Process of Conciliation
Arbitration Law BlogsSubject-wise Law Notes
July 11, 2023
Conciliation is a non-adjudicatory alternative dispute resolution
(ADR) process to resolve conflicts between parties. It is a voluntary
and confidential method of resolving disputes to facilitate
communication, understanding, and agreement between the parties
involved.
In conciliation, a neutral third party, known as the conciliator, assists
the parties in reaching a mutually acceptable resolution. The
conciliator acts as a facilitator, helping the parties identify and
explore the issues in dispute, understand each other’s perspectives,
and find common ground for agreement.
Conciliation is governed by specific procedures and guidelines,
which may vary depending on the jurisdiction or the applicable laws.
In India, the process of conciliation is regulated by legislation such as
the Arbitration and Conciliation Act.
Contents hide
1. Principles of Process of Conciliation
1.1. Independence and Impartiality (Section 67(1))
1.2. Fairness and Justice (Section 67(2))
1.3. Confidentiality (Sections 75, 70, proviso)
1.4. Disclosure of Information (Section 70)
1.5. Cooperation of Parties with Conciliator (Section 71)
1.6. Rules of Procedure (Section 66)
1.7. Place of Meeting (Section 69(2))
1.8. Communication between Conciliator and Parties (Section 69(1))
2. What is the Process of Conciliation under the Arbitration and
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Conciliation Act 1996?
2.1. Step 1: Commencement of Conciliation Proceedings
2.2. Step 2: Appointment of Conciliators
2.3. Step 3: Submission of Written Statements to the Conciliator
2.4. Step 4: Conduct of the Conciliation Proceedings
2.5. Step 5: Administrative Assistance
3. Termination of Conciliation Proceedings – Section 76
3.1. Termination by Signing of Settlement Agreement (Section 76(a))
3.2. Termination by Conciliator’s Declaration (Section 76(b))
3.3. Termination by Written Declaration of Parties (Section 76(c))
3.4. Termination by Party’s Written Declaration to Other Party and
Conciliator (Section 76(d))
4. Case Laws Relating to Conciliation Process
4.1. Haresh Dayaram Thakur v. State of Maharashtra and Ors.
4.2. Mysore Cements Ltd. v. Svedala Barmac Ltd.
Principles of Process of Conciliation
The principles of conciliation as discussed under the Arbitration and
Conciliation Act are:
Independence and Impartiality (Section 67(1))
The conciliator must maintain independence and impartiality
throughout the conciliation process. They should assist the parties
unbiasedly and fairly while striving to reach an amicable settlement.
Fairness and Justice (Section 67(2))
The conciliator should adhere to principles of objectivity, fairness,
and justice. This involves considering the rights and obligations of
the parties, relevant trade practices, and the circumstances
surrounding the dispute, including any prior business dealings
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between the parties.
Confidentiality (Sections 75, 70, proviso)
All matters relating to the conciliation proceedings are to be treated
as confidential by the conciliator and the parties involved. If a party
provides information with the condition of confidentiality, the
conciliator must not disclose that information to the other party
without consent.
Disclosure of Information (Section 70)
When the conciliator receives information regarding any facts related
to the dispute from one party, they should disclose the substance of
that information to the other party. This allows the other party to
provide an appropriate explanation.
Cooperation of Parties with Conciliator (Section 71)
The parties are expected to cooperate in good faith with the
conciliator. This includes submitting written materials, providing
evidence, and attending meetings as requested by the conciliator.
Rules of Procedure (Section 66)
The conciliator is not bound by the procedural rules outlined in the
Code of Civil Procedure, 1908, or the Indian Evidence Act, 1872.
However, while not strictly bound by technical procedural rules, the
conciliator should still uphold the principles of natural justice.
Place of Meeting (Section 69(2))
The parties can agree upon the location for meetings with the
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conciliator. In the absence of such an agreement, the conciliator will
determine the meeting place after consulting with the parties,
considering the circumstances of the conciliation proceedings.
Communication between Conciliator and Parties
(Section 69(1))
The conciliator may invite the parties to meet, communicate with
them orally or in writing, and may choose to engage with the parties
collectively or separately as necessary.
What is the Process of Conciliation under the
Arbitration and Conciliation Act 1996?
Part 3 of the Arbitration and Conciliation Act 1996 discusses the
process of conciliation, which is an alternative method of resolving
disputes outside of court. Conciliation is governed by the provisions
outlined in the Arbitration and Conciliation Act, 1996 (26 of 1996), as
defined in Wharton’s Law Lexicon.
Step 1: Commencement of Conciliation Proceedings
Section 62 of the Act addresses the initiation of conciliation
proceedings. To begin the process, one party must send a written
invitation to the other party. The conciliation proceedings can only
proceed if the other party accepts the invitation. If no response is
received within 30 days of sending the invitation, it will be deemed
non-acceptance.
