SALB1903 SATHYABAMA SCHOOL OF LAW

ARBITRATION, CONCILIATION & ALTERNATIVE DISPUTE

RESOLUTION SYSTEM

UNIT 3

CONCILIATION

Meaning – Different Kinds of Conciliation: Facilitative, Evaluative, Court: Annexed,

Voluntary and Compulsory- Qualities of a Conciliator- Duties of a Conciliator- Role of a
Conciliator- Confidentiality and Neutrality- Stages of Conciliation- Procedure- Conciliation
Under Statutes: Industrial Disputes Act, 1947 – Family Courts Act, 1984 – Hindu Marriage
Act, 1955- Arbitration and Conciliation Act, 1996- Writing the Award Ethical Issues in
Conciliation.

MEANING AND CONCEPT OF CONCILIATION

Conciliation is a peaceful and structured method of resolving disputes without resorting to

formal adjudication. As per the Oxford Dictionary, conciliation refers to "the action of stopping
someone from being angry." In the context of law and dispute resolution, it embodies the effort
to reconcile opposing parties and guide them toward a mutually agreeable solution through
the assistance of a neutral third party, known as the conciliator.

The term is derived from the Latin word "concile," meaning "to bring together." While
conciliate and reconcile both suggest harmony and understanding, conciliation specifically
involves a structured process aimed at dispute resolution, particularly under the framework of
Alternative Dispute Resolution (ADR).

In essence, conciliation means bringing opposing parties into harmony to settle the dispute in
a voluntary, private, and informal manner. It avoids litigation while still ensuring that the rights
and interests of both parties are addressed through dialogue and negotiation.

Scope and Application of Conciliation

Conciliation is not confined to any one category of disputes. It is widely applicable across a
broad spectrum of legal and commercial conflicts, including:

• Commercial and financial disputes

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• Employment and labor-related issues

• Family and matrimonial conflicts

• Real estate and partnership disputes

• Intellectual property and insurance matters

• Taxation, antitrust, consumer protection, and environmental issues

Its effectiveness lies in its non-adversarial nature, which encourages ongoing relationships
between the parties—particularly important in business, employment, and family contexts.

Nature and Characteristics of Conciliation

Conciliation is defined by several key characteristics:

• Voluntary: Parties choose to enter into conciliation willingly.

• Confidential: All discussions and negotiations remain private.

• Flexible: The process is informal and can be adapted to the needs of the parties.

• Non-binding until agreement: The parties are not bound by any proposals unless they
formally sign a settlement agreement.

• Neutral facilitation: The conciliator does not impose a solution but facilitates
communication and negotiation.

The conciliator plays a central role in reducing hostility, improving communication, identifying
key issues, and suggesting options for resolution. However, the conciliator has no authority to
enforce decisions or compel agreement—his/her role is to act as a facilitator, not an adjudicator.

DIFFERENT KINDS OF CONCILIATION

Conciliation is a recognized and structured form of Alternative Dispute Resolution (ADR) that
aims to amicably resolve disputes without resorting to adversarial litigation. Under Part III of
the Arbitration and Conciliation Act, 1996, conciliation is defined as a voluntary, informal, and
flexible process in which a neutral third party (the conciliator) assists disputing parties to reach
a mutually agreeable settlement. The conciliator does not adjudicate or pass binding judgments,
but instead encourages dialogue, clarifies misunderstandings, and helps bridge the gap between
the parties. Over time, conciliation has evolved into various forms depending on the extent of
intervention, the initiating authority, and the statutory backing. The key types of conciliation
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include Facilitative, Evaluative, Court-Annexed, Voluntary, and Compulsory

Conciliation, each having distinct features, applications, and relevance under Indian law.

