Morth Circular 2026: Arbitration and Disputes Over INR 10 Crore, What Infrastructure Contractors & Owners Must Do

The MoRTH circular arbitration India 2026 policy shift has sent shockwaves through the country’s highway and infrastructure sector. On 12 January 2026, the Ministry of Road Transport and Highways (MoRTH) issued a circular that effectively excludes binding arbitration as a dispute-resolution mechanism for claims equal to or exceeding INR 10 crore in national highway contracts, including BOT (Build-Operate-Transfer) and HAM (Hybrid Annuity Model) concessions. A follow-up internal guidance circular dated 25 February 2026 reinforced the operational framework for this exclusion. For EPC contractors, project owners, concessionaires, and in-house counsel working on large-value public infrastructure projects, the MoRTH circular impact demands an immediate reassessment of contractual risk, dispute-resolution strategy, and clause-drafting practices.

Executive Summary: What the MoRTH Circular Says and Immediate Takeaways

The January 2026 MoRTH circular, and the February 2026 follow-up, represent the most significant policy intervention in infrastructure arbitration India has seen in recent years. Here are the headline points every project stakeholder must understand immediately:

• Primary circular date: 12 January 2026 (MoRTH Circular No. H-25011/02/2025-P&P). This circular directs that arbitration shall not be the dispute-resolution mechanism for claims of INR 10 crore or above in national highway (NH) sector contracts.
• Follow-up guidance: 25 February 2026. MoRTH issued internal implementation instructions, detailing the operational steps for dispute-resolution cells and conciliation committees to replace arbitration for covered disputes.
• Scope of exclusion: The circular covers monetary claims ≥ INR 10 crore as well as non-monetary claims (including declaratory relief) arising from road and highway contracts under MoRTH’s purview, BOT, HAM, EPC, and item-rate contracts let by NHAI and MoRTH.
• Replacement mechanism: For disputes falling under the circular, MoRTH directs resolution through internal conciliation committees, expert panels, and, where necessary, court proceedings, not binding arbitration.
• Applicability to existing contracts: The circular’s language targets new tender documents and contract amendments going forward, but significant ambiguity remains about its effect on existing contracts with pre-agreed arbitration clauses.
• Immediate risk: Contractors with pending claims, and those negotiating new concessions, must review every dispute-resolution clause against the circular’s requirements or risk procedural challenge, award unenforceability, or contractual non-compliance.

What Does the MoRTH Circular Actually Say? Text, Scope, and Operative Clauses

Understanding the precise language and limits of the circular is essential before taking any contractual or litigation step. The following analysis draws directly from the MoRTH circular PDFs issued on 12 January 2026 and 25 February 2026.

Scope and Covered Contracts

The January 2026 circular applies to contracts executed under the aegis of MoRTH and the National Highways Authority of India (NHAI). This includes BOT (toll and annuity), HAM, EPC, and item-rate contracts for the construction, operation, and maintenance of national highways. Concession agreements, operation and maintenance (O&M) contracts, and consultancy agreements linked to these projects are also captured. The circular specifically addresses disputes where the central government or NHAI is a party, it does not, on its face, extend to state highway authorities or municipal contracts governed by separate state legislation.

Definitions and Monetary Threshold

The operative threshold is INR 10 crore (approximately USD 1.2 million at prevailing rates). Any claim, whether a single claim or an aggregate of connected claims arising from the same contract, that meets or exceeds this threshold falls within the circular’s exclusion zone. The circular further clarifies that non-monetary claims, such as requests for declaratory or injunctive relief, are also excluded from arbitration regardless of quantification. This point was confirmed by legal reporting on the circular’s reach.

Transitional and Prospective Application

The circular’s operative language is primarily prospective: it directs that all new tender documents and contract amendments issued after 12 January 2026 must incorporate the revised dispute-resolution framework. However, the circular does not expressly carve out or grandfather contracts executed before that date. This creates a grey zone, particularly for contracts with existing arbitration clauses that are already in force. The February 2026 follow-up circular further instructs internal dispute-resolution cells to apply the new framework to disputes arising after the circular date, regardless of when the underlying contract was signed. Industry observers expect this ambiguity to generate litigation in the near term, as contractors seek to preserve arbitration rights under pre-existing agreements.

