Conciliation is a voluntary dispute resolution process where a neutral conciliator helps parties reach a mutual agreement. It begins with a written invitation, progresses through the appointment of conciliators, and concludes with a legally binding settlement agreement.
Introduction
Conciliation is the process of resolving problems without using litigation. Conciliation is a procedure in which parties continue to address their differences with the assistance of a conciliator. The major distinction between arbitration and conciliation is that in arbitration proceedings, the award is the decision of the Arbitral Tribunal, but in conciliation, the decision is reached by the parties with the assistance of the conciliator. For the first time, India's conciliation law has been codified in accordance with the UNCITRAL Conciliation Rules.
In conciliation, a neutral third party, known as the conciliator, helps the parties reach a mutually agreeable agreement. The conciliator serves as a facilitator, assisting the parties in identifying and exploring the issues at hand, understanding each other's points of view, and reaching an agreement.
The process of Conciliation under Arbitration and Conciliation Act
1. Commencement of Conciliation Proceedings[1]
Conciliation proceedings are commenced when one party sends a written invitation to the other side to conciliate. The invitation should specify the subject of the dispute. Conciliation proceedings begin when the opposite party accepts the request to conciliate in writing. If the other party declines the invitation, there will be no conciliation proceedings. If the party inviting conciliation does not receive a response within 30 days of sending the invitation, he may interpret this as a rejection of the request to conciliate. If he so chooses, he must notify the other party in writing.
2. Appointment of Conciliators
After the parties have agreed to proceed with conciliation, a conciliator will be appointed. Section 64 governs the nomination of conciliators[2]. If the parties agree, they may appoint a single conciliator. If the parties decide on two conciliators, each will pick one. In the instance of three conciliators, each party will pick one, and the parties may agree on a third conciliator to serve as the presiding conciliator.
3. Submission of Statements to Conciliator[3]
The conciliator may request that each side submit a brief written statement. The statement should describe the broad nature of the dispute as well as the issues at hand. Each party shall forward a copy of the statement to the other side. The conciliator may compel each party to produce a written declaration of their viewpoint, as well as the facts and arguments that support it. It may be complemented with suitable documentation and evidence. The party should provide a copy of such remarks, papers, and evidence to the other party.
4. Conduct of the Conciliation Proceedings
The parties may be invited to meet with the conciliator. He can provide information to the parties either verbally or in writing. He may speak with the parties individually or in a group setting[4]. The conciliator has some discretion in how the conciliation process is conducted. He is allowed to act in any way he thinks is suitable. However, he should consider the case's facts, the parties' clear desires, a party's request for an oral hearing, and the necessity of a prompt conflict resolution[5].
5. Administrative Assistance
Administrative support for the conduct of conciliation proceedings is made easier by Section 68[6]. With the parties approval, the conciliator and the parties may request administrative support from an appropriate organization or individual.
6. Settlement Agreement
A. Settlement of conflict
The conciliator's job is to help the parties come to a mutually agreeable resolution. He has the right to offer suggestions for resolving the conflict at any point during the conciliation process. Such requests do not have to be submitted in writing or include a justification[7]. Each party may present the conciliator with recommendations for resolving the conflict on his own initiative or at the conciliator's invitation[8].
Section 73 prescribes procedures for successful end of conciliation proceedings[9]. After determining that a mutually agreeable settlement may be reached, the conciliator will draft a potential settlement and provide it to the parties for their consideration. The conciliator may revise the conditions of the potential settlement in light of the parties observations after receiving them. The parties must sign the settlement if it is approved, and it will be legally binding on them[10]. Each party will receive a copy of the settlement agreement after the conciliator authenticates it[11].
B. Status and Effect of Settlement Agreement
According to Section 74, a settlement agreement on conditions agreed upon under Section 30[12] will have the same standing and consequences as an arbitral award. Since the parties willingly agree in writing to the settlement agreement, it is not subject to section 33[13] or section 34 of the Act. This indicates that it will be regarded as a court order and will be enforceable. There are only two situations where the Settlement agreement can be set aside:
- It could be set aside if the subject matter of the dispute is not capable of settlement agreement by conciliation as stated under section 34(2)(b)(i) of the Act[14].
- It could be set aside if it is opposed to public policy of India as under section 61(2) of the Act[15].
7. Termination of Conciliation Proceedings[16]
Four methods are listed in Section 76 of the Arbitration and Conciliation Act for ending conciliation proceedings:
A. Termination through Settlement Agreement Signature[17]
When a settlement agreement is signed by the parties, the conciliation process is over. The date the settlement agreement is signed is regarded as the date of termination.
B. Termination by Declaration of the Conciliator[18]
If the conciliator states in writing that more conciliatory efforts are no longer warranted, the conciliation process may be ended. The conciliator's pronouncement is the date of termination.
C. Termination through Parties Written Declaration[19]
By submitting a formal declaration to the conciliator indicating their desire to cease the conciliation process, the parties can end the proceedings. The declaration date is the date of termination.
D. Termination by Written Notice to Conciliator and Other Party[20]
It is possible for one party to unilaterally cease the conciliation process by notifying the other party and the conciliator in writing of their desire to do so. The declaration date is the date of termination.
8. Use of the Arbitration process or Court Proceedings[21]
Generally speaking, the parties are not permitted to start judicial or arbitral actions over a dispute that is the focus of the conciliation proceedings. However, under extraordinary circumstances, a party may start judicial or arbitral procedures if he believes that doing so is essential to protecting his interests.
9. Costs[22]
Costs refers to appropriate expenses associated with the following:
- With the parties approval, the conciliator requested the fee and costs of the witness and the conciliator.