FACILITATIVE CONCILIATION

Facilitative conciliation is one of the most widely accepted models of ADR, where the
conciliator plays the role of a neutral facilitator. Here, the primary function of the conciliator
is to enhance communication between the disputing parties and assist them in identifying
issues, exploring possible solutions, and negotiating a settlement. The conciliator does not offer
any opinion or judgment about the merits of the case. Instead, the emphasis is on empowering
the parties to arrive at their own resolution, thereby preserving autonomy and relationships.
This form of conciliation is particularly suitable in matters involving ongoing relationships—
such as family disputes, employment conflicts, or business partnerships. In India, facilitative
conciliation is commonly practiced in Lok Adalats and mediation centres established under the
Legal Services Authorities Act, 1987, and also promoted through Section 89 of the Civil
Procedure Code (CPC), where courts refer disputes for amicable resolution through facilitative
means.

EVALUATIVE CONCILIATION

In contrast to the facilitative model, evaluative conciliation involves a more directive role by
the conciliator. Here, the conciliator may evaluate the legal and factual positions of each party,
provide an assessment of strengths and weaknesses, suggest likely court outcomes, and even
propose specific terms for settlement. This form is especially relevant in complex disputes
requiring technical expertise or commercial insight—such as in the fields of construction
contracts, infrastructure projects, or cross-border business disputes. While the conciliator's
opinion is not binding, it often carries weight and can influence the negotiation process
significantly. In India, evaluative conciliation is seen in institutions such as the Indian Council
of Arbitration (ICA) and the Construction Industry Arbitration Council (CIAC), where subject-
matter experts are often engaged as conciliators to render professional opinions during dispute
resolution.

COURT-ANNEXED CONCILIATION

Court-annexed conciliation refers to a process where the judiciary facilitates or mandates

conciliation as part of its dispute resolution mechanism. This process typically occurs under
Section 89 of the CPC, which empowers courts to refer cases to alternative dispute resolution
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methods, including conciliation. In such scenarios, the court either directly refers the case to a
conciliation centre or assigns trained judicial officers or panel conciliators to handle the matter.
Though initiated by the court, the process remains non-binding unless a settlement is mutually
agreed upon by the parties. Court-annexed conciliation offers the advantage of judicial
supervision while ensuring that parties have an opportunity to resolve disputes amicably and
expeditiously. In India, most High Courts and District Courts have established mediation and
conciliation centres, especially to handle family disputes, land acquisition issues, and partition
suits, where a conciliatory approach is more effective and humane.

VOLUNTARY CONCILIATION

Voluntary conciliation embodies the true spirit of ADR, where parties mutually consent to
resolve their dispute through conciliation without external coercion or judicial direction.
Governed under Section 61 to 81 of the Arbitration and Conciliation Act, 1996, this form of
conciliation begins with one party sending an invitation, which the other party must accept in
writing. Parties enjoy full autonomy in selecting the conciliator, determining the rules, and
withdrawing from the process at any stage. The flexibility and confidentiality of voluntary
conciliation make it particularly attractive for resolving commercial, contractual, and cross-
border disputes. Many Indian corporations, government departments, and public-sector
undertakings include conciliation clauses in their contracts to encourage such resolution
mechanisms.

COMPULSORY CONCILIATION

Compulsory conciliation refers to a legal requirement where parties must engage in conciliation
before proceeding to litigation or arbitration. Importantly, while participation in the process is
mandatory, reaching a settlement remains voluntary. This form of conciliation is enforced to
reduce the burden on the judiciary and promote early resolution of disputes. In India, the
Industrial Disputes Act, 1947 is the most prominent legislation mandating conciliation. Under
Section 12 of the Act, in disputes involving employers and workers, conciliation by a
Conciliation Officer or Board is a prerequisite before the matter can proceed to adjudication.
Courts also invoke Section 89 CPC to direct parties to attempt conciliation in family and civil
matters before proceeding with a trial. Failure to participate in compulsory conciliation may
result in dismissal, delay, or cost penalties.

Conciliation, in its varied forms, serves as a vital tool for resolving disputes amicably,
efficiently, and confidentially, without resorting to time-consuming litigation. Whether it is
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facilitative conciliation preserving relationships, evaluative conciliation providing expert

inputs, court-annexed conciliation blending judiciary with ADR, voluntary conciliation
empowering party autonomy, or compulsory conciliation mandated by law—each model
contributes significantly to the dispute resolution ecosystem in India.

