A breather for construction projects under litigation

Over the last few years, companies in the construction sector have been hit by cash flow concerns. While these companies may have obtained arbitral awards against government entities, it is seldom that the judgment creditor is able to secure the fruits of the award in reasonable time, considering that a challenge to the award is a likely scenario. To bring much needed relief to judgment creditors, National Institution for Transforming India Aayog (NITI Aayog) proposed measures to address the issues plaguing the construction sector, for consideration of the Cabinet Committee on Economic Affairs (CCEA).

NITI Aayog's suggested measures have been introduced in the General Financial Rules, 2017 by an amendment (referred to as the "Amendment"). The Amendment provides that government entities challenging an arbitral award shall release 75% of the award amount to the contractor/concessionaire (collectively referred to as "Contractor") in an escrow account, against a bank