Para 9.9.5 - Arbitration Rules | KartavyaDesk

Original Rule Text

9.9.5 Arbitration 1. Arbitration Agreement: If an amicable settlement is not forthcoming, recourse may be taken to the settlement of disputes through arbitration as per the Indian Arbitration and Conciliation Act, 1996 [Amended 2015120 and 2021121]. For this purpose, when the contract is with a domestic supplier, a standard arbitration clause (hereinafter called the ‘Agreement’) may be included in the Tender Document (Please refer to the Model Tender Document) indicating the arbitration procedure to be followed, based on which the Arbitration Act shall become applicable. 2. This Agreement shall continue to survive termination, completion, or closure of the Contract for 120 days after that. The venue of arbitration should be the place from where the contract has been issued. 3. The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 provides parties to a dispute (where one of the parties is a Micro or Small Enterprise) to be referred to the Micro and Small Enterprises Facilitation Council if the dispute is regarding any amount due under Section 17 of the MSMED Act, 2006. If a Micro or Small Enterprise, being a party to dispute, refers to the provisions in the MSMED Act 2006, these provisions shall prevail over this Agreement. 4. Government Guidelines on Arbitration in Contracts: Department of Expenditure, Ministry of Finance has issued following guidelines122 for arbitration in contracts of domestic procurement by the Government and by its entities and agencies (including Central Public Sector Enterprises [CPSEs], Public Sector Banks [PSBs] etc. and Government companies): a) Arbitration as a method of dispute resolution should not be routinely or automatically included in procurement contracts/ tenders, especially in large contracts. b) As a norm, arbitration (if included in contracts) may be restricted to disputes with a value less than Rs. 10 crores. This figure is regarding the value of the dispute (not the value of the contract, which may be much higher). It may be specifically mentioned in the bid conditions/ conditions of the contract that arbitration will not be a method of dispute resolution in all other cases. c) Inclusion of arbitration clauses covering disputes with a value exceeding the norm specified in sub-para (b) above should be based on careful application of mind and recording of reasons and with the approval of: i) Regarding Government Ministries/ Departments, attached/ subordinate offices and autonomous bodies, the Secretary concerned or an officer (not below the level of Joint Secretary) to whom authority is delegated by the Secretary. ii) Regarding CPSEs/ PSBs/ Financial institutions etc., the Managing Director. d) In matters where arbitration is to be resorted to, institutional arbitration may be given preference (where appropriate, after considering the reasonableness of the cost of arbitration relative to the value involved). e) General or case-specific modification in the application of the above guidelines may be authorised by the Secretary concerned (or an officer not below the level of Joint Secretary to whom the authority is delegated by him) in respect of Government

What This Means

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Key Points

• •Arbitration is a method of dispute resolution under the Indian Arbitration and Conciliation Act, 1996.
• •Arbitration is generally preferred for disputes valued under ₹10 crores.
• •For disputes exceeding ₹10 crores, approval from senior officials (Secretary/Joint Secretary level or MD) is required.
• •The MSMED Act, 2006 takes precedence if the dispute involves payments to a Micro or Small Enterprise.
• •The arbitration agreement survives for 120 days after contract termination, completion, or closure.

Practical Example

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Frequently Asked Questions

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.