BIHAR STATE LEGAL SERVICES AUTHORITY,

PATNA
FINAL DRAFT SUBMITTED IN THE FULFILMENT OF THE COURSE TITLED:
“CONCILIATION AS A PART OF ALTERNATIVE DISPUTE RESOLUTION
SYSTEM”

NAME - SWARAJ SIDDHANT

INSTITUTION – CHANAKYA NATIONAL LAW UNIVERSITY, PATNA
COURSE – B.B.A LL.B(Hons.)
YEAR - FIRST YEAR (FIRST SEMESTER)
 DECLARATION BY THE INTERN

I hereby declare that the work reported in the B.A., LL.B (Hons.) Project Report entitled

”Conciliation” submitted at Bihar State Legal Services Authority is an authentic record of my

work carried out while working as an intern at the same institution. I have not submitted this

work elsewhere for any other degree or diploma. I am fully responsible for the contents of my

Project Report.

SIGNATURE OF THE INTERN

NAME OF THE INTERN – SWARAJ SIDDHANT
INSTITUTION – CHANAKYA NATIONAL LAW UNIVERSITY
 ACKNOWLEDGEMENT

I am thankful to the Bihar State Legal Services Authority for giving me the opportunity to
prepare and present research paper on this important topic, and also for giving us interns such a
returning chance for the enhancement of our skills in the field of Law. To get such a chance
while working as intern is of great importance and help for our respective careers.

I am also thankful to my colleagues, friends, and family for helping and supporting me while I
was interning and preparing this research paper.

I would also like to thanks the NALSA, and BCI, for creating such ventures for law student to
intern at, and develop their legal acumen and exposure.

- Swaraj Siddhant,
Chanakya National Law University, Patna
(Intern)
 CONTENTS

 Introduction
 Legal Provisions of conciliation in India
 Principles of Conciliation
 Role of Conciliator
 CPC and Conciliation
 Advantages of Conciliationn
 Conciliation vis-à-vis Other Alternative Dispute Redressal systems
 Conclusion vis-à-vis Arbitration
 Conciliation vis-à-vis Mediation
 Conclusion
 Introduction
With the passage of time, the legal redressal system has seen a heavily noticeable detour from
judicial processes, to the ADRS, namely the Alternative Dispute Resolution System. The
incoming of ADRS has surely served the public with an option to get settlement, by means other
than long-drawn Court proceedings. The court proceedings are generally long drawn, and such
redressal system doesn’t give the participants a chance to have a settlement of any sort, the
decision aims to end the dispute by the means of complete siphoning of any possibilities future
discourse, by the means of settling the case in favour of one, and only one party, but this also
leads to no probable way of having any future relations between the parties, as it is quite likely
that the other party would be facing the consequence of having the judgment against their
interests. The ADRS work on a different principle. These methods aim to settle a dispute by
means of reaching coming grounds and interests, so that both the parties are benefitted, and
hence, have possibilities of future relations, as no one parties is at a complete disadvantage.

Indian Judicial Redressal System has had a tough time working , while being withheld by the
constraints of heavy red-tapism, severe lack of personnels, and consequential humungous
backlog of cases, exceeding even beyond 8-digit numbers. It is because of these problems that
the public has had a tough time going for legal redressal to the Judiciary, and it is this very
reason why the Indian population refrains from pinging the Judiciary for their dispute resolution.
It was then that the Government felt the need of introducing two revolutionary Acts , which has
led to increasing number of dispute resolution in India. The two acts were the Legal Services
Authority Act, 1987, and the Arbitration and Conciliation Act, 1996. The incoming of Lok
Adalats by the former act, and Government recognition of alternative dispute resolution methods
such as Mediation, Arbitration and Conciliation, has, not to mention, led to ever increasing
number of settled disputes, at a considerable high rate.