The practical implication is significant: if MoRTH or NHAI, acting as employer, refuses to participate in arbitration citing the circular, the contractor faces the burden of establishing that the pre-existing contractual arbitration clause survives the administrative direction, a question that may ultimately require judicial determination.

Legal Status and Enforceability: Can the Executive Override Arbitration Agreements?

The central legal question raised by the MoRTH circular arbitration India 2026 policy is whether an executive direction can unilaterally override a contractual right to arbitrate. This section provides the enforceability analysis that contractors and owners need.

Arbitration Clause Sanctity and Public Policy

Under Indian law, an arbitration agreement is a binding contract between the parties. The Arbitration and Conciliation Act, 1996 (as amended) affords statutory protection to arbitration agreements: courts are required to refer disputes to arbitration where a valid agreement exists, and interference with the arbitral process is circumscribed. An executive circular, even one issued by a powerful ministry, does not, by itself, amend the statute or override a contractual obligation already undertaken by the government as a contracting party. The Supreme Court of India has repeatedly affirmed that the government, when it enters into a commercial contract, is bound by the same contractual obligations as any private party.

The doctrine of promissory estoppel and the right to enforce arbitration agreements have been upheld as part of the rule of law and the constitutional right to equality before the law (Article 14).

That said, government circulars issued under executive authority do carry persuasive weight. Where the circular is implemented through tender conditions, i.e., new contracts are drafted without arbitration clauses, there is no pre-existing contractual right to override. The enforceability challenge arises only where the circular is applied retrospectively to contracts already containing arbitration clauses.

Likely Judicial Review Lines and Precedents

Industry observers expect that affected contractors will challenge the circular’s retrospective application in the High Courts, relying on established principles. Indian courts have consistently held that executive instructions cannot override statutory rights. Where the Arbitration and Conciliation Act, 1996 provides a statutory right to refer disputes to arbitration (under Section 8 and Section 11), a mere administrative circular cannot negate that right unless the statute itself is amended. Legal commentators have noted that the circular may face scrutiny on grounds of arbitrariness if applied to existing contracts, as it could be seen as an unreasonable restriction on the contractor’s vested right to an agreed dispute-resolution mechanism.

Practical Risk Assessment for Parties

For contractors with pre-existing arbitration clauses, the risk is that MoRTH or NHAI will refuse to participate in arbitration, forcing the contractor to seek court intervention under Section 11 of the Arbitration Act (appointment of arbitrator) or Section 8 (referral to arbitration). Early indications suggest that courts will be called upon to determine, on a case-by-case basis, whether the circular extinguishes the contractual right or merely reflects policy for future contracts. In the meantime, contractors should document all refusals and seek timely judicial or tribunal directions.

Interaction with the Arbitration Act 2025 and Enforcement Pathways

India’s arbitration framework has itself been in flux. The broader legislative environment, including ongoing reforms and the Arbitration Act 2025 India discussions, interacts with the MoRTH circular in ways that practitioners must understand.

Key Provisions That Matter

The Indian Arbitration and Conciliation Act, 1996 remains the primary statute governing domestic and international commercial arbitration in India. Legislative amendments over the years, including the 2015 and 2019 amendment acts, have introduced time-bound awards, restrictions on court intervention, and fast-track procedures. The government’s policy direction (including through the Repealing and Amending Act, 2025, which made housekeeping changes to various statutes) signals continued legislative attention to arbitration. Additionally, comparative reforms, such as the UK’s Arbitration Act 2025, which introduced summary disposal powers for tribunals, have informed Indian policy debate about modernising arbitral procedure.

Enforcement Options If Arbitration Proceeds

If a contractor successfully invokes an existing arbitration clause despite the circular, the resulting award is enforceable under Part I of the Arbitration and Conciliation Act, 1996. The enforcement of arbitral awards India framework provides for execution of domestic awards as decrees and for recognition of foreign-seated awards under Part II. However, MoRTH or NHAI may seek to challenge any such award under Section 34 (setting aside) on public-policy grounds, arguing that the award was rendered in contravention of the government’s stated dispute-resolution policy. The likely practical effect will be protracted enforcement litigation, a factor contractors must weigh when deciding whether to pursue arbitration.

