There is a massive infrastructure boom in India. These large scale and complex projects involve multiple stakeholders, from government to private contractors and lenders. This gives rise to high-value and technically complex disputes. India has been developing its dispute resolution framework, with significant reforms over the past decade to make the process faster, accessible, and more dependable. From the amendments of 2015, 2019, 2021, the proposed new amendment bill of 2024 to the Arbitration and Conciliation Act, 1996 and the enactment of the Commercial Courts Act, 2015 and related amendments, the evolution of India’s disp ute resolution framework is now heading towards mediation and away from arbitration.

Today, various government instrumentalities are facing huge debt on account of pending liabilities arising out of arbitral awards. National Highways Authority of India by March 2025 had liabilities of about INR 1.16 trillion arising out of only arbitration claims against it. It is because of increasing liabilities, concerns over prolonged proceedings (mostly at post arbitration stage) and inconsistent awards that the Government has slowly started to move away from arbitration for high-value disputes. In view of these growing uncertainties, the Ministry of Finance by an Office Memorandum No. F.1/2/2024-PPD dated 3 June 2024 advised ministries and other government bodies to only refer disputes below Rs 10 crore to arbitration and prefer mediation and conciliation instead for high value disputes.

Following these directions, several government and public authorities have revised their contracts to remove arbitration clauses. Very recently, the Ministry of Road Transport and Highways by its circular no. H-25011/02/2025-P&P (C. No 262142) dated 12 January 2026, has removed arbitration mechanism for disputes of value above Rs 10 crore and has prescribed arbitration by SAROD for disputes of value below Rs 10 crore. Such a systemic depar ture from the longstanding arbitration regime which is globally known for its independence, neutrality and party autonomy, is against the basic principles of the Arbitration Act and the dream of making India a preferred jurisdiction for arbitration.

The recent policies are couched upon the Mediation Act, 2023. However, amicable settlement by mediation depends on compromise by parties. In large scale projects with high value claims, where liabilities and technical issues are contested, parties are unlikely to agree to compromise and settlement without proper adjudication of claims and determination of rights. Mediation at present may thus only be useful as a pre-requisite step to arbitration. The Government may introduce any dispute resolution process, but ultimately such a process has to be effective. At present, in several disputes, it is seen that Dispute Resolution Board is not empowered to give binding decisions and authorities refuse to comply with DRB decisions.

Even where disputes are timely referred to the Conciliation Committee of Independent Experts by contractors, the authorities fail to allocate a CCIE panel and ultimately all these matters reach the stage of arbitration. The problem thus is not arbitration itself but also how it is conducted in infrastructure disputes. The true reasons that have undermined the efficacy of arbitration proceedings in India include absence of a robust institutional arbitration framework, ineffective contract management, excessive judicial intervention, prevalence of ad-hoc arbitration, routine challenge of arbitral awards and consequent delayed enforcement. Arbitration proceedings may get protracted due to voluminous documentation, lengthy pleadings, evidence, and adjudication. This leads to repeated adjournments and consequent extension of statutory time limits.

Dispute resolution mechanisms in large scale projects therefore need procedural discipline. MoRT&H has also attempted to resolve the issue of prolonged arbitrations by issuing a circular on 4 September 2025 whereby the time limit for passing of award can be extended only after approval from the higher competent authorities, however there can be misuse of the same. Therefore, the future of dispute resolution may not lie in choosing between arbitration, mediation or courts. Each mechanism is distinct and has its own role. While mediation and conciliation help protect business and commercial relationships by enabling settlements, arbitration gives technical adjudication and determination of rights and liabilities in a time bound manner.

Courts, although, may be competent to deal with such commercial disputes, however the adjudication process is a long-drawn battle and the question of specialization is still a grey area and depends on various factors. At this stage, policies should focus on building a holistic dispute resolution ecosystem suited to mega projects rather than shifting fully to one method and away from another. The focus should be on developing a systematically tiered, project-specific dispute resolution mechanism that ensures effective resolution of all disputes arising therefrom. Removing arbitration as a dispute resolution process will not significantly cut liabilities. If the contractor’s claims have merit, any adjudication process will lead to the same result. Blaming and removing arbitration as the dispute resolution mechanism cannot be the sole solution without taking appropriate steps at all stages, including pre- and post-contract stages.

(The writers are, respectively, Senior Partner, and Partner (Designate) at S&A Law Offices.)

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