QUALITIES OF A CONCILIATOR

The Arbitration & Conciliation Act, 1996 does not impose formal educational or professional
qualifications for conciliators. Section 64 allows parties to appoint any person of their choice.
However, institutions and experienced practitioners recognize the importance of certain
baseline traits and competencies. To become a Conciliator the Person shall:

• be of major age;

• be of sound mind

• bear High moral character.

• have recognized competence in the fields of Law, Commerce or Finance.

• have a proven track record of public morality and carry high integrity;

• not have any conflict of interest.

• be proficient in language which parties can speak and understand.

• have some experience in ADR methodologies; and

• have the capacity to carryout Conciliation in an independent and impartial manner

without any fear or favour.

(There is no nationality precondition in Conciliation cases.)

DUTIES OF A CONCILIATOR

1. Duty to request written statements – The conciliator shall request each party to
submit a written statement outlining the general nature of the dispute and the key issues
involved. (Section 65)

2. Duty to maintain independence and impartiality – The conciliator must act

independently and impartially throughout the process to help parties reach a fair
resolution. (Section 67(1))
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3. Duty to apply fairness and objectivity – The conciliator shall be guided by principles
of objectivity, fairness, and justice, considering trade usages and the parties’ past
conduct. (Section 67(2))

4. Duty to conduct appropriate proceedings – The conciliator may adopt any procedure
suitable to the case, ensuring the process is efficient and responsive to party preferences.
(Section 67(3))

5. Duty to arrange administrative assistance – The conciliator, with party consent, may
engage administrative support from institutions or individuals. (Section 68)

6. Duty to manage communications – The conciliator may meet or communicate with

parties jointly or separately, orally or in writing. (Section 69)

7. Duty to determine meeting location if not agreed by parties – The conciliator shall
decide the venue after consulting the parties. (Section 69(2))

8. Duty to disclose material information – Any factual information shared by one party
must be disclosed to the other, unless explicitly given in confidence. (Section 70)

9. Duty to maintain confidentiality – The conciliator must ensure that all aspects of the
conciliation, including the settlement agreement, are kept confidential. (Section 75)

10. Duty to assist in drawing up a settlement agreement – If parties agree to a settlement,

the conciliator shall assist in drafting, authenticating, and distributing the agreement.
(Section 73)

11. Duty to declare termination of proceedings – The conciliator may terminate

proceedings where further attempts at conciliation are not justified. (Section 76(b))

12. Duty to fix costs of conciliation – After termination, the conciliator must fix reasonable
costs and notify the parties in writing. (Section 78)

13. Duty to abstain from acting in related proceedings – The conciliator shall not serve
as arbitrator, counsel, or witness in any future arbitration or litigation relating to the
same dispute. (Section 80)

ROLE OF A CONCILIATOR

The arbitration and conciliation act 1996 is India’s primary legislation governing arbitration
and conciliation proceedings. Section 67 of the Indian Arbitration and Conciliation Act deals
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explicitly with the role of a conciliator. It outlines the conciliator’s responsibilities, principles,
and powers during the conciliation process.

Section 67 of the Indian Arbitration and Conciliation Act guides various aspects of a
conciliator’s role, such as assisting the parties in reaching an amicable settlement, adhering to
principles of objectivity, fairness, and justice, conducting the proceedings appropriately, and
making settlement proposals.

What is the Role of the Conciliator?

• Assisting Parties in Reaching an Amicable Settlement

The primary role of a conciliator, as stated in Section 67, is to assist the parties in reaching a
mutually acceptable resolution to their dispute.

This involves facilitating communication, encouraging dialogue, and exploring possible

solutions. The conciliator acts as a neutral and impartial third party, promoting a cooperative
environment where parties can freely express their concerns and interests.

• Guided by Principles of Objectivity, Fairness, and Justice

A conciliator must uphold objectivity, fairness, and justice principles throughout the
conciliation proceedings. This means treating both parties equally without favouring one over
the other.