Using Fast-Track Procedures to Limit Delay and Costs

For disputes that remain arbitrable (e.g., claims below INR 10 crore or where the arbitration clause is upheld), fast-track arbitration under Section 29B of the 1996 Act, and analogous institutional rules, can significantly reduce time and cost. The emphasis on written pleadings, limited oral hearings, and a six-month timeline for awards offers a streamlined alternative. For international arbitration: 2025 ranking and seat-selection considerations, India’s institutional arbitration ecosystem (including MCIA and DIAC) continues to develop in parallel with global best practice.

Practical Options for Contractors and Owners, Immediate Steps

This section provides the actionable playbook that infrastructure arbitration India practitioners need right now. Each sub-section targets a specific contractual scenario and provides a step-by-step checklist.

For Contracts Tendered Before 12 January 2026, Safeguard Checklist

1. Audit every dispute-resolution clause. Confirm whether the contract contains a binding arbitration clause and identify the appointing authority, seat, and governing rules.
2. Document any refusal by MoRTH/NHAI. If the employer refuses to participate in arbitration, record the refusal in writing (letter, email, meeting minutes), this creates the evidentiary foundation for a court application.
3. File for appointment of arbitrator under Section 11. If arbitration is contractually agreed but the employer declines to cooperate, file an application before the relevant High Court or the Supreme Court for appointment of an arbitrator.
4. Seek interim relief under Section 9. If the dispute involves ongoing project works, pending payments, or encashment of bank guarantees, apply for interim measures from the court concurrently.
5. Preserve evidence. Secure all project records, correspondence, measurement books, variation orders, and payment certificates. These are essential regardless of whether the dispute proceeds via arbitration, conciliation, or court litigation.

For New Tenders and Contracts After the Circular, Negotiation Checklist and Clause Bank

1. Review tender conditions carefully. Post-circular tenders will likely exclude arbitration for claims ≥ INR 10 crore. Identify the alternative dispute-resolution mechanism specified (conciliation, expert panel, court).
2. Negotiate tiered escalation clauses. Where permissible, propose a multi-tier clause: mandatory negotiation → conciliation → expert determination → court (or, for claims below the threshold, arbitration).
3. Seek quantum-splitting carve-outs. If the circular’s threshold is based on aggregate claim value, explore whether individual claims below INR 10 crore can be referred to arbitration separately, though note that artificial splitting may be challenged.
4. Build in interim-relief protocols. Draft explicit rights to approach courts for interim measures (injunctions, security for costs, preservation orders) regardless of which forum handles the merits.
5. Include a “change-in-law” trigger. Where permitted, include a clause that if the government’s policy changes (e.g., the circular is withdrawn or judicially overruled), the parties may revert to arbitration by mutual agreement.

Interim Relief Strategies: Injunctions, Security, Bank Guarantees, Challenge Windows

When arbitration is excluded or contested, contractors must not lose sight of urgent interim remedies. Courts under Section 9 of the Arbitration and Conciliation Act, 1996, or under the Civil Procedure Code for non-arbitration disputes, retain jurisdiction to grant:

• Anti-encashment injunctions: Prevent NHAI or the employer from invoking bank guarantees or performance securities pending resolution.
• Orders for interim payments: Particularly where the contractor faces cash-flow distress due to withheld payments.
• Preservation and inspection orders: Secure project sites, records, and measurement data.
• Stay of coercive action: Prevent termination or blacklisting while the dispute-resolution mechanism is clarified.

Timing is critical. Applications for interim relief should be filed promptly, delay weakens the claim for urgency and may result in the court refusing relief.

Drafting and Negotiation: Sample Clause Bank and Fallbacks for MoRTH Circular Arbitration India 2026

Below are four sample dispute-resolution clauses, each designed for a different scenario that may arise in the wake of the circular. These are starting points for negotiation and should be adapted to the specific contract and counterparty. The goal is to draft arbitration clauses for government contracts that are robust, enforceable, and responsive to the current policy environment.

• Clause A, Preservation-First (Where Arbitration Survives).
  “Any dispute arising out of or in connection with this Contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration in accordance with the [Arbitration and Conciliation Act, 1996 / Rules of the [named institution]], with the seat of arbitration at [city]. The Tribunal shall consist of [one/three] arbitrator(s) appointed in accordance with [clause]. Nothing in any government circular, administrative direction, or policy issued after the date of this Contract shall be deemed to vary or extinguish the parties’ agreement to arbitrate, unless both parties agree in writing.”
  