Of the various methods of Alternative Dispute Resolution, Conciliation is one peculiar and
creative way of dispute settlement, which came to be legally recognized by the Arbitration and
Conciliation Act, 1996. Conciliation is a less formal form of arbitration. This process does not
require an existence of any prior agreement. Any party can request the other party to appoint a
conciliator. One conciliator is preferred but two or three are also allowed. In case of multiple
conciliators, all must act jointly. If a party rejects an offer to conciliate, there can be no
conciliation.1

1
Conciliation in India : An overview, PSA Issue VII, 2010.
 Legal Provisions of Conciliation in India

Conciliation is a process in which a third party, called a conciliator, restores damaged

relationship between disputing parties by bringing them together, clarifying perceptions, and
pointing out misperceptions. The conciliator may or may not be totally neutral to the interests of
the parties. Successful conciliation reduces inflammatory rhetorics and tensions, opens channels
of communication, and facilitates continued negotiations. Frequently, conciliation is used as a
medium to restore the parties to a pre-dispute status quo, after which other ADR techniques may
be deployed.

In order to understand what Parliament meant by ‘Conciliation’, we have necessarily to refer to

the functions of a ‘Conciliator’ as visualized by Part III of the 1996 Act. It is true, section 62 of
the said Act deals with reference to ‘Conciliation’ by agreement of parties but sec. 89 permits the
Court to refer a dispute for conciliation even where parties do not consent, provided the Court
thinks that the case is one fit for conciliation. This makes no difference as to the meaning of
‘conciliation’ under sec. 89 because, it says that once a reference is made to a ‘conciliator’, the
1996 Act would apply. Thus the meaning of ‘conciliation’ as can be gathered from the 1996 Act
has to be read into sec. 89 of the Code of Civil Procedure. The 1996 Act is, it may be noted,
based on the UNCITRAL Rules for conciliation.

The Arbitration and Conciliation Act, 1996 is based on the United Nations Commission on
International Trade Law (UNCITRAL) Model Law on international commercial arbitration and
conciliation. While the Act was not intended to displace the judicial system, the new law ushered
in an era of private arbitration and conciliation. It was also the first time that a comprehensive
legislation was made on the subject of conciliation in India. The UNCITRAL Rules on
Conciliation, 1980 recognized “the value of conciliation as a method of amicably settling
disputes arising in the context of international commercial relations” and that adoption of
uniform conciliation rules by “countries with different legal, social and economic systems would
significantly contribute to the development of harmonious international economic relations.”1
Accordingly, these rules were closely followed by the Indian legislators to formulate conciliation
rules under Part III of the Act.

Under section 65 of the Arbitration and Conciliation Act, 1996 , the ‘Conciliator’ may request
each party to submit to him a brief written statement describing the “general nature of the dispute
and the point at issue”. He can ask for supplementary statements and documents too. Section 67
describes the role of a Conciliator. Sub-section (2) states that he shall be guided by principles of
objectivity, fairness and justice, giving consideration, among other things, to the rights and
obligations of the parties, the usage off the trade concerned and the circumstances surrounding
the dispute, including any previous business practices between the parties. Sub-section (3) states
that he shall take into account “the circumstances of the case, the wishes the parties may express,
including a request for oral statements”. Sub-section (4) is important and permits
the’Conciliator’ to make proposals for a settlement.2 Section 69 of the act states that the
conciliator may invite parties to meet him. Section 70 deals with disclosure by the conciliator of
information given to him by one party to another. Section 71 deals with cooperation of parties
with the conciliator, Section 72 deals with suggestions being submitted to the conciliator by each
party for the purpose of settlement. Finally, Section 73 states that the conciliator can formulate
terms of a possible settlement if he feels there exist elements of a settlement. He is also entitled
to ‘reformulate the terms’ after receiving the observations of the parties. Sub-section (1) of
section 73 reads thus:

“ Sec. 73(1) settlement agreement – (1) When it appears to the conciliator that there exist
elements of a settlement which may be acceptable to the parties, he shall formulate the terms of a
possible settlement and submit them to the parties for observations. After receiving the
observations of the parties, the conciliator may reformulate the terms of a possible settlement in
the light of such observations”

The above provisions in the 1996 Act, make it clear that the ‘conciliator’ under the said Act,
apart from assisting the parties to reach a settlement, is also permitted to make “proposal for a
settlement” and “formulate the terms of a possible settlement” and “reformulate the terms”. This
is indeed the UNCITRAL concept.