The conciliator must consider various factors, including the rights and obligations of the
parties, trade usage, and the circumstances surrounding the dispute. By doing so, they ensure
that the proposed settlement aligns with the principles of equity and fairness.

• Conducting the Conciliation Proceedings Appropriately

Section 67 grants conciliators the flexibility to conduct the conciliation proceedings in a

manner they deem appropriate. This enables them to tailor their approach to the case’s specific
needs.

They may take into account the circumstances of the dispute, the expressed wishes of the
parties, and the need for a speedy resolution. Furthermore, if a party requests the conciliator to
hear oral statements, the conciliator should consider such requests.

• Making Proposals for Settlement

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At any stage of the conciliation process, a conciliator is empowered to make settlement

proposals to the parties. These proposals, which need not be in writing and are not required to
be accompanied by a statement of reasons, can serve as potential solutions for the parties to
consider. The aim is to guide the parties towards a settlement that effectively accommodates
their interests and resolves their dispute.

The role of a conciliator, as outlined in Section 67 of the Arbitration and Conciliation Act, is
crucial in promoting the resolution of disputes through amicable means. By acting as an
impartial facilitator, a conciliator assists parties in reaching a mutually satisfactory settlement
guided by objectivity, fairness, and justice principles.

STAGES OF CONCILIATION

Conciliation is a form of alternative dispute resolution (ADR) that provides a flexible, informal,
and voluntary method of settling disputes outside the formal judicial system. According to
Wharton’s Law Lexicon, conciliation is a non-adjudicatory dispute resolution process
governed by mutual consent and legal guidance, often without a binding authority. In India,
conciliation is codified under Part III of the Arbitration and Conciliation Act, 1996, which lays
down a comprehensive statutory framework for its conduct.

Step 1: Commencement of Conciliation Proceedings- Section 62

The initiation of conciliation proceedings begins with a written invitation by one party to the
other. The request should clearly express the intent to resolve the dispute through conciliation
and describe the subject matter of the dispute.

If the party receiving the invitation accepts it in writing, the proceedings formally commence.
However, if the other party rejects the proposal or fails to respond within 30 days, the invitation
is deemed not accepted, and no proceedings may commence.

Step 2: Appointment of Conciliators- Section 64

Once the parties agree to proceed, they must mutually decide on the appointment of one or
more conciliators:

• Single Conciliator: Appointed jointly by both parties.

• Two Conciliators: Each party appoints one conciliator.

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• Three Conciliators: Each party appoints one, and together they appoint a third
conciliator to act as the presiding conciliator.

It is essential that the conciliators remain impartial, independent, and possess adequate
professional or subject matter expertise.

Step 3: Submission of Written Statements- Section 65

After the conciliators are appointed, they may request each party to provide a written statement
outlining:

• The facts of the case,

• The issues in dispute, and

• Their respective positions.

These written statements are to be shared not only with the conciliator(s) but also with the
opposite party, fostering transparency. The conciliator may also request additional documents,

Step 4: Conduct of Conciliation Proceedings- Sections 67(3) and 69(1)

The conduct of conciliation proceedings is highly flexible and is largely guided by the
conciliator’s discretion. The conciliator may:

• Communicate with the parties orally or in writing,

• Hold joint sessions or separate meetings, and

• Determine the procedure best suited to the nature and complexity of the dispute.

All actions must adhere to principles of fairness, impartiality, and confidentiality. The
conciliator’s role includes encouraging parties to reach a settlement voluntarily, without
coercion.

Step 5: Administrative Assistance- Section 68

To facilitate the conciliation process, the parties or the conciliator may seek administrative
assistance from an appropriate institution or individual.

Such assistance may include:

• Organizing meetings,

• Providing secretarial or technical support, and

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• Managing records and documentation.

However, the appointment of such administrative support must be done with the mutual consent
of both parties.

Step 6: Settlement Agreement: Section 73

If the conciliator believes that there are elements of a possible settlement, they may formulate
and submit settlement proposals to the parties. Once the parties agree to the terms:

• A written settlement agreement is drafted and signed by both parties.

