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Arbitration,conciliation,ADR Construction contract-mutual obligations A construction contract is between two parties-Employer and Contractor.

. The work is executed based on Contract provisions and the rights and obligations of the parties are governed by these documents Both parties have to fulfill their respective obligations under the contract. Non fulfillment of any obligation by one party affects the interests of the other party Long duration of contract-various issues arise during construction Views of one party may not be acceptable to the other resulting in disagreement 10Unresolved issues result in disputes Most of the issues are resolved by mutual discussions with the spirit of accommodating each others point of view and in the overall interest of work. The Engineer plays an important role in ascertaining the views of both sides. The Engineer, with his professional experience and fairness, endeavours to convince both parties to come to a common understanding and agreement. If there is a disagreement, the Engineer gives his decision/ determination in accordance with the contract. In case the issue can not be resolved, the dispute is precipitated Sources of disputes Sources of disputes could be: 20 Inconsistencies/discrepancies in contract provisions Delay in giving possession of site Denial of extension, Liquidated damages Rejection of work, Cancellation of contract, Foreclosure Variations, Fixing rates, Delays and denial of payments, etc. Delays in execution and failure of contractor Non adherence to contract conditions and specifications by contractor Interpretation of contracts in case of discrepancies The following aspects are to be considered while interpreting contract documents 30 a) Contract to be read as a whole

c) Local custom or usage d) Reasonable meaning e) Order of precedence among various documents forming part of contract f) Words versus figures g) Written words versus printed words h) General versus special provisions Inconsistencies in different parts of Contract In order to resolve apparent inconsistencies or contradictions, in cases where the subject matter is covered several times in different parts of the Contract, the order of precedence to be considered is laid down in the General Conditions of Contract adopted by various organisations There is a sub-clause in FIDIC contract form also (Federation Internationale des Ingenieurs-Conseils) laying down the order of precedence for interpretation Interpretation of contracts-Order of precedence- FIDIC The contract agreement The letter of acceptance The letter of tender The Particular Conditions The General Conditions 20 The Specification The Drawings The schedule or any other documents Engineers clarification If an ambiguity or discrepancy is found in the documents, the Engineer shall issue necessary clarification or instruction The work will be executed as per the instruction of Engineer Disagreement on any issue may result in claim/dispute which will have to be resolved by various procedures of dispute resolution Notice for claim and substantiation 30 If the contractor wishes to claim for any additional payment, he shall give notice to Engineer with copy to Employer, immediately on occurrence of an event leading to claim


Contractor shall keep contemporary record necessary to support his claim Without necessarily admitting the Employers liability, Engineer may inspect the records Contractor shall send detailed particulars and supporting details to substantiate his claim Contractor shall also submit any further particulars, documents or clarifications as desired by the Engineer Copies of the correspondence shall be endorsed to the Employer Engineers response to the claim 10 If the Engineer agrees to the claim, he shall issue a variation order admitting payment If the Engineer does not agree, he shall state reasons for his disagreement The Contractor may advance further arguments in support of his claim The Engineer may reconsider and give his decision/determination Copies of the correspondence shall be endorsed to the Employer Dispute Resolution-ADR Disagreement between the Employer and the Contractor results in dispute Going to Court for resolving disputes involves lengthy litigation which is tedious and time taking 20 Various alternative methods of dispute resolution are, therefore, devised for settlement of disputes-ADR Arbitration and conciliation are governed by The Arbitration and Conciliation Act,1996 Claims and counter claims The party making claims is called Claimant The claimant submits his Statement of Claims, substantiating his claims The opposite party who responds and defends the claims is called Respondent or Defendant The respondent submits arguments against the claims, called Pleadings in defence or defence statement 30 The opposite party may submit his own claims called counter claims The first party submits defence statement against the claims of opposite party Various stages of resolution of disputes-Domestic/Government contract form

Mutual discussion Decision of Accepting officer Conciliation- provision in the Arbitration and Conciliation Act, 1996 Arbitration as per the Arbitration and Conciliation Act, 1996 Intervention by Court Various stages of resolution of disputes-FIDIC contract Mutual discussion Decision of the Engineer 10 Dispute review board-or Dispute Resolution Board-(Dispute Adjudication Board in FIDIC 99) Arbitration Intervention of Court Dispute Review Board-FIDIC contract FIDIC contract provides for DRB to settle disputes during execution / completion of project Any disputes that cannot be settled by mutual discussion and decision of Engineer may be referred to the DRB Procedure for appointment of DRB, qualifications and experience required of the Board members, conducting proceedings etc, is laid down in the contract 20 The board members need not be legal experts and they need not follow strict court procedure. However, they should be impartial, reasonable and objective Dispute Review Board-appointment Normally formed by 3 Members experienced with the type of construction and acceptable to both parties A Member should have no financial interest in any party There should not be any previous employment with any party This should be confirmed by each member before accepting the appointment One Member is nominated by each party 30 The other party has to agree to the nomination