Step 2: Appointment of Conciliators
Once the parties have agreed to engage in conciliation proceedings,
appointing a conciliator is next. Section 64 covers the appointment
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of conciliators. If the parties agree, they can appoint a single
conciliator. If the parties opt for two conciliators, each party will
appoint one. In the case of three conciliators, each party will appoint
one conciliator, and the parties together can agree upon a third
conciliator who will act as the presiding conciliator.
Step 3: Submission of Written Statements to the
Conciliator
The conciliator may request both parties to provide written
statements detailing the relevant facts pertaining to the case. Both
parties must submit their written statements to the conciliator.
Additionally, the parties are required to exchange their written
statements with each other.
Step 4: Conduct of the Conciliation Proceedings
Sections 67(3) and 69(1) describe the conduct of conciliation
proceedings. The conciliator has the discretion to communicate with
the parties through written or oral means. They can choose to meet
with the parties collectively or separately. The conduct of the
proceedings will be tailored to suit the case’s specific circumstances.
Step 5: Administrative Assistance
Section 68 of the Act addresses the option of seeking administrative
assistance. The parties or the conciliator may seek assistance from
an institution or individual if necessary. However, the consent of the
parties is required to engage in such administrative assistance.
Termination of Conciliation Proceedings –
Section 76
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Section 76 of the Arbitration and Conciliation Act provides four ways
in which conciliation proceedings can be terminated:
Termination by Signing of Settlement Agreement
(Section 76(a))
Conciliation proceedings end when the parties involved sign a
settlement agreement. The date of termination is considered to be
the date on which the settlement agreement is signed.
Termination by Conciliator’s Declaration (Section
76(b))
The conciliation proceedings can be terminated if the conciliator
declares in writing that further efforts at conciliation are no longer
justified. The date of termination is the date of the conciliator’s
declaration.
Termination by Written Declaration of Parties
(Section 76(c))
The parties have the authority to terminate the conciliation
proceedings by providing a written declaration to the conciliator
stating that they wish to end the proceedings. The date of
termination is the date of the declaration.
Termination by Party’s Written Declaration to Other
Party and Conciliator (Section 76(d))
A party can unilaterally terminate the conciliation proceedings by
sending a written declaration to both the other party and the
conciliator, expressing their intention to terminate the proceedings.
The date of termination is the date of the declaration.
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Case Laws Relating to Conciliation Process
Haresh Dayaram Thakur v. State of Maharashtra and
Ors.
In the case of Haresh Dayaram Thakur v. State of Maharashtra and
Ors. (AIR 2000 SC 2281), the Supreme Court examined the
provisions of Sections 73 and 74 of the Arbitration and Conciliation
Act 1996. In paragraph 19 of the judgment, the court made the
following observations:
According to the statutory provisions mentioned above, it is evident
that a conciliator’s role is to assist the parties in settling their
disputes amicably. The conciliator is granted broad powers to
determine the procedure to be followed without being bound by
procedural laws such as the Code of Civil Procedure or the Indian
Evidence Act 1872.
When the parties are able to reach a mutual agreement, and the
conciliator believes that there is a potential settlement acceptable to
the parties, the conciliator should follow the procedure outlined in
Section 73. This involves formulating the settlement terms and
presenting it to the parties for their observations. The final step for
the conciliator is to draft the settlement based on the parties’
observations.
The settlement becomes legally binding only when the parties
themselves draw up the settlement agreement or request the
conciliator to prepare it and affix their signatures. As per Sub-section
(3) of Section 73, once the parties sign the settlement agreement is
considered final and binding on them and any individuals claiming
under them.
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Mysore Cements Ltd. v. Svedala Barmac Ltd.
In the case of Mysore Cements Ltd. v. Svedala Barmac Ltd. (AIR
2003 SC 3493), the court discussed Section 73 of the Arbitration
and Conciliation Act. The court made the following observations:
Section 73(1) states that when the conciliator believes that there are
elements of a possible settlement that may be acceptable to the
parties, they should formulate the terms of the potential settlement
and present them to the parties for their observations. Upon
receiving the parties’ observations, the conciliator may reformulate
the settlement terms accordingly.
However, in the present case, the court did not find any such
formulation and reformulation by the conciliator, as required under
Sub-section (1). Sub-section (2) states that if the parties reach a
settlement agreement based on the possible terms of settlement
formulated, they may draft and sign a written settlement agreement.
Sub-section (3) clarifies that when the parties sign the settlement
agreement, it becomes final and binding on them and any individuals
claiming under them. Furthermore, Sub-section (4) requires the
conciliator to authenticate the settlement agreement and provide
each party with a copy.
Conclusion
Conciliation is a valuable alternative dispute resolution process
guided by the Arbitration and Conciliation Act. It involves a neutral
conciliator assisting parties to settle. The process begins with a
written invitation, followed by the appointment of a conciliator.
Written statements are exchanged, and the conciliator conducts
proceedings based on fairness and justice. Confidentiality is
maintained throughout.
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The goal is to reach a settlement agreement, which becomes final
and binding when the parties sign. Conciliation allows parties to
resolve disputes amicably, avoiding litigation while preserving
relationships. It offers a structured and flexible approach,
empowering parties to actively participate in finding mutually
acceptable resolutions.
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