Govt. kicks off contractual dispute settlement scheme


With a deadline of October 31 for businesses to submit their claims for consideration, the Center on Wednesday established a plan for the settlement of contractual issues with vendors or suppliers to the government and its undertakings.

What is Vivad se Vishwas ll?

  • Background: To resolve contract disputes that may arise between the Government of India and various businesses, the Ministry of Finance, Department of Expenditure, has issued this memorandum. It draws attention to the financial losses made by the government as a result of negative arbitration rulings and the requirement to properly resolve open disputes.
  • Application: The “Vivad se Vishwas Il (Contractual Disputes)” scheme is applicable in cases of contractual disputes where one of the parties is the Government of India or a specific organization, such as autonomous bodies, public sector banks, public sector financial institutions, Central Public Sector Enterprises, Union Territories without a legislature, or businesses in which the Government of India owns 50% or more of the stock. These businesses are known as “procuring entities,” while the contested party is known as a “contractor.”
  • Eligible Disputes: Disputes must have an arbitral award rendered by January 31, 2023, or a judicial award rendered by April 30, 2023, for them to be eligible for resolution under the plan. Contract-specific performance disputes will not be eligible for resolution under this plan.
  • Claim Submission: Contractors should submit their claims via the Government e-Marketplace (GeM) or IREPS portal (for contracts with the Ministry of Railways). Within two weeks of receiving the claims, the procuring entities will examine the claims and present settlement sums.
  • Amount of Settlement: Depending on where the case stands, contractors may get a settlement payment. For judicial awards, whichever is lower—85% of the net awarded sum or 85% of the contractor’s claim—will be paid. The corresponding figures are 65% rather than 85% for arbitral awards.
  • Calculation of Interest: If there was a delay in payment under the award, simple interest at a rate of 9% per year will be due on the settlement amount from the award’s specified payment time until the date of the procuring entity’s email of acknowledgement.
  • Settlement Agreement: After the parties have reached an agreement on the settlement sum, a settlement agreement will be signed, and the settlement sum will be paid within 30 days of the signing of the agreement.
  • Limitation on Large Claims: The procurement organizations have the discretion to accept or reject claims that exceed Rs 500 crore. If rejected, the authority in question must record and approve the grounds for the decision.
  • Confidentiality: The settlement agreement must be kept confidential, except when it is being implemented and enforced.
  • Retraction of Litigation: Following the execution of the settlement agreement, both parties agree to renounce all pending litigation, including arbitration and court cases.
  • No appeal based on an offer: No settlement offer made during the negotiation process may be cited in a subsequent lawsuit.
  • Starting date of the program: The program will go into effect on July 15, 2023, and claims can be filed up until October 31, 2023.