- Any professional guidance that the conciliator requests with the parties permission
- Any support given to Sections 64(2)(b)[23] and 68[24]
- Any additional costs related to the settlement agreement and the conciliation process[25].
Upon the conclusion of the conciliation process, the conciliator determines the expenses and notifies the parties in writing[26]. Each party bears an equal portion of the expenses[27].
10. Deposits [28]
The conciliator may make an estimate of the probable expenses and order each party to make an equal advance deposit. The conciliator may request further deposits from each party during the conciliation process. The conciliator may postpone the proceedings or discontinue them by notifying the parties in writing if the required deposits are not paid in full by both parties within 30 days. The date of declaration marks the effective end of the proceedings. After the proceedings are over, the conciliator will provide the parties an account of the deposits they have received and return any unexplained amount.
Judicial Pronouncements
1. UOI v. M/s. Jagat Ram Trehan & Sons[29]
The court ruled that although a settlement agreement is regarded as a court decree, the executing court may decline to grant prayer if it believes the agreement violates section 34(2)(b) and is therefore without jurisdiction.
2. Haresh Dayaram Thakur v. State of Maharashtra and Ors[30]
The court addressed the provisions of Sections 73 and 74 of the Arbitration and Conciliation Act of 1996. Based on the statutory provisions mentioned above, it is clear that a conciliator is someone who helps the parties resolve their differences amicably. For this reason, the conciliator has broad authority to determine the process that he will follow, free from the restrictions of procedural laws such as the Indian Evidence Act of 1872 or the Code of Civil Procedure[31].
When the parties are able to settle their disagreement through mutual consent and the conciliator believes that there is a settlement element that may be acceptable to both parties, he must follow the steps outlined in Section 73, draft a settlement, and give it to the parties for their consideration. The final step is for the conciliator to draft a settlement based on the parties comments on the terms he has formulated. The parties must draft a settlement agreement or ask the conciliator to draft one and sign it before the settlement may be finalized. The parties' signed settlement agreement is final and enforceable against the parties and those claiming under them under Subsection (3) of Section 73. Therefore, a successful conciliation process ends only when the parties' written settlement agreement is officially in effect. Under Section 74, such an agreement has the legal standing and consequences of an arbitral ruling.
3. Mysore Cements Ltd. v. Svedala Barmac Ltd[32].
It was said that Settlement Agreements are covered by Section 73 of the Act. According to subsection (1), the Conciliator must draft the conditions of a potential settlement and provide them to the parties for review if he believes there are aspects of it that the parties may find acceptable. The Conciliator may reiterate the terms of a potential settlement in light of the parties' views after receiving them. In this case, we do not discover any such formulation and reformulation by the Conciliator; but, under Sub-section (2), if the parties achieve a settlement agreement on the probable parameters of settlement formulated, they may draw out and sign a formal settlement agreement. When the parties sign the Settlement Agreement, it becomes final and binding on the parties and those claiming under it. Under Subsection (4), the Conciliator must authenticate the Settlement Agreement and provide a copy to each of the parties. From the indisputable facts and the documents, it is evident that all of Section 73's conditions are not met.
Conclusion
Conciliation as an alternative dispute resolution method benefits the parties since it is cost effective and expeditious, is simpler, faster, and more convenient than the lengthy litigation route, and avoids the possibility of bias and corruption. Parties that seek to settle their issues can benefit significantly from the conciliation procedure. To allow the conciliator to play his role effectively, the parties should be brought together face to face at a common location where they can interact face to face and with the conciliator, separately or together, without distractions and with only the objectives of sincerely resolving the conflict.
The process starts with a written invitation, followed by the appointment of a conciliator. Written statements are exchanged, and the conciliator handles the process in accordance with fairness and justice. Confidentiality remains intact throughout. The goal is to reach a settlement agreement, which will become final and binding once the parties execute it. Conciliation enables parties to settle problems amicably, avoiding litigation and sustaining relationships. It takes a structured and flexible approach, allowing parties to actively participate in reaching mutually accepted solutions.
[1] The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s.62.
[2] Id. at s. 16.
[3] Id. at s. 64.
[4] Id. at s. 69(1).
[5] Id. at s. 67(3).
[6] Id. at s. 68.
[7] Id. at s. 67(4).
[8] The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s.72.
[9] Dr. Ashok K. Jain, Law of Arbitration Conciliation Mediation and Negotiation (ADR) 241 (Ascent Publication, Delhi, 4TH edn., 2023).
[10] The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s.73 (3).
[11] Id. at s. 73(4).
[12] Settlement under the Arbitration and Conciliation Act, 1996.
[13] Correction and Interpretation of Arbitral Award; Additional award under the Arbitration and Conciliation Act, 1996.
[14] Application for setting aside the arbitral award under the Arbitration and Conciliation Act, 1996.
[15] Application and Scope of Conciliation under the Arbitration and Conciliation Act, 1996.
[16] The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s.76.
[17] Id. at s. 76(a).
[18] Id. at s. 76(b).
[19] Id. at s. 76(c).
[20] Id. at s. 76(d).
[21] Id. at s. 77.
[22] Id. at s. 78.
[23] Appointment of Conciliators under The Arbitration and Conciliation Act, 1996.
[24] Id. at 6.
[25]The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s.78 (2).
[26] Id. at s. 78(1).
[27] Id. at s. 78(3).
[28] Id. at s. 79.
[29] AIR 1996 Del 191.
[30] AIR 2000 SC 2281.
[31] The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s.66.
[32] AIR 2003 SC 3493.