Third Member is nominated by the two Members already nominated as above and he should be acceptable to both parties The third member acts as chairman DRB proceedings-commencement DRB proceedings are commenced from the date the chairman accepts his appointment DRB chairman calls for Claims statement from both parties with details within a specified date He shall endorse copy to the other members The parties are asked to endorse copies to opposite party as well as other members 10 On receipt, the chairman calls for Defence statement from the opposite parties by a specific date Copies to be endorsed to the parties as well as other members Parties may request for extension of time for submission which may be considered by the DRB DRB proceedings-hearing On receipt of all the documents from both parties, each member studies the case in detail The chairman fixes the date for site visit and hearing of the case in consultation with all concerned 20 The procedure for conducting the proceedings will be decided by DRB in consultation with the parties On the appointed date, DRB visits site along with parties The hearing of the case is conducted at a convenient location Full opportunity is given to both parties to present their cases during site visit as well as during the hearing DRB proceedings-recommendations DRB Members make their own notes during site visit and the hearing They may ask for any clarifications from the parties 30 The hearing will be closed after both parties are satisfied that they are given full opportunity to present their case There after, the DRB will have their internal meeting, deliberate the issues among them and make their Recommendations

This will be signed by the members and chairman The copies will be sent to both parties and the members If this is not acceptable to either party, the matter may be referred to Arbitration Dispute Adjudication Board DRB is replaced by DAB in FIDIC 99 DAB is formed in a similar way and conducts proceedings in a similar way While DRB gives Recommendations, DAB gives its Decision which shall be binding on parties 10 Within a specified period, any party may give notice of dissatisfaction to the other party with copy to DAB. The case may be referred to arbitration there after If no such notice is given with the specified period, then the DABs decision shall be final and binding on both parties Resolution of disputes-ADR Mutual discussion Decision of Engineer/ Accepting officer Dispute review board- provision in FIDIC contract form Conciliation- provision in the Arbitration and Conciliation Act, 1996 Arbitration as per the Arbitration and Conciliation Act, 1996 20Powers vested with Engineer/Accepting officer As per contract, Engineer/Accepting officer is vested with powers to act as quasiarbitrator to decide on disputed issues Order of precedence among various documents of contract agreement to be considered Contractor submits his claim with supporting details Dept. submits their point of view giving the basis and details Engineer/Accepting officer examines documents/details and consults both sides Effort for mutual agreement If not possible, he gives his unbiased decision 30 If this is not acceptable to either party, reference is made to DRB/conciliation/arbitration as the case may be

The Arbitration and Conciliation Act, 1996 This is a very recent act formulated and enacted to make it more responsive to contemporary requirements. The old act, The Indian Arbitration Act, 1940 was considered outdated. The new act replaces the old act It was recognized that our economic reforms may not become fully effective if the law dealing with settlement of both domestic and international commercial disputes remains out of tune with such reforms 10 Conciliation, which is getting worldwide recognition as an instrument for settlement of disputes , is included in the act The United Nations Commission on International Trade Law UNCITRAL adopted the Model Law on International Commercial Arbitration An important feature of the Model Law is that the concepts of different legal systems of the world are harmonised in it. Thus, contains provisions which are designed for universal application The General Assembly of United Nations recommended that all countries give due consideration to the said Model Law in view of the desirability of uniformity of law of arbitration procedures and the specific needs of international commercial arbitration practice 20 The Arbitration and Conciliation Act, 1996 was enacted keeping this aspect in view Objectives of the Act To comprehensively cover international and commercial arbitration and conciliation Also domestic arbitration and conciliation To make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of specific arbitration To provide that the arbitral tribunal gives reasons for its award To ensure that the tribunal remains within the limits of its jurisdiction To minimise the supervisory role of courts 30 To permit an arbitral tribunal to use mediation, conciliation or other procedures during the arbitral proceedings to encourage settlement of disputes Other objectives of the Act To provide that every final award is enforced in the same manner as if it were a decree of the court

To provide that a settlement agreement reached by the parties as a result of conciliation proceedings will have the same status and effect as an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal To provide that, for purpose of enforcement of foreign awards, every arbitral award made in a country to which one of the two international Conventions relating to foreign awards to which India is a party applies, will be treated as foreign award Contents of the Act Part I Arbitration- consisting of TEN chapters Part II Enforcement of certain foreign awards- consisting of TWO chapters 10 Part III Conciliation Part IV Supplementary provisions The First Schedule The Second Schedule The Third Schedule Notes on Sections