• The agreement is final and binding, carrying the same status as an arbitral award under
Section 74.

• Copies are provided to all parties and the conciliator.

Step 7: Termination of Proceedings: Section 76

Conciliation proceedings terminate upon:

1. Signing of the settlement agreement, or

2. A written declaration by the conciliator stating that further efforts are futile, or

3. A joint written declaration by the parties declaring termination, or

4. A unilateral written declaration by one party, communicated to the other and to the
conciliator. This ensures that conciliation does not become an indefinite process.

The conciliation procedure under the Arbitration and Conciliation Act, 1996 offers a structured
yet flexible alternative to formal legal proceedings.

CONCILIATION UNDER STATUTES

Conciliation is one of the most effective mechanisms under the umbrella of Alternative Dispute
Resolution (ADR). It offers a structured yet informal process wherein a neutral third party,
referred to as the conciliator, assists disputing parties in arriving at a mutually agreeable
solution. Unlike arbitration or litigation, conciliation is non-adjudicatory, non-binding unless
formalized, and deeply rooted in voluntary cooperation. It is marked by key characteristics
such as party autonomy, confidentiality of proceedings, procedural flexibility, and a strong
emphasis on preserving relationships—particularly valuable in disputes involving family,
employment, or commercial interests. The conciliator, while neutral, actively facilitates
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dialogue and understanding, often proposing settlement terms, but never imposing decisions.
The process focuses on collaboration over confrontation, making it a vital legal tool in both
statutory and contractual frameworks. In India, conciliation finds recognition and
institutionalization through various legislative enactments, namely, the Industrial Disputes Act,
1947; the Family Courts Act, 1984; the Hindu Marriage Act, 1955; and the Arbitration and
Conciliation Act, 1996. Each of these statutes incorporates conciliation in distinct ways,
tailored to the nature and sensitivity of the disputes they govern.

CONCILIATION UNDER THE INDUSTRIAL DISPUTES ACT, 1947

Conciliation is a vital statutory mechanism for the resolution of industrial disputes under the
Industrial Disputes Act, 1947. It offers an alternative method to litigation by promoting
amicable settlements between employers and employees. The primary objective of this
mechanism is to avoid strikes, lockouts, and prolonged legal disputes by facilitating dialogue
through a neutral third party. Historically, the roots of conciliation in India can be traced back
to the Trade Disputes Act of 1929, which first provided for the appointment of conciliation
officers and the formation of Boards of Conciliation. These provisions were later incorporated
and expanded under the Industrial Disputes Act, 1947, to ensure a more structured and
accessible framework for resolving disputes in the industrial sector.

The Industrial Disputes Act, 1947, aims to maintain peace and harmony in industrial relations
by mandating efforts toward amicable settlement before resorting to litigation. It
institutionalizes conciliation through both individual Conciliation Officers and Boards of
Conciliation. Under Section 4 of the Act, the appropriate government is empowered to appoint
Conciliation Officers whose chief role is to mediate and promote the settlement of industrial
disputes. These officers may operate permanently or be designated for specific cases or
jurisdictions. Section 5 provides for the constitution of Boards of Conciliation for more
complex or large-scale disputes. These Boards consist of a neutral chairman and an equal
number of representatives from both employer and employee sides, reinforcing the balanced
nature of the process.

Section 12 outlines the duties of Conciliation Officers, mandating them to investigate disputes
and encourage settlement through discussions and negotiations. If conciliation fails, the officer
must submit a failure report to the government within 14 days or such earlier time as prescribed.
Section 13 extends similar responsibilities to Boards of Conciliation, requiring them to
facilitate settlement and, in the absence of success, submit a reasoned report. Importantly,
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Section 18(3) gives settlements arrived at during conciliation binding effect on all parties to
the dispute, including successors and sometimes even future employees. This statutory
enforceability adds gravity and effectiveness to the conciliatory process.

