New Delhi: In a significant policy shift, the Public Works Department (PWD) of the Delhi government has removed the arbitration clause from all its upcoming contracts, signalling a move away from alternative dispute resolution mechanisms in public infrastructure projects.
As per an official order dated April 21, Clause 25 of the General Conditions of Contract (GCC) which earlier provided for dispute resolution through arbitration will no longer be included in future PWD contracts. The revised clause now mandates that any contractual disputes must be settled exclusively through the jurisdiction of Delhi courts.
“The Competent Authority has decided that the Arbitration Clause (Clause 25 Settlement of Disputes & Arbitration) shall be deleted from the GCC of all future contracts of PWD,” read the order signed by Special Secretary (PWD) Ruchika Katyal.
This shift follows similar cautionary moves at the central level. In June 2024, the Ministry of Finance issued a detailed Office Memorandum limiting the use of arbitration in public procurement, particularly for contracts involving sums above Rs 10 crore. The memorandum flagged concerns about arbitration’s inefficiency, cost, and its frequent failure to reduce litigation as originally intended.
Senior legal voices have reacted strongly to Delhi’s decision. “This is a very disturbing development. We need to understand why there is this vote of no confidence against arbitration by the Delhi government,” said Gourab Banerji, Senior Advocate and President of the Arbitration Bar of India. “Surely the solution is not to throw out the baby with the bath water.”
Under the new regime, all future PWD disputes will bypass arbitration tribunals and be directed to civil
courts in Delhi. Critics argue that this could overburden the judiciary and lead to further delays in resolving contract-related issues.