Principles of Conciliation:
The procedure laid down in Part III of the Act reflects the following broad principles:

(1) Non-adversary Nature of Conciliation Proceedings – there is no claimant or plaintiff in

conciliation proceedings, which itself makes conciliation too amicable. In the absence of
claimant or plaintiff, all the conciliating parties are presumed to be having the same stand on the
issue, thus making the process very smooth and agitation free.

(2) Voluntary Nature of Proceedings – Any party can commence and discontinue the
proceedings. This principle lucidly presents the option of accepting, continuing or abstaining
from carrying on the conciliated outcome.

(3) Flexible Procedure – The conciliator has the discretion to adopt any procedural law to
ensure speedy and inexpensive conduct of proceedings. This principle equips the conciliator to
work as per his own discretion and autonomy in the matters of working of the conciliation
process, as he has the freedom to have the task done as per the procedure and legal means , in his
capacity and comfort he seems fit.

2
Arbitration and Conciliation Act, 1996 - Section 67(4) – The conciliator may, at any stage of the conciliation
proceeding, make proposals for a settlement of the dispute. Such proposals need not be in writing and need not be
accompanied by a statement of the reasons thereof
(4) Decisions are Recommendatory – Disputes are settled by mutual agreement and not by
imposed decisions. This quality of conciliation makes it a far more acceptable, amicable, and
preferred way of settling disputes.

Role of a Conciliator :
Per section 80 of the Arbitration and Conciliation Act, 1996 the Conciliator doesn’t decide for
the parties, but strives to support them in generating and options in order to find a solution that is
compatible for both of them, thereby fulfilling the mandate of section 67 of the act under which
the main function of the conciliator is to assist the parties to reach an amicable settlement. For
achieving this, a Conciliator is obliged to –
i. Act in an independent and impartial manner, and
ii. Abide by the principles of objectivity, fairness and justice,
iii. Section 67(4) specifically enables the Conciliator to “make proposals for settlement
of the dispute…. At any stage of the conciliation proceedings”.
iv. The above provisions make it clear that the conciliator, apart from assisting the
parties to reach a settlement, is also permitted and empowered to make proposals for
a settlement and formulate/reformulate the terms of possible settlement.

CPC and Conciliation:

