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Settlement of disputes between two public sector enterprises / banks/ and between a public sector enterprise/ bank and a Government Department


Government of India, Ministry of Finance, Department of Economic Affairs (Banking Division) has, vide their letter dated October 19, 2005 circulated guidelines as contained in Ministry of Heavy Industries and Public Enterprises, Department of Public Enterprises, Government of India (Department of Public Enterprises) letter dated January 22, 2004 for settlement of disputes between two public sector enterprises /banks/ and between a public sector enterprise/ bank and a Government Department for compliance. The guidelines as contained in the said letter dated January 22, 2004 of Department of Public Enterprises supersede the existing guidelines on the subject. As per the new dispensation in the event of any dispute or difference relating to the interpretation and application of the provisions of the commercial contract(s) between Central Public Sector Enterprises (CPSEs), Banks, Port Trusts etc, inters, or CPSE and the Government Department S) (except a dispute or difference concerning the Railways, Income -Tax, Customs and Excise duties), such disputes or differences shall be compulsorily referred by either party for arbitration to the Permanent Machinery of Arbitrators (PMA) created in the Department of Public Enterprises. The procedure to be followed for such purpose is detailed in the letter of Department of Public Enterprises. Gist of some of the other important issues covered under the guidelines is as follows:

It has to be ensured that no litigation involving such disputes is taken up in a Court or a Tribunal without the matter having been first examined and given permission/clearance by the High Power Committee generally known as Committee on Disputes (COD) set up in the Cabinet Secretariat. 

It is advised that the parties will also ensure inclusion of an Arbitration Clause (if not already done so) in favour of PMA (as per the format given in Annexure attached with the letter) in all the existing and the future contracts/supply orders between the parties.

The aforesaid guidelines are still in vogue and are being followed for settlement of disputes between two public sector enterprises /banks/ and between a public sector enterprise/ bank and a Government Department.


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