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Vivad se Vishwas II Scheme: Fast-tracking Contractual Dispute Resolution

Description: Explore how the Vivad se Vishwas II Scheme aims to expedite contract dispute resolution, save costs, and promote a smoother business environment. Learn about its impact, challenges, and future prospects.

Introduction

Arbitration is a mechanism to resolve disputes between parties without having to initiate a case in court.

• The scheme aims to settle contractual disputes involving the government and its undertakings where an arbitral award is under challenge in a court. It offers a voluntary settlement process with standardized terms and provides graded settlement terms based on the level of pendency of the disputes.
• To be eligible for consideration under the settlement scheme, the aggrieved party should have secured an arbitral award by January 31, 2023, and the cut-off date for court orders is April 30.
• The scheme applies to all domestic contractual disputes where one of the parties is either the Government of India or an organization under its control.
• The scheme aims to expedite the resolution of contractual disputes and promote a smoother business environment for vendors and suppliers dealing with the government and its undertakings. The deadline for firms to submit their claims for consideration is October 31.

About

• Contractual disputes are disputes between the parties to any contract regarding any clause of the contract. They may arise due to various reasons, such as breach of contract, non-performance, delay, force majeure, frustration of contract, etc.

Impact

• Legal Costs: Resolving contractual disputes often involves legal proceedings, leading to substantial legal costs for the parties. These costs can include fees for lawyers, arbitrators, mediators, experts, and courts.
•  Delay in Project Completion: Disputes can cause delays in project completion, affecting timelines, and potentially leading to cost overruns. Delays can also impact the quality and performance of the project deliverables, as well as the satisfaction of the end-users and stakeholders.
• Financial Loss: Contractual disputes can result in financial losses for one or more parties, especially if payments are withheld or if penalties and damages are awarded. Financial losses can affect the cash flow and profitability of the parties, as well as their ability to meet their obligations to other parties.

Challenges

• Lack of awareness and trust among the parties about alternative dispute resolution methods, such as arbitration and mediation, which can offer faster and cheaper solutions than litigation.
• Lack of adequate infrastructure and resources for the commercial courts and arbitration institutions, which affects their functioning and efficiency.
• Lack of uniformity and consistency in the interpretation and application of the laws and precedents relating to contractual disputes by different courts and tribunals.
• Lack of clarity and certainty in some aspects of the laws and regulations governing contractual disputes, such as force majeure, frustration of contract, public policy, etc., creates ambiguity and confusion among the parties.
• Lack of enforcement of some awards and judgments due to various legal and practical difficulties, such as challenges before higher courts, lack of cooperation from authorities, etc.

Therefore, there is a need for further reforms and initiatives to overcome these challenges and enhance the dispute resolution mechanism for contractual disputes in India.

Way Forward

The scheme will boost developer and investor confidence, and will free up financial resources locked in disputes.

• Creating more awareness and confidence among the parties about the benefits and advantages of alternative dispute resolution methods through campaigns, workshops, seminars, etc.
• Providing more financial and technical support to the commercial courts and arbitration institutions to improve their infrastructure and capacity.
• Developing a uniform code or guidelines for contractual disputes to ensure coherence and harmony in the legal framework.
• Simplifying and streamlining the procedures and formalities for enforcing awards and judgments to ensure their timely execution.
• Encouraging dialogue and negotiation among the parties to resolve their disputes amicably and avoid litigation.

By adopting these measures, India can hope to achieve a robust and efficient dispute resolution mechanism for contractual disputes that can foster a conducive business climate, attract more investments, promote trade relations and enhance public welfare.

Here is the link to What is the Open Market Sale Scheme?