The National Highways Authority of India (NHAI) has opted to initiate a conciliation process with a construction firm currently undergoing insolvency resolution.
The matter concerns claims totalling ₹1,461.63 crore related to the expansion of the Varanasi-Gorakhpur road corridor in Uttar Pradesh. The financial disagreement arises from a project carried out under the National Highways Development Project Phase-IV, involving the four-laning of a key section of National Highway 29. According to the official records submitted to regulatory authorities, the private developer—now under the Corporate Insolvency Resolution Process (CIRP)—has made claims citing various delays, encroachments, and unanticipated costs incurred during the project’s execution.
NHAI has countered these claims with its own, seeking ₹892.24 crore for losses allegedly borne due to project delays. These counterclaims include compensation for supervisory and consultancy expenses, liquidated damages, and loss of toll revenue. With the matter now referred to the Conciliation and Settlement Committee of Independent Experts established by NHAI, both sides appear poised to resolve the dispute outside of litigation. This move towards an amicable settlement underscores a broader trend in India’s infrastructure sector, where regulatory authorities are increasingly favouring dispute resolution mechanisms that can help prevent prolonged legal battles and ensure timely project completion. The conciliation process is especially crucial in cases involving companies under insolvency, where quick resolutions can protect the interests of lenders, public infrastructure, and taxpayers alike.
The Varanasi-Gorakhpur project, executed on Engineering, Procurement and Construction (EPC) mode, was intended to accelerate connectivity in eastern Uttar Pradesh, linking key economic and cultural nodes. However, the project ran into multiple bottlenecks. According to project documents reviewed by officials, delays in land acquisition, encroachments along the right of way (ROW), and changing wage norms significantly increased the cost and duration of the development work. Representatives for the construction firm, currently suspended under the Insolvency and Bankruptcy Code (IBC) of 2016, have stated that the claimed sum reflects additional resource deployment and damages from state-induced project delays. Since the onset of insolvency proceedings, the company’s affairs are being managed by a Resolution Professional, as required by the IBC framework.
This road dispute is not an isolated occurrence but reflects a systemic challenge in India’s infrastructure landscape. Delays due to land acquisition, utility shifting, and prolonged approvals often affect project timelines and inflate costs. In such cases, developers find themselves exposed to financial stress, while authorities face accountability for cost escalations and inefficiencies. The involvement of a high-profile state authority such as NHAI in the conciliation process reflects an acknowledgment that faster resolutions serve the larger public interest. The infrastructure sector, particularly highway construction, is a critical pillar in India’s ambition to become a $5 trillion economy. Smooth project execution, timely payments, and equitable conflict resolution are essential to maintaining investor confidence and ensuring sustainable urban development.
This case also holds significant implications for the banking sector. With the construction firm already facing insolvency proceedings initiated by a major lender for dues over ₹1,200 crore, any further delays or disputes over payments could impact the recovery prospects for creditors. Conciliation offers a time-bound mechanism for dispute settlement, potentially paving the way for revival or asset restructuring efforts that align with the IBC’s objectives. Industry experts believe that using independent expert committees for conflict resolution in public-private infrastructure contracts can reduce litigation costs, improve transparency, and foster a more collaborative governance model. The Conciliation and Settlement Committee, established by NHAI, is designed to mediate such high-stake disputes with an emphasis on equitable resolution, balancing public interest with fair compensation to contractors.
For cities and regions like Varanasi and Gorakhpur, which are undergoing rapid urbanisation, infrastructural upgrades such as four-lane highways are vital not just for economic development but also for reducing vehicular congestion and improving environmental outcomes. When such projects stall or result in disputes, the repercussions go beyond economics—they delay access to improved connectivity, impact local livelihoods, and postpone sustainable urban planning goals. Given the push for more climate-resilient and efficient transport infrastructure, resolving legacy disputes like this one becomes essential. Prolonged legal battles consume public funds, delay future projects, and erode trust in public procurement systems. On the other hand, conciliatory settlements represent a more future-focused approach, aimed at ensuring infrastructure continues to serve the public without becoming a financial or environmental liability.
While the conciliation process will now follow its course under the NHAI’s internal framework, the outcome could set a precedent for how stalled infrastructure projects are resolved when contractors fall into insolvency. With multiple stakeholders—including banks, contractors, government authorities, and citizens—depending on the timely completion of public works, conflict resolution mechanisms like this are more relevant than ever. Whether this particular case leads to a breakthrough or further contention, its resolution will likely influence how similar EPC-mode highway contracts are structured and enforced in the future. Ultimately, the public’s interest lies in an outcome that ensures accountability, efficiency, and continuity in infrastructure development, especially as India continues its journey toward urban sustainability and equitable mobility for all.
NHAI to Seek Resolution in Rs 1461 Cr Dispute