  Negotiation tip: This clause works best for contracts executed before the circular, where the parties wish to reaffirm arbitration. Include a “no unilateral variation” provision.
• Clause B, Hybrid (Mandated Conciliation, Then Arbitration Below Threshold).
  “For disputes where the aggregate claim value is less than INR 10 crore, the parties shall first attempt conciliation in accordance with Part III of the Arbitration and Conciliation Act, 1996. If conciliation fails within [60/90] days, the dispute shall be referred to arbitration as set out in Clause [X]. For disputes where the aggregate claim value equals or exceeds INR 10 crore, the parties shall refer the dispute to [the Conciliation Committee / Expert Panel constituted by MoRTH], with a right reserved to either party to approach the competent court for interim relief or final determination.”
  
  Negotiation tip: This is a compliance-oriented clause for new tenders, acknowledging the circular while preserving arbitration for smaller disputes.
• Clause C, Court-Jurisdiction Carve-Out for Interim Relief.
  “Notwithstanding the dispute-resolution mechanism set out in this Contract, either party may apply to the courts of competent jurisdiction for interim or conservatory measures, including injunctions, orders for preservation of evidence, and orders restraining encashment of bank guarantees. Such application shall not be deemed a waiver of any right to arbitration, conciliation, or other dispute-resolution mechanism provided herein.”
  
  Negotiation tip: Essential in every BOT HAM arbitration India contract, regardless of whether arbitration is available for the merits.
• Clause D, Non-Binding Expert Determination / Fast-Track Protocol.
  “Disputes arising under this Contract that fall within the scope of [MoRTH Circular dated 12.01.2026] shall first be referred to an independent expert (appointed by agreement or, failing agreement, by [institution]). The expert’s determination shall be advisory and non-binding. Either party may, within [30] days of the expert’s determination, refer the dispute to the competent court. If neither party refers the dispute within [30] days, the expert’s determination shall be treated as the final resolution.”
  
  Negotiation tip: Useful where parties want a quick, informed assessment without full litigation. Build in a short challenge window to ensure fairness.

Decision Matrix: When to Litigate, Conciliate, or Arbitrate

Not every dispute will follow the same path. The following decision matrix, structured as a comparison table, helps project owners and contractors choose the appropriate forum based on claim characteristics and the circular’s constraints.

Actionable decision flow: Begin by determining claim quantum (above or below INR 10 crore). If above and the contract post-dates the circular, the primary path is conciliation followed by court litigation. If above but the contract pre-dates the circular, assess whether the arbitration clause can be enforced, if so, proceed with arbitration while obtaining interim relief from the court. For claims below INR 10 crore, arbitration remains available under most contract forms. In all cases, secure interim relief early.

What to Do About Ongoing Arbitrations and Claims Already Filed

Parties currently engaged in arbitration proceedings that were initiated before 12 January 2026 face a distinct set of challenges. The circular’s language does not expressly terminate ongoing proceedings, but MoRTH or NHAI may use it as a basis to refuse further participation or to seek a stay.

The recommended procedural steps are:

1. Seek immediate directions from the tribunal. Request a procedural order confirming the tribunal’s jurisdiction and the continuation of proceedings, noting that the arbitration was validly commenced under a pre-existing agreement.
2. Apply for interim measures. If the employer is likely to take coercive action (e.g., encashing bank guarantees, terminating the contract), apply under Section 17 (tribunal) or Section 9 (court) for interim protection.
3. Preserve all evidence. Ensure all project documentation, correspondence, expert reports, and payment records are secured and indexed.
4. Monitor judicial developments. Track any High Court or Supreme Court decisions on the circular’s enforceability, a favourable ruling will strengthen the position of ongoing arbitrations.
5. Prepare for parallel proceedings. If the employer challenges the tribunal’s jurisdiction, be ready to defend jurisdiction through both the tribunal and the courts simultaneously.

Early indications suggest that tribunals validly constituted before the circular will continue to exercise jurisdiction, but the risk of challenge and delay is real. Proactive case management is essential.

