The Fast Expanding Construction Sector

Education Blogs |Danieli Corus

The infrastructure and industry sector in India is progressing rapidly with many ongoing large scale construction projects receiving huge investments. Any large-scale construction project in industry sectors is complex and involves one or more contractors/employers. The importance of construction sector cannot be denied from the fact that it’s contribution to GDP of India is around 1.4% which is next highest to the agriculture. It employs around 40 Million of work force. This sector has operation budget of around 175000 crores per annum.
Due to multi – party nature, the projects are becoming more risky. There are many risks in the large and mega construction projects in any country in general and in India in specific. One of the identified risk is delay of the projects due to various reasons of delays, therefore, the disputes in the construction sector are on rise. Any kind of disputes in the projects, delays the   projects which are not good for country’s economy as growth declines. Whenever such disputes do arise among the stake holders, it is essential that there should be a mechanism in place to sort out the dispute and complete the project as early as possible under agreed contract conditions. Construction disputes always arise in a variety of situations which varies from project to project. These disputes finally land in demands of extension of time of project without imposition of any liquidated damages (LD) and penalties and brings   claims and counter-claims from contractors to employers and vice-versa and that begins the battle of conflicts and disputes.

One of the first requirement for this kind of projects is engineering of the process/technology, equipment’s and structures which again needs the support and application of various engineering disciplines like Civil, Mechanical, Electrical, Instrumentation, Automation, Chemical, Metallurgical etc Involvement of these engineering’s may vary from one industrial project to other depending on process of production, type of technologies and products manufactured. Objectively, construction sector needs to be on top priority for the nation to achieve a high growth rate.

In today’s competitive environment, the construction sector is becoming more complex and uncertain resulting in various disputes including non-performance, breach of contract and delays.  To resolve these disputes, approaching courts does not appear to be the most promising option as it becomes long drawn and tedious. Resolution of disputes through courts may take inordinately long time given the extreme pendency in litigation. This will in turn defeat the main purpose of dispute resolution. Delay in resolution of disputes in construction projects is an unhealthy trend for the country’s economy as it leads to a decline in its growth.

Means of Dispute Resolution in the Construction Sector
To minimize the disputes, there is a need to have a clear understanding of the contract, the project execution requirements and to adhere to the same. However, in practice, disputes are bound to arise in projects. Therefore, it is necessary that the disputants have confidence and faith in that mechanism of dispute resolution. Arbitration is a preferred mode of dispute resolution because of its economic price and shorter durations with the flexibility in procedures and autonomy of disputants. However, arbitration has not been a prevalent means of resolution in industrial disputes, specifically in the construction sector.
However, given the estimated backlog of three crore cases in courts, disputants have had to compromise with the best possible alternative in the given circumstances and have lived with these disputes.  Other than ad-hoc arbitrations, there are a number of institutional arbitrations wherein the arbitration is governed through an institution including International Chamber of Commerce, Singapore International Arbitration Centre as well as Indian Council of Arbitration.

Alternate dispute resolution mechanism like Arbitration and conciliation is getting   huge popularity in India .The Government of India’s has taken lot of initiatives to present India as a pro-foreign investment and pro-arbitration nation.  Now this dispute resolution mechanism will be reachable by a common man of this country. This situation has created a big demand of qualified arbitrators comprising of   advocates, chartered accountants and officers with an engineering degree, to take over the role of arbitrators.

With the increase in arbitration as the most preferred mode of dispute resolution, it has created rewarding career opportunities, for a wider range of professionals, as arbitrators in India and other international arbitration centers world over. The stricter and more professional timelines are also encouraging foreign investment in India. India will be on the path of becoming the arbitration hub and consequently the requirement for arbitrators will rise.

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