Does the new Bill run the risk of ending up like many other tribunals that were replete with court intervention? Amit Kapur and Vishnu Sudarsan evaluate why the currently drafted Dispute Resolution Bill, which is understood to have reached the PMO and awaiting introduction in both Houses this winter, is flawed.
On the direction of the Prime Minister, the Planning Commission has drafted a Bill of legislation to address the vexatious issue of settling disputes arising from public-private partnerships (PPPs) and contracts for construction of works, production and supply of foods or provision of services that are entered into by the central government, state governments, a local or statutory authority or any corporation or society owned or controlled by such government (´Public Contracts´). The decision to draft such a law stemmed from the perception that the current dispensation for resolution of disputes has not worked, thereby giving rise to the need for establishing a dedicated mechanism in this regard.
The Public Contracts (Settlement of Disputes) Bill, 2013, provides for the constitution of dedicated tribunals for the Public Contracts whose functions, among other things, would include adjudication of disputes and differences connected with or arising from the Public Contracts which (as the most recent reports suggest) involve at least $800,000. Such tribunals shall have the authority, power and jurisdiction over all the disputes arising from a Public Contract.
The spirit and intent of the Bill are laudable, seeking as it does to address an issue that is critical to the smooth and effective rollout of infrastructure projects. However, the approach taken is flawed: By seeking to cover such array of contractual transactions, the Bill may be hamstringing its effectiveness and derailing its objective. The Bill would prove to be much more focused and effective where it is to be limited to PPPs. By doing so, the tribunals will not be stretched or overburdened (which would result in a possible back-log of cases).
Where does the new bill fit?
A universe of institutions exists for dispute resolution, comprised of the court system, arbitral tribunals, statutory regulators/ tribunals, and alternative dispute resolution mechanisms (including conciliation, mediation, lok adalats, and dispute resolution boards). Against this backdrop, the expert institutional framework for resolution of disputes must:
(a) fit into the overall dispute resolution architecture where a variety of interventions are being proposed including, the Commercial Division of High Courts Bill, the Right of Citizens for Time Bound Delivery of Goods and Services and Redressal of their Grievances Bill, the Regulatory Reform Bill, the proposed amendment to the Arbitration & Conciliation Act, 1996, et al.
(b) have a sharply defined and focused jurisdictional and legislative framework to ensure expeditious, time-bound adjudication without multiple alternative interventions (adapting lessons from the challenges faced in India regarding timely decisions in arbitration and regulatory mechanism like the Electricity Act, 2003).
Need for tiered mechanism
Another major structural flaw in the Bill is the failure to provide for two-tier expert bodies, after which a final appeal of substantial question of law will lie with the Supreme Court unlike in the case of the Electricity Regulatory Commissions (ERCs), Airports Economic Regulatory Authority, Telecom Regulatory Authority of India, Stock Exchange Board of India, etc. The Bill provides for a single-tier tribunal with a direct appeal to Supreme Court. This mechanism is at imminent peril of opening of floodgates of intervention by High Courts in an absence of an expert appellate body.
In the past, experiments in the Central Administrative Tribunal and Debt Recovery Tribunal have met with similar fate, where the Supreme Court itself directed that matters must come to the High Court before coming to Supreme Court. Such a situation would, in turn, compromise the fundamental idea of time-bound two-tier adjudicatory adjudication, which has earned the confidence and respect of senior judiciary and are not ordinarily interfered with except in statutory appeals to Supreme Court.