Annex A: Checklist for Clause Replacements (Contract Managers)

• Step 1: Identify all active contracts with MoRTH/NHAI containing arbitration clauses. Create a register with contract date, dispute-resolution clause reference, and claim status.
• Step 2: Classify each contract as pre-circular (executed before 12 January 2026) or post-circular. Different strategies apply to each category.
• Step 3: For pre-circular contracts, draft a written notice to the employer reaffirming the arbitration clause and requesting compliance. Retain proof of delivery.
• Step 4: For post-circular contracts, review the tender-mandated dispute-resolution mechanism. Prepare tiered escalation clauses for negotiation (see Clause B and Clause D above).
• Step 5: Ensure every contract, pre-circular and post-circular, includes an explicit interim-relief carve-out (see Clause C above).
• Step 6: Update internal dispute-resolution SOPs: train project managers on documentation requirements, refusal protocols, and escalation timelines.
• Step 7: Engage counsel. No clause replacement or dispute strategy should be finalised without legal review tailored to the specific contract and project.

Annex B: Sample Tribunal/Court Applications

Skeleton, Application for Interim Relief (Section 9, Arbitration and Conciliation Act, 1996)

• Court: [Name of High Court / Commercial Court], [City]
• Parties: [Contractor Name] (Applicant) v. [NHAI / MoRTH / Employer] (Respondent)
• Subject: Application under Section 9 of the Arbitration and Conciliation Act, 1996, for interim measures pending arbitration / resolution of dispute.
• Prayer: (i) Restrain the Respondent from encashing Bank Guarantee No. [X] dated [date]; (ii) Direct the Respondent to release interim payments of INR [amount] certified as due under Running Account Bill No. [X]; (iii) Preserve all project records and measurement books at site; (iv) Any other interim relief the Court deems fit.
• Grounds: Set out the arbitration clause, the Respondent’s refusal to arbitrate (citing the circular), and the urgency/irreparable harm if interim relief is not granted.
• Supporting documents: Contract (with arbitration clause highlighted), refusal correspondence, bank guarantee copy, certified bills, project progress reports.

Sample, Notice to Employer Reaffirming Arbitration Rights

• To: [Designated officer, MoRTH / NHAI Project Director]
• From: [Contractor, authorised signatory]
• Date: [Date]
• Re: Contract No. [X], Reaffirmation of arbitration clause and notice of dispute
• Body: “We refer to Contract No. [X] dated [date] executed between [parties]. Clause [X] of the said Contract provides for binding arbitration of disputes. We note the MoRTH Circular dated 12.01.2026; however, the said circular does not, in our respectful submission, override the arbitration agreement between the parties, which was entered into prior to the circular’s issuance. We hereby invoke the arbitration clause and call upon you to appoint/agree to the appointment of an arbitrator within [30] days, failing which we shall approach the competent court under Section 11 of the Arbitration and Conciliation Act, 1996.”

Conclusion: Navigating Infrastructure Arbitration India After the MoRTH Circular

The MoRTH circular arbitration India 2026 policy represents a fundamental shift in how large-value highway disputes will be resolved. For contractors, project owners, and concessionaires, the circular demands immediate action: audit existing clauses, document every employer response, pursue interim relief proactively, and engage experienced arbitration counsel. The enforceability of the circular against pre-existing contracts remains an open and contestable question, one that the Indian judiciary will almost certainly be called upon to resolve. In the meantime, careful drafting, strategic use of tiered dispute-resolution mechanisms, and rigorous evidence preservation are the cornerstones of effective risk management. The international commercial & dispute resolution guide published by Global Law Experts offers additional context for parties navigating cross-border dimensions of these disputes.

Practitioners should find an arbitration lawyer on GLE for contract-specific advice and clause reviews tailored to the post-circular landscape.

Last reviewed: 4 May 2026. This article will be updated promptly upon any MoRTH clarification, judicial decision, or legislative amendment affecting its analysis.

Sources

1. Ministry of Road Transport & Highways, Circular dated 12.01.2026
2. Ministry of Road Transport & Highways, Circular dated 25.02.2026 (follow-up guidance)
3. Lexology, Firm analysis of the MoRTH circular
4. <a href="https://