In essence, conciliation under this Act serves not merely as an option but as a mandatory
institutional mechanism intended to reduce industrial unrest and prevent litigation.

CONCILIATION IN FAMILY DISPUTES UNDER INDIAN LAW

Across the globe, alternative dispute resolution (ADR) has emerged as a reliable method to
resolve conflicts in a cost-effective and timely manner. India, too, is witnessing a progressive
shift where corporations and individuals are increasingly resorting to conciliatory processes
such as mediation and conciliation to avoid the time-consuming and often emotionally draining
litigation route. The judiciary and legislature of India have acknowledged this shift and are
attempting to align domestic practices with global trends by incorporating ADR into statutory
and procedural frameworks.

Particularly in India, the family plays a central role in the social fabric. Many disputes that
come before the courts are not just legal issues but are deeply intertwined with moral, ethical,
and cultural values. Hence, there is a natural inclination towards mechanisms that resolve
disputes with dignity and minimal confrontation, making conciliation a preferred choice in
family law matters.

LAW COMMISSION REPORT AND SECTION 89 OF CPC

The Law Commission of India, in its 129th Report, acknowledged the need for alternative
modes of dispute resolution in family matters and civil disputes generally. It recommended that
once issues are framed in a civil suit, courts must mandatorily attempt settlement using ADR
techniques such as arbitration, mediation, conciliation, judicial settlement, or Lok Adalats. This
recommendation culminated in the incorporation of Section 89 into the Code of Civil
Procedure, 1908 (CPC), which provides both the framework and procedural authority for courts
to refer cases for alternative resolution.

The provision is supported by procedural rules contained in Order X, Rules 1A, 1B, and 1C of
the CPC. Rule 1A allows parties to choose a mode of out-of-court settlement. Rule 1B mandates
that they appear before the chosen authority, and Rule 1C gives discretionary power to the
presiding officer of that authority to refer the matter back to the court if it is not conducive to
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justice. These provisions enable courts to play an active role in encouraging parties, especially
in matrimonial matters, to reach an amicable settlement.

ORDER XXXIIA: SUITS RELATING TO FAMILY MATTERS

A vital legislative effort was made through the introduction of Order XXXIIA in 1976, which
specifically addresses matrimonial and other family-related disputes under CPC. It applies to a
wide range of family matters including suits for matrimonial relief, legitimacy, guardianship,
custody of minors, maintenance, adoption, succession, and matters governed by personal laws.
Notably, Rule 3 of Order XXXIIA places a mandatory duty upon the court to assist parties in
reaching a settlement whenever possible, and even adjourn proceedings to facilitate such
attempts. This highlights the statutory recognition of conciliation as a foundational pillar in
family dispute resolution.

CONCILIATION UNDER HINDU AND SPECIAL MARRIAGE LAWS

The Hindu Marriage Act, 1955 (HMA), and the Special Marriage Act, 1954 (SMA) embed the
concept of reconciliation within their framework. Section 23(2) of the HMA mandates the court
to make every effort to bring about reconciliation between the parties before granting any
matrimonial relief under the Act. A similar duty is imposed under Sections 34(2) and 34(3) of
the SMA. These provisions not only reinforce the value of conciliation but also reflect the
ancient Hindu scriptural traditions that emphasized reconciliation before dissolution of
marriage. This statutory embedding ensures that courts function not merely as adjudicatory
bodies but as facilitators of harmony in familial relationships.

CONCILIATION UNDER MUSLIM PERSONAL LAW

Islamic law also places significant emphasis on reconciliation in marital disputes. The Quran
prescribes a four-step process before a divorce (talaq) is finalized. Initially, the husband is
encouraged to engage in dialogue (faizuhunna) with his wife to resolve misunderstandings. If
unresolved, the next step involves a temporary separation (wahjuruhunna) to allow emotional
cooling-off. Should differences persist, further efforts (wazribuhunna) are to be made through
counseling and persuasion to seek resolution. If reconciliation is still not achieved, the final
step involves arbitration by two representatives, one from each family. This process highlights
that even in the Islamic tradition, reconciliation is not just recommended but forms an essential
part of marital dispute resolution.