Regulatory criteria
The authorities must be governed by explicit legislative/policy guidelines laying down the end objectives of such intervention, which in turn would serve as the touchstone to evaluate the decisions. This should include guidelines with suitable due process and other safeguards. The efficacy of the mechanism would depend upon how effectively the framework defines and implements the filters which address issues like:
(a)salvage and optimal utilisation of the investment made and the infrastructure asset created distancing ownership from the outcome/public good involved to secure continuous and good quality affordable supply of infrastructure facility in a viable manner;
(b) avoidance of moral hazards and abuse;
(c) price inexcusable or negligent delays by governmental authorities which impair timelines for implementation of projects;
(d)defining the fair and appropriate intervention drawing from one or more of the following parties:
(i) take out equity
(ii) expropriation/step-in;
(iii) rebid to the universe of qualified unsuccessful bidders;
(iv) renegotiation;
(v) refinance including take-out finance;
(vi) payment of termination payment;
(vii) taking over of the assets post the mid-term termination of a public contract;
(e) fair and appropriate sharing of the burden/pain for any intervention to balance interests. In sharing the pain, the mechanism would have to be real and rational/implementable. This may have to include relaxation and compensation for time and cost overruns against the grantor/public authority responsible for unjustified delays. The decision-making authorities must be subject to objective criteria for securing accountability of the decisions. This could draw from well-established precedents like:
(a) regulatory impact assessment;
(b) oversight committee of the Parliament;
(c) annual plan based assessment of performance of the authority in question with objective monitoring of outcomes;
(d) evaluation of efficacy in decision making including factors like
(i) timely decisions (ii) based on relevant considerations, etc;
(e) requirement for a written justification by the decision making body/pursuing agency for change in policy or dispensation mid-stream wherein they are obliged to elucidate:
(i) how and why public interest underpinning the change would outweigh adverse impacts;
(ii) mechanism to compensate adverse effect on the PPP projects.
Accommodation over annihilation
The divesture of jurisdiction the Bill appears to extend to sectoral regulators as well. It should be noted that in sectors such as electricity, the sectoral regulators are vested with dispute-settlement functions. Some of these regulators are but recently constituted. To divest these specialist/expert bodies of adjudicatory functions in respect of disputes in those sectors may not be advisable. This is particularly so when the sectoral regulators and dispute settlement bodies (such as the SERCs, the Telecom Dispute Settlement and Appellate Tribunal, etc) have proved to be effective and efficient in discharging their functions.
The Bill, rather than seeking to divest or displace these pre-existing bodies, should develop a mechanism whereby these bodies are assimilated into the proposed framework, thereby ensuring continuity and predictability in these sectors.
Other issues
Some other issues that are worth considering in respect of the Bill are:
(a) It is unclear how this Bill will tie in with the Public Procurement Bill, 2012, which also provides for a dispute settlement mechanism with respect to public procurement (including PPPs). While the Public Procurement Bill 2012 addresses the pre-contract scenario and this Bill address the post-contractual scenario, it would still be worthwhile to clearly spell out the intended relationship between the two statutes.
(b) It may be worth considering limiting the jurisdiction of the Tribunal to be notified pursuant to the Bill to PPP in infrastructure as defined by Ministry of Finance and Planning Commission. The capacity in terms of adequacy of trained and experienced staff drawn from branches of law, economics, finance, project management and to ensure that the proposed tribunal is not inundated and rendered ineffective in resolving diverse/complex issues in a time-bound manner.
(c) The Bill provides that no court except the Supreme Court is entitled to exercise ´any jurisdiction, powers or authority´ with respect to matters concerning disputes covered under the Bill. This appears to be an implicit bar on the writ jurisdiction of High Courts exercisable under Article 226 of the Constitution of India. It is settled law that the writ jurisdiction of the High Court cannot be excluded by statute or an act of the legislature being as it is a part of the basic structure of the Constitution of India.
(d) The Bill proposes the constitution of Tribunals by the Government of India, which shall be authorised to adjudicate on disputes arising out of a Public Contract. Since such disputes will vary from a local state level to central level and would also be sector specific, it is advisable from both a time and cost perspective that the tribunals feature experts well aware of issues concerning the relevant dispute are also aware of the local state level issues and sector specific issues. The current dispensation is crafted in a manner that does not mandate inclusion of experts.
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