Noida Must Fund Contractor’s ₹8.21-Crore VSV-II Settlement After Routing Road Project Through IRCON, Delhi HC Rules.

Respondent No. 1, a Central Public Sector Enterprise, entered into a construction contract on behalf of Respondent No. 2, the Noida Authority.

An arbitral award dated 6 June 2016 directed payment of ₹9,44,09,629 to the petitioner, with interest; Respondent No. 1’s counterclaims were rejected.

The respondents’ challenge under Section 34 of the Arbitration and Conciliation Act, 1996 was returned for lack of jurisdiction, while execution proceedings were later closed after the petitioner did not furnish security for release of the deposited amount.

Under the Vivad se Vishwas II (Contractual Disputes) Scheme, 2023, the petitioner sought settlement for ₹8,21,15,653.75.

Respondent No. 1 rejected the claim, stating that it could not proceed without Respondent No. 2’s permission; Respondent No. 2 contended that the Scheme did not apply to it as a State authority.

The Court applied the Vivad se Vishwas II (Contractual Disputes) Scheme, 2023. Paragraph 4 identifies the organisations, including Central Public Sector Enterprises, that qualify as “procuring entities”; paragraph 18 requires acceptance of qualifying claims of ₹500 crore or less; and paragraph 22(i) makes the procuring entity the competent authority to accept settlement, while paragraph 22(ii) requires the public authority on whose behalf procurement was made to provide the settlement budget.

Paragraph 10(b) permits settlement whether or not an award is under challenge or appeal, and paragraphs 5 and 8 address eligible monetary awards and domestic arbitration respectively.

The Court interpreted paragraph 22’s reference to “public authority” as not being limited to Central Government bodies.

Respondent No. 1 was undisputedly a procuring entity under paragraph 4, and the petitioner’s claim was below ₹500 crore.

The Court held that paragraph 22(i) makes Respondent No. 1 the competent authority to accept the settlement and does not require it to obtain Respondent No. 2’s consent.

Since Respondent No. 2 had chosen to route the procurement through Respondent No. 1, a Central Public Sector Enterprise, it fell within paragraph 22 as the public authority responsible for providing the settlement budget; the Scheme did not restrict “public authority” to a Central Government body.

The pending Section 34 challenge did not prevent settlement because paragraph 10(b) expressly covers cases under challenge or appeal.

It set aside Respondent No. 1’s rejection of the petitioner’s claim and directed Respondent No. 1 to execute the settlement under the Scheme; the petition was allowed.