Summary: The Ministry of Road Transport and Highways (MoRTH) circular dated January 12, 2026, provides that arbitration will not be available for disputes exceeding INR 10 crore in BOT, HAM, and EPC contracts, purporting to replace existing dispute resolution clauses with immediate effect. This raises critical questions: Can a government circular unilaterally amend signed contracts that expressly require written consent for modifications? While prospective application may be defensible, retrospective substitution of dispute resolution mechanism, without mutual consent, presents serious enforceability concerns and challenges fundamental principles of contractual sanctity. The circular’s ambiguous carve-out for “ongoing arbitrations” adds further uncertainty, particularly about disputes at pre-arbitral stages. This development marks a significant departure from India’s pro-arbitration stance and warrants careful legal and policy scrutiny.
Considerable debate has surrounded the MoRTH circular dated January 12, 2026, and rightly so. The circular provides that arbitration will not be available for disputes exceeding INR 10 crore across BOT (Build Operate Transfer), HAM (Hybrid Annuity Mode), and EPC (Engineering Procurement Construction) contracts. It further states that existing dispute resolution clauses in all BOT/HAM/EPC contracts stand replaced with the revised clause with immediate effect, with only one exception: ongoing arbitrations will continue under the old regime.
This is where the ambiguity begins.
Can a Government Circular Unilaterally Amend a Signed Contract?
Most highway contracts contain clear and unequivocal amendment provisions. For instance, the Model EPC Contract (Clause 27.24) provides: “The Agreement may not be supplemented, amended, modified or changed except by an instrument in writing signed by the Contractor and the Authority…”
Similarly, the Model HAM Contract (Clause 41.9) states: “No amendment or modification hereto shall be valid and effective unless such modification or amendment is agreed to in writing by the Parties and duly executed by persons especially empowered in this behalf by the respective Parties.”
The Model BOT Contract (Clause 47.10) contains an identical provision: “No amendment or modification hereto shall be valid and effective unless such modification or amendment is agreed to in writing by the Parties and duly executed by persons especially empowered in this behalf by the respective Parties.”
When contracts expressly stipulate that any modification must be in writing and signed by both parties, a fundamental question arises: Can a government circular override and retrospectively amend the dispute resolution mechanism in already-executed agreements?
This is the core issue.
A dispute resolution clause, especially an arbitration agreement, is not procedural surplusage. It defines the forum for adjudication, enforceability, timeframe for dispute resolution, and allocation of litigation risk.
Against this backdrop, a critical question emerges: Unilateral executive substitution, without contractual consent, raises serious concerns of enforceability.
Prospective vs Retrospective Applicability
The distinction between prospective and retrospective application is crucial.
Prospective Application
Prospectively, the intent behind the circular may be understandable even if it represents a departure from the preferred arbitration framework. Parties entering into future contracts can assess and price this risk.
Retrospective Application
Retrospectively, however, the legality is clearly debatable. Applying a new dispute resolution framework to contracts already executed, without mutual consent, fundamentally alters vested contractual rights and creates serious enforceability concerns.
The retrospective sweep of this circular disturbs settled contractual expectations. Infrastructure projects are typically structured on the basis of comprehensive risk allocation matrices where dispute resolution mechanisms form a critical component of both legal and financial due diligence. Investors, lenders, and developers evaluate projects on the premise that dispute resolution pathways remain stable throughout the contract tenure. A mid-course unilateral amendment, particularly one that diverts high-value disputes away from arbitration, undermines this foundational assumption.
What Counts as an “Ongoing Arbitration”?
The carve-out for “ongoing arbitrations” introduces a further layer of uncertainty.
What happens to disputes currently pending before the Chairman/Engineer, before a Conciliation Committee, or at pre-arbitral stages, where the arbitration notice has not yet been issued?
Since arbitration is typically considered to have “commenced” only upon the receipt of a notice invoking arbitration (Section 21 of the Arbitration and Conciliation Act, 1996), it remains unclear whether such disputes are protected from the new circular despite being substantively live and contractually in motion.
This ambiguity is particularly concerning, given the multi-tiered dispute resolution architecture common in infrastructure contracts. Disputes often traverse good faith negotiations, engineers’ determinations, and conciliation panels before crystallising into formal arbitration proceedings. The circular’s silence on the treatment of disputes at these intermediate stages creates a grey zone that may spawn satellite litigation over jurisdictional thresholds alone.
The Hon’ble Supreme Court of India in M/s. Soma Isolux Nh One Tollway Private Limited V. Harish Kumar Puri & Ors., Civil Appeal No. 4611 Of 2014observed “once the contract is signed by the contracting parties obviously the contract having assumed the legal authority of a concluded contract would govern the terms and conditions of the contract between the parties who have signed and thereafter would be binding on the contracting parties. But to contend that even though the contract stands concluded after the same has been signed by the contracting parties, the opinion of the Central Government on its administrative side will prevail over the terms and conditions of the contract in absence of any statutory violation, would be difficult to accept…”
The Road Ahead
How this circular will ultimately be interpreted and implemented remains to be seen. One thing, however, is clear: It is a significant departure from a pro-arbitration stance in high value highway contracts and likely requires a closer relook both legally and practically.
Beyond its immediate contractual ramifications, the circular represents a significant policy shift in the treatment of infrastructure disputes.
For decades, arbitration has been positioned as a specialised forum for technically complex disputes, a mechanism for expeditious resolution, and a tool for preserving long-term public–private relationships.
A wholesale retreat from arbitration for high-value disputes, particularly through unilateral substitution in existing contracts, raises broader questions regarding investor confidence, project bankability, and the predictability of dispute resolution in public–private partnerships.
The timing of this circular is particularly noteworthy. India has been actively positioning itself as an arbitration-friendly jurisdiction, with recent legislative and institutional reforms aimed at bolstering its credentials as a preferred seat for international arbitration. The MoRTH circular, however, may send mixed signals to the global infrastructure and investment community.
Furthermore, the practical implications for ongoing and future projects warrant careful consideration. Developers may need to reassess their risk matrices, lenders may seek enhanced protections, and bidders for future projects may factor in premium pricing to account for reduced certainty in dispute resolution.
Concluding Thoughts
The MoRTH circular is emblematic of a broader tension in public procurement: the balance between executive policy-making discretion and the sanctity of a contract. The principle of pacta sunt servanda “contracts must be kept” remains a cornerstone of commercial certainty.
The circular’s seemingly retrospective application, coupled with its ambiguous carve-outs, raises fundamental questions of legality, enforceability, and policy wisdom. As this debate unfolds in boardrooms and potentially courtrooms, stakeholders across the infrastructure ecosystem would do well to engage constructively with the underlying issues, not merely the immediate legal skirmish.
For now, the circular stands as a reminder that in the evolving landscape of infrastructure dispute resolution, clarity, consultation, and contractual consent remain non-negotiable pillars of sustainable public–private partnerships.