Mechanism for out of court settlement of commercial disputes

The Union Cabinet on Wednesday approved a new mechanism for settling commercial disputes out of court between government departments and public sector undertakings.

"The Union Cabinet approved the strengthening of the mechanism for resolution of commercial disputes of central public sector enterprises inter se and also between CPSEs and other government departments/organisations. The decision will put in place an institutionalised mechanism within the government for speedy resolution of commercial disputes of CPSEs without the matter being referred to the courts of law," an official statement said.

"It will reduce court cases. At times even courts have questioned government departments settling disputes through litigation," Law Minister Ravi Shankar Prasad told reporters.

The statement said, a new two-tier mechanism will replace the existing permanent machinery of arbitration mechanism to resolve commercial disputes between CPSEs, and CPSEs and government departments out of court.

At the outset, such commercial disputes will be referred to a committee comprising secretaries of the administrative ministries to which the disputing parties belong and the Law Secretary.

The financial advisors of the two ministries concerned will represent the issues related to the dispute in question before the committee.

In case the two disputing parties belong to the same ministry, the committee will comprise secretary of the administrative ministries concerned, the Law Secretary and Secretary, Department of Public Enterprises.

In such a case, the matter would be represented by the financial advisor and one joint secretary of that ministry.

At the next level, in case the dispute remains unresolved, it will be referred to the Cabinet Secretary, whose decision will be "final and binding on all".