Sack government official who drafted it: Experts pan OM limiting arbitration to high-stakes disputes

The official who drafted the office memorandum (OM) recommending that arbitration should not be routinely used in disputes involving the government should be sacked, a panelist at a conference organised by the Nani Palkhivala Arbitration Centre said on Saturday.

The Memorandum titled Guidelines for Arbitration and Mediation in Contracts for Domestic Public Procurement recommends that arbitration clauses in public procurement contracts involving the government should not be routinely used and that arbitration of government contract disputes should be restricted to disputes with a value of less than ₹10 crore.

The discussion on 'Current Controversial Issues in Arbitration' was part of a technical session held during the 15th Annual International Conference on the theme 'India and Global Arbitration: Opportunities and Challenges for 2025–2030'.

The session was chaired by Khaitan & Co. Partner Sanjeev Kapoor. HSA Advocates Partner Amrita Narayan, Larsen & Toubro (L&T) Limited's Group Legal Advisor Hemant Kumar, Advocate Diya Kapur and One Essex Court Chambers' Barrister V Niranjan were the panelists at the session.

Kumar opined that the government official who drafted the OM should face the music.

"I am a little confused, what is the purpose of this seminar and other two recent ones conducted in Maharashtra? To promote arbitration. Our Prime Minister, Finance Minister, everyone says that we want to promote it, but this circular contradicts everything. Not from an L&T perspective, but I am very crude about this - you just do not want to pay our retainer fees. The person who drafted it should be sacked. Who is the biggest litigator? The government. My view is that we are unnecessarily organising such conferences. Just withdraw it (the OM). 5 crore cases are pending (in Indian judiciary)", he said, while clariying the remarks were strictly in his personal capacity.

Kapoor felt that the government, in trying to address issues, has ended up throwing the baby out with the bathwater.

"You have actually created more problems. We may have delays in arbitration, but a complex commercial suit (in court) cannot be (disposed of) before 10 years. While we have issues with delay in arbitration but no arbitration is not the answer. So many arbitrations are now done in a year-and-a-half, Section 34 (pleas) are now narrowed. We have a sophisticated bar. Earlier, arbitration was treated like a civil suit, you would sit after 4 pm with chai and pakodas but not anymore. If you (government) have issues with fees, fix it beforehand in your (government) agreements. Go to institutions that have proper fee schedules, that you trust. Wrong solution it (the OM) is."

Kapoor added that the OM appeared to be the wrong cure for the problem.

As the session drew to close, Senior Advocate Arvind Datar asked in jest whether L&T plans to challenge the OM in court.

However, he added that industry bodies should point out to the government how counterproductive the guidelines are.

The panel also touched upon the recent Supreme Court decision that set aside a ₹2,800 crore arbitral award in favor of Anil Ambani owned Delhi Airport Metro Express Pvt Ltd (DAMEPL) in relation to the dispute over Delhi Airport Express Line.

This judgment was passed by the top court in a curative petition.

Narayan said that the timeline of the case was alarming.

"It has taken almost 12 years to achieve finality; curative should be sparingly used. Arbitration was supposed to be speedy and efficacious, but if it takes as long as DMRC to attain finality, then courts have to take steps. Instead of reopening and re-appreciating, you should only see if Section 34 grounds were met or not."

Kumar added that the decision was "really frustrating".

"I think in arbitration and litigation, we should not have review or curative remedies. All views are my own, not my organisation's. Rupa Hurra guidelines not followed. They relied on PWD report not IIT's. It is not a good decision and worrying for big corporates like us."

V Niranjan opined that the decision was surprising but will probably be come to be seen as a one-off.