FAMILY COURTS ACT, 1984

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Recognizing the sensitive nature of family disputes and the need for conciliatory adjudication,
the Indian Parliament enacted the Family Courts Act in 1984. The Preamble of the Act itself
emphasizes the objective of promoting conciliation and securing speedy settlement of disputes
related to marriage and family affairs. Section 9 of the Act mandates family courts to make
every effort for reconciliation before proceeding with a matter. The Act envisages a holistic
approach where trained counselors and mediators assist families in navigating their disputes.
Family Courts thus serve as a specialized forum equipped both legally and administratively to
implement conciliatory justice.

The Indian judiciary has reiterated the mandatory nature of reconciliation in family disputes.
In Shiv Kumar Gupta v. Lakshmi Devi Gupta (2005), the Calcutta High Court emphasized the
judge’s duty to adhere to Section 23(2) of the HMA. The Supreme Court in Jagraj Singh v. Bir
Pal Kaur (2007) reaffirmed that courts must attempt reconciliation at the first instance before
granting divorce. Furthermore, the Supreme Court’s decision in Salem Bar Association v.
Union of India (2003) led to the adoption of Model ADR and Mediation Rules, which were
circulated to all High Courts for implementation with local modifications. These judicial
pronouncements illustrate the court’s commitment to mainstreaming conciliation within the
litigation process.

India's conservative family structure and strong cultural underpinnings often discourage parties
from seeking help outside their private circle. It is, therefore, imperative to raise awareness
about the efficacy and benefits of conciliation and ADR mechanisms, especially in rural and
semi-urban areas. Outreach programs and legal literacy campaigns can play a vital role in
familiarizing citizens with these processes.

CONCILIATION UNDER THE ARBITRATION AND CONCILIATION ACT, 1996

The Arbitration and Conciliation Act, 1996, provides the most comprehensive statutory
framework for conciliation in Indian law. Part III of the Act, spanning Sections 61 to 81,
incorporates detailed provisions based on the UNCITRAL Model Law. Section 61 declares the
application of conciliation to any dispute of a civil or commercial nature, regardless of whether
the dispute is contractual. Section 62 lays down the procedure for initiation—one party may
send a written invitation to conciliate, and the process commences only upon the written
acceptance of the other party.

Sections 65 to 67 prescribe the responsibilities of the parties and the conciliator. The parties
must submit written statements detailing the nature of the dispute, and the conciliator may
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request additional information. The conciliator assists the parties in identifying disputed issues,
generating settlement options, and guiding negotiations. Importantly, the conciliator is not
bound by the Code of Civil Procedure or the Indian Evidence Act, allowing for greater
flexibility.

Section 73 provides for the drawing up of a settlement agreement once parties reach a
consensus. This agreement, signed by both parties and the conciliator, becomes binding.
Section 74 confers upon such agreements the same legal status as an arbitral award on agreed
terms, making them enforceable like a decree. Section 75 mandates confidentiality throughout
the proceedings, and Section 77 bars either party from initiating arbitration or litigation while
conciliation is ongoing, unless both agree otherwise.

The conciliation mechanism under this Act stands out for its voluntary nature, procedural
simplicity, and enforceable outcome, making it highly suitable for commercial and civil
disputes.

AWARD UNDER CONCILIATION – SETTLEMENT AGREEMENT

Part III of the Arbitration and Conciliation Act, 1996 exclusively deals with the conciliation
process, which is distinct from arbitration. Unlike arbitration, conciliation is non-adjudicatory
and voluntary, where a neutral third party – the conciliator – facilitates the resolution of a
dispute by encouraging parties to arrive at a mutually acceptable agreement.

The process begins when one party sends a written invitation to the other to settle the dispute
through conciliation. Upon acceptance, both parties proceed to appoint a conciliator (either one
or more, as mutually decided).

Settlement in Conciliation

Section 73: Settlement Agreement

Section 73 of the Act is the central provision governing the formulation and finalization of a
settlement agreement during conciliation proceedings.

