Rajasthan government eliminates arbitration provisions in state contracts

JAIPUR: The Rajasthan government has issued an order that may have significant implications for contractors working with the state.

According to the order, all procurement institutions are directed to exclude any provision for arbitration in contractual agreements going forward.

The order issued by joint secretary, finance Manish Mathur states, “it has been observed that in contracts between the state government and contractors, arbitration provision is being made to deal with situations of mutual disagreements, whereas in General Financial and Accounts Rules and the Rajasthan Transparency in Public Procurement Rules, there is no provision available in this regard.

The Advocate General of Rajasthan has also expressed his opinion on this matter, stating that the arbitration provisions are contrary to state interests. Therefore, all institutions are directed that in future, no provision related to arbitration should be included in any contractual agreements being made.

The absence of arbitration provisions in contracts means that contractors will now have limited options for resolving disputes with the state. Their only recourse will be to file a civil suit, which could potentially lead to lengthy legal battles and increased costs for all parties involved.

This change in policy may have far-reaching consequences for the construction and public works industry in Rajasthan, as it could discourage contractors from taking on projects with the state government. It may also lead to a reevaluation of existing contracts and agreements, as well as potential disputes and legal challenges arising from the lack of arbitration provisions.

The government has been exploring ways to reduce their reliance on arbitration and instead opting for more traditional legal routes to resolve disputes. However, it remains to be seen how this change will play out in practice and what impact it will have in Rajasthan and beyond.