NHBF Opposes ₹10 Crore Dispute Arbitration Ban, Seeks FM Clarity

TRANSPORTATION

Overview

The National Highway Builders Federation (NHBF) is challenging the road transport ministry's directive to end arbitration for disputes exceeding ₹10 crore. This move, affecting ongoing projects, has sparked concerns over fair contracting principles. Builders warn the shift to conciliation could impair cash flow, trigger lender worries, and transfer financial risk to the banking system, prompting a plea to Finance Minister Nirmala Sitharaman for sector-specific clarity.

Builders' Concerns Mount

The National Highway Builders Federation (NHBF) has strongly opposed a recent directive from the Ministry of Road Transport and Highways to halt arbitration for disputes valued at ₹10 crore or more. Builders argue this policy, extended to ongoing projects even before arbitration is invoked, fundamentally breaches settled principles of fair contracting.

Financial Strain Fears

This shift away from arbitration towards mandatory conciliation for large claims is projected to create significant financial strain. The NHBF warns that it could impair project cash flows, hinder debt servicing capabilities, and trigger serious concerns among lenders. Ultimately, this move risks transferring substantial financial stress onto the banking system, impacting the sector's stability.

Sector-Specific Needs

In a letter to Finance Minister Nirmala Sitharaman, the NHBF highlighted that the revised dispute framework, as it stands, discourages investment, inflates project costs, and delays execution. They contend that India's infrastructure sector, characterized by long concession periods, high leverage, and sensitive financing structures, requires dispute resolution mechanisms calibrated specifically for its unique challenges. The federation has also engaged with bankers and financial lenders to assess the broader implications for loan portfolios and the bankability of future projects under standard contract models like BOT, HAM, and EPC.

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