Govt to audit arbitration cases exceeding ₹1 crore in 20 years

The audit is aimed at assessing the extent of financial losses arising from legal disputes with contractors and losses suffered due to it, officials added.

The Delhi government has directed the Public Works Department (PWD), water department, and the Irrigation and Flood Control Department (I&FC) to submit detailed records of all arbitration cases involving claims above ₹1 crore over the last 20 years, senior government functionaries said.

PWD minister Parvesh Verma (HT Photo)

The audit is aimed at assessing the extent of financial losses arising from legal disputes with contractors and losses suffered due to it, officials added.

The government has also issued a binding directive that no payments shall be made in arbitration cases where the award is against the government, unless all legal remedies have been exhausted and formal clearance is obtained from the legal department.

Parvesh Verma, the minister overseeing the three departments which have been given the directive, said: “We are auditing two decades of arbitration history to identify who was responsible and why legal battles were surrendered. I have now removed the arbitration clause from PWD contracts. If there’s a dispute, let it go to court.”

The move comes a day after chief minister Rekha Gupta ordered a vigilance probe into alleged irregularities in the under-construction Barapullah Elevated Road Phase-3 and the payment of ₹175 crore to the contractor executing the work in 2023 during the tenure of the former Aam Aadmi Party (AAP) government.

Officials said that the three departments have been instructed to provide yearly and award-wise data covering four aspects — total number of arbitration cases exceeding ₹1 crore, cases decided against the government along with brief descriptions, amount paid or losses incurred in such cases, and the number of appeals filed before making payments.

“This audit comes amid mounting concerns over repeated legal setbacks in infrastructure and civil works, many of which have resulted in heavy payouts to private contractors,” an official from Verma’s office added.

A PWD official said that the earlier the department had decided to completely remove the arbitration clause from all future contracts.

“Contractors will henceforth have to directly approach the courts in the event of disputes, making the process more rigorous and reducing the scope for opportunistic claims. This shift is expected to act as a strong deterrent to frivolous claims and force all stakeholders to approach project disputes with more seriousness and legal preparedness,” the official added.

On Monday, CM Gupta had said that the Barapullah project that was scheduled for completion in October 2017, was repeatedly delayed and eventually went into arbitration. The ruling favoured the contractor with an award of ₹120 crore. When the payment was withheld, the company approached the Delhi High Court, which in May 2023 ordered PWD to pay ₹175 crore, including interest and taxes.