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Vivad se Vishwas Scheme for settlement of contractual dispute – Claims to be submitted by 31.10.2023

The Department of Expenditure, Ministry of Finance, has launched the scheme, “Vivad se Vishwas II” vide an Office Memorandum dated 29.05.2023. This scheme is purposefully crafted to expedite the resolution of pending contractual disputes with its primary focus directed toward facilitating fresh investments and enhancing the ease of doing business with the Government of India (‘GOI’).


This scheme is tailored to address contractual disputes encompassing a spectrum of entities, including the GOI, autonomous bodies, public sector banks, public sector financial institutions, Central Public Sector Enterprises (‘CPSEs’), Union Territories without a legislature, and organisations wherein the GOI holds a 50% share, such as Metro Rail Corporations. It is, imperative to note, however, that these entities retain the discretion to opt out of the scheme, contingent upon approval by their respective Board of Directors.


The scheme’s scope extends to disputes of a financial nature between contractors and procuring entities, specifically those involving monetary awards issued by the courts or arbitral tribunals. Notably, cases involving specific performance of contracts (whether full or partial), international arbitration matters, and disputes that have already been settled through conciliation agreements are not eligible for settlement under the scheme. Thus, the scheme exclusively covers disputes with financial claims against procuring entities, applicable to all contractors and suppliers interested in participating. Additionally, CPSEs functioning as contractors or suppliers in a contract can submit their claims under this scheme.


The scheme applies to the following:

1. All kinds of procurement, including procurement of goods, services and works.

2. Earning Contracts, in which the government receives money in exchange for goods, services, or rights, and Public Private Partnerships (‘PPP’) contracts.


The settlement amounts to be disbursed to contractors under this scheme adhere to the following criteria, subject to the award type, status, and other factors:

1. For court awards passed on or before 30.04.2023: Contractors may be entitled to receive up to 85% of the net award amount or 85% of the claim amount, whichever is lesser.

2. For arbitral awards passed on or before 31.01.2023: Contractors may expect to receive up to 65% of the net award amount or 65% of the claim amount, whichever is lower.


It is important to note that interim orders passed by courts or arbitral tribunals under the Arbitration & Conciliation Act, 1996, are expressly excluded from the scheme’s purview. For claims exceeding Rs. 500 crores, the scheme delineates specific conditions and approval procedures for procuring entities. Furthermore, the scheme mandates a fixed interest rate of 9% per annum, regardless of the interest rate specified in the award.


The scheme has commenced on 15.07.2023, and contractors willing to participate are required to submit their claims by 31.10.2023, through the online portal of Government e-Marketplace (‘GeM’). In cases of non-GeM contracts of the Ministry of Railways, contractors can register their claims via the Indian Railways E-Procurment System (‘IREPS’) portal.


The scheme incorporates a well-defined timeline for the entire settlement process, stipulating that procuring entities must evaluate the settlement amount and extend an offer to the contractor within two weeks. Subsequently, the contractor is granted a 30-day window to accept the settlement offer. Once both parties agree, the settlement agreement is to be digitally signed, after which payments are to be executed within a 30-day timeframe.


Notably, the scheme emphasizes that any offers, negotiations, or settlements conducted within its framework should not be quoted or referenced to in any subsequent legal proceedings.


Conclusion

“Vivad se Vishwas Scheme II” represents a significant step towards expediting the resolution of contractual disputes in India. It aims to reduce the burden of litigation, unlock financial resources for accelerated economic growth, and foster a conducive business environment. The Scheme provides clear criteria for settlement amounts, with exclusions for cases already settled through conciliation agreements, and emphasizes timely resolution through well-defined procedures. This comprehensive approach makes it a valuable avenue for contractors, suppliers, and government entities, ultimately contributing to the ease of doing business and attracting investment in India. Interested parties can access further details and guidelines on the Ministry of Finance, Department of Expenditure's official website.


Authored by Purvi Garg, Advocate at Metalegal Advocates. The views expressed are entirely personal and do not constitute legal opinion.

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