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Finance Ministry writes to states: Use arbitration only in disputes under Rs 10 cr

Ziraat Times News Network

Srinagar: The Union Finance Ministry has recommended restricting arbitration clauses in government contracts to disputes of less than Rs 10 crore.

“Arbitration as a method of dispute resolution should not be routinely or automatically included in procurement contracts/ tenders, especially in large contracts,” said a June 3 office memorandum by the Department of Expenditure’s Procurement Policy Division sent to all states, including Jammu and Kashmir.

In its memorandum, the Department of Expenditure said, “The process of arbitration itself takes a long time and is not as quick as envisaged, besides being very expensive too. The reduced formality, combined with the binding nature of decisions, has often led to wrong decisions on facts and improper application of the law.”

“Adjudication by the courts is a remedy which always exists wherever there is no arbitration clause. However, another alternative to arbitration is  mediation, which is a process whereby parties attempt to reach an amicable settlement of their dispute with the assistance of a third person (mediator) who does not have the authority to impose a settlement upon the parties to a dispute,” the Department of Expenditure memorandum said.Under mediation, both parties will have to reach a mutual agreement, failing which the case goes to trial.


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