties before any other legal forum are to be withdrawn within these 30 days. Once a settlement is reached, any further legal proceedings will only be allowed after obtaining MoP’s approval.

If the CCIE fails the conciliation process, the parties can then take recourse to approach courts. However, the option of arbitration would not be available once the conciliation mechanism has been exercised. If the conciliation proceedings are successful, the parties should sign the written settlement agreement, and the conciliators would authenticate the same.

In 2020, the Ministry of New and Renewable Energy issued clarifications regarding the dispute resolution mechanism to address unforeseen disputes between solar and wind developers and the Solar Energy Corporation of India, NTPC, and NHPC.