Disclaimer: Education only, not legal advice. Dispute policy for highway contracts changed in 2025 and 2026 and is being challenged. Read the current NHAI and MoRTH circulars and take legal advice on any specific claim.
In simple words (if you are in class 10)
When a builder and the government disagree about money, for example "you changed the design, so pay me more", they first try to talk it out. If that fails, a neutral expert or a small private court called an arbitral tribunal decides. Big roads have big disagreements, sometimes worth hundreds of crores, so the way these fights are settled matters a lot to companies and investors.
The professional view
1. Where claims come from
- Delays by the authority: late land handover, utility shifting, forest and other clearances, design approvals.
- Change of scope orders, and disputes about what is "in scope".
- Price variation and indexation formulas, including the base-index choice. In Ssangyong v. NHAI, the Supreme Court set aside an award that had upheld a circular changing the WPI base year for price adjustment.
- Change in law and force majeure (for example COVID-19 and toll suspensions).
- Damages and deductions for O&M non-compliance, and termination disputes.
2. The ladder of dispute resolution
| Step | What it is | Key dates |
|---|---|---|
| Amicable settlement | Senior management talks under the agreement | Now 30 days from written notice under the 2026 circular |
| Dispute Resolution Board (DRB) | A standing panel for EPC and item-rate contracts | For EPC, PBMC and item-rate contracts of ₹300 crore or less, the DRB sub-clause was deleted on 2 May 2025; the January 2026 circular removed the DRB stage |
| Conciliation Committee of Independent Experts (CCIE) | Panels of retired experts to settle claims | Started for item-rate contracts on 3 Dec 2012, extended to BOT (Toll), BOT (Annuity) and HAM on 5 Apr 2016, formalised by Policy Circular 2.1.23 on 2 Jun 2017 |
| SAROD-Roads | Society for Affordable Redressal of Disputes, set up in 2013 by NHAI and the National Highways Builders Federation as a specialist arbitration body | Its use was later written into the model agreements |
| Arbitration | Under the Arbitration and Conciliation Act, 1996 | Award can be challenged under section 34, then appealed |
Source for the dates: TTA, "A fork in the road", March 2026.
3. The January 2026 reset
A MoRTH directive of 12 January 2026 and an NHAI circular of 19 January 2026 apply to BOT (Toll), HAM and EPC projects, with immediate and retrospective effect except for arbitrations already under way (same source):
- The DRB stage is removed. Parties first try amicable settlement within 30 days of written notice.
- Disputes below ₹10 crore go to arbitration before SAROD or the India International Arbitration Centre (IIAC), and the award is final and binding.
- Disputes of ₹10 crore and above are not to be referred to arbitration. They go to conciliation under the 1996 Act (to be replaced by mediation under the Mediation Act, 2023, once notified), and parties may approach civil courts.
- Declaratory and non-monetary disputes are also kept out of arbitration.
The builders' federation wrote to the Finance Minister opposing the change on 17 January 2026. Expect legal challenges about applying it to signed concessions.
4. Vivad se Vishwas settlements
Government schemes settle contractual disputes at a discount to the award. Vivad se Vishwas-III, notified in February and March 2026, offers settlement at 45% of the net award amount (65% to 70% where a court has ruled), with a ₹500 crore cap. A clarification of 19 March 2026 requires all pending cases for a project to be settled together (same source).
Decision lens for a CFO or InvIT board: compare the settlement amount now with the probability-weighted, time-discounted value of continuing to litigate, net of legal costs and bank-guarantee costs. Settled amounts often go straight to lenders under the escrow waterfall.
5. Accounting for claims and awards (Ind AS)
| Situation | Typical treatment |
|---|---|
| Claim lodged, outcome uncertain | Contingent asset under Ind AS 37: not recognised; disclosed only where an inflow is probable |
| Variable consideration in a construction contract | Ind AS 115: included only to the extent it is highly probable that a significant reversal will not occur |
| Award in the company's favour, challenged under section 34 | Usually still not "virtually certain". Many entities recognise only amounts received, or amounts released against a bank guarantee with a matching liability |
| Award against the company | Provision under Ind AS 37 if an outflow is probable and can be estimated reliably |
| Settlement agreed (for example Vivad se Vishwas) | Recognise when the settlement agreement is binding and the amount is fixed |
Audit focus: legal-counsel confirmations, the status of each case, bank guarantees given to receive part-payment of awards, interest on awards, and the tax treatment of interest and compensation.
6. Questions an investment committee should ask
- What claims does the SPV have, at what stage, and what is the legal view of each?
- Has any award been paid against a bank guarantee that could be called back?
- Is any claim already counted in the valuation or the NDCF?
- How does the 2026 circular change the route and timing for the biggest claim?
- Would a Vivad se Vishwas settlement be better on a present-value basis?
Sources
- TTA, March 2026: https://tta.in/a-fork-in-the-road-analysing-nhais-new-approach-to-dispute-resolution-in-highway-concessions/
- Delhi High Court judgments discussing SAROD regulations, for example: https://delhihighcourt.nic.in/app/showFileJudgment/JIS29072025AA18292024_193757.pdf
Education only. This page is not investment, tax, legal or accounting advice, and it does not recommend buying, selling or holding any security. Laws and rules change: check the linked primary source and consult a qualified professional before acting.
Last reviewed 25 October 2026. Spotted an error? Tell us and we will correct it.