Section 73:

• If the conciliator perceives potential for settlement, they may propose terms of a
possible settlement to the parties, who may provide observations. These terms can be
reformulated based on party feedback.
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• Upon reaching a mutual agreement, the parties may draw up and sign a written
settlement agreement. The conciliator may assist in drafting this agreement if requested.

• Once signed by both parties, the settlement agreement is considered final and binding.

• The conciliator is required to authenticate the agreement and provide copies to both
parties.

Section 74: Status and Effect of Settlement Agreement

Section 74 elevates the legal status of a settlement agreement drawn under Section 73. It
declares that such a settlement has the same legal status and effect as an arbitral award on
agreed terms under Section 30 of the Act.

Nature and Binding Force of Settlement Agreements

A settlement agreement under conciliation:
• Is voluntary, but once signed and authenticated, becomes legally binding.
• Eliminates the need for court decree or fresh legal proceedings for enforcement.
• Has finality akin to an arbitral award.
CASE LAWS:

(i) Haresh Dayaram Thakur v. State of Maharashtra, (2000) 6 SCC 179

• The Supreme Court emphasized the necessity of signature of both parties on the
settlement agreement.

• A settlement agreement under Section 73 attains the status of an arbitral award under
Section 74 only if signed by both disputing parties and authenticated by the conciliator.

(ii) Anuradha SA Investments LLC & Anr. v. Parsvnath Developers Ltd. & Ors

The court addressed objections regarding non-stamping of a settlement agreement.

• Held that improper stamping does not render the agreement invalid.

• Such an agreement may be subsequently stamped to cure the defect, and retains its
enforceability as an arbitral award under Section 74.

The statutory provisions under Sections 73 and 74 of the Arbitration and Conciliation Act,
1996, supported by judicial interpretation, establish that a settlement agreement in conciliation
is not merely persuasive but has the same force as an arbitral award.
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ETHICAL ISSUES IN CONCILIATION

Conciliation is an alternative dispute resolution (ADR) method that aims to resolve disputes
amicably through the intervention of a neutral third party, known as the conciliator. While
conciliation promotes efficiency and mutual understanding, it raises significant ethical
considerations that must be addressed to ensure fairness, transparency, and integrity in the
process.

Ethical Principles in Conciliation

1. Neutrality and Impartiality- The conciliator must remain neutral and impartial
throughout the process. Any bias or perception of favouritism can undermine the
legitimacy of the process.
2. Confidentiality - One of the cornerstones of conciliation is maintaining strict
confidentiality. Parties must trust that sensitive information will not be disclosed or
used against them later, especially in litigation. Section 75 of the Arbitration and
Conciliation Act, 1996 (India) mandates confidentiality in conciliation proceedings.
3. Informed Consent- All parties must participate voluntarily and with full awareness of
their rights and obligations. The conciliator has a duty to ensure parties are not coerced
or misled.
4. Disclosure Requirements- Conciliators must disclose any situation that may raise a
conflict of interest. This includes financial, familial, or professional links with either
party.
5. Avoiding Dual Roles- A conciliator should not act in a dual role, such as being a future
arbitrator or legal adviser for either party. It compromises objectivity and trust in the
process.
6. Professional Competence- Conciliators must possess adequate legal and subject-
matter knowledge. Lack of competence can lead to poor resolution outcomes and
unethical handling.
7. Diligence in Proceedings- Timely handling, proper documentation, and procedural
fairness are part of ethical diligence.
8. Fairness and Equity- The outcome of conciliation should be fair and just, not merely
a compromise. The conciliator should guard against coercive settlements or unfair
advantage.
SALB1903 SATHYABAMA SCHOOL OF LAW

Ethics in conciliation are not mere formalities but foundational to the process’s success.
Upholding neutrality, confidentiality, and fairness ensures credibility and promotes long-lasting
dispute resolution. Ethical lapses, however minor, can delegitimize outcomes and erode public
trust in ADR mechanisms.