A 1999 amendment to the CPC enabled the courts to refer pending cases to arbitration,
conciliation and mediation to facilitate early and amicable resolution of disputes.10 Prior to the
amendment of the CPC, the Act did not contain any provision for reference by courts to
arbitration or conciliation in the absence of the agreement between the parties to that effect.
However, pursuant to the insertion of section 89 in the CPC, a court can refer the case to
arbitration, conciliation, judicial settlement11 or mediation, “where it appears to the court that
there exist elements of settlement which may be acceptable to the parties.” Section 89 of the
CPC empowers the court to formulate the terms of settlement and give them to the parties for
their observation and after receiving the observations, reformulate the terms of a possible
settlement and refer the same for arbitration, conciliation, judicial settlement or mediation. Once
a court refers a case to conciliation, the provisions shall not apply and the parties shall be bound
by the provisions of the Act. This allows the parties to terminate the conciliation proceedings in
accordance with section 76 of the Act,12 even if the dispute has not been resolved, thereby
rendering the entire dispute resolution process futile.
Advantages of Conciliation:
1. COST EFFECTIVE AND EXPEDITIOUS PROCESS – Conciliation is an
economical and expeditious mechanism for resolution of disputes in comparison to
litigation and arbitration, which makes it an excellent ADR Mechanism. The cost
management tools and expertise of the conciliator generally prevent multiplication of
actual costs to the parties and seek to make it cost efficient. 3 The conciliator follows a
simplified procedure suited to the aspirations of the parties and keeping in mind the need
for speedy settlement of the dispute.4 Moreover the time management tools applied by the
conciliator prevent dragging on of conciliation proceedings for longer periods and ensure
its conclusion within a reasonable time frame. The end result in conciliation is a
negotiated settlement which is treated to be an arbitral award on agreed terms, thereby
obviating the possibility of successive appeals and finally resolving the dispute in an
expeditious and cost effective manner.
2. AUTONOMY AND CONVENIENCE OF PARTIES – Conciliation is flexible and
convenient. The parties are free to agree on the procedure to be followed by the
conciliator, the time and venue of the proceedings and thus eventually control the
process. The conciliator may conduct the conciliation proceedings in such a manner as he
considers appropriate, taking into account the circumstances of the case, convenience of
the parties and the wishes the parties may express.5 A very commendable feature of
conciliation is that the parties can withdraw from conciliation at any stage. 6 Unless a
party consents to the initiation and continuance of conciliation and accepts the resultant
settlement agreement he cannot be said to be bound by the process, and he may walk out
from conciliation proceedings at any time. This is unlike arbitration and litigation where
decisions can be made even if a party walks out.7 In litigation or arbitration what solution
or resolution would be contained in the judgment or award is not within the control or
prior knowledge of the parties and moreover the ultimate decision is based on a
straightforward decision on merits keeping in view the rights and positions of the parties.
In conciliation however the parties control the outcome and can incorporate terms and
conditions in the settlement agreement as per mutual agreement. They can devise creative
solutions for their disputes at one go which may not have been within the contemplation
of an arbitrator or a judge. They can also decide how their rights and liabilities are going
to be actually worked out on The parties therefore not only control the procedure in

3
Ashwanie Kumar Bansal, Arbitration and ADR 26 (Universal Law Publishing Co. Pvt. Ltd., Delhi, 2005).
4
S. 67(3), Arbitration and Conciliation Act, 1996.
5
S. 67(3), Arbitration and Conciliation Act, 1996
6
Mukul Mudgal, “Conciliation: An Indian Perspective”, II (2) Nyaya Kiran (April 2003).
7
Ashwanie Kumar Bansal, Arbitration and ADR 24 (Universal Law Publishing Co. Pvt. Ltd., Delhi, 2005).
 conciliation proceedings but also the final outcome of the proceedings. Indeed party
autonomy is a very laudable feature of conciliation.
3. CREATIVE SOLUTIONS/ REMEDIES – In litigation or arbitration what solution or
resolution would be contained in the judgment or award is not within the control or prior
knowledge of the parties and moreover the ultimate decision is based on a
straightforward decision on merits keeping in view the rights and positions of the parties.
In conciliation however the parties control the outcome and can incorporate terms and
conditions in the settlement agreement as per mutual agreement. They can devise creative
solutions for their disputes at one go which may not have been within the contemplation
of an arbitrator or a judge. They can also decide how their rights and liabilities are going
to be actually worked out on resolution of the dispute and chalk out ingenious modalities
for complying with the basic terms of settlement.8
4. PARTY SATISFACTION AND HARMONY – Unlike litigation and arbitration where
one party wins and the other loses, in conciliation both parties are winners as the decision
is acceptable to both. Both parties are in favour of the decision, as until both parties agree
to a proposal, the settlement or agreement does not take place. Therefore it is a win-win
situation for both the parties as both the parties are satisfied with the agreement. Such
win-win situation enables them to retain good relationship for times to come unlike
litigation and arbitration where the parties on account of the win-loss equation are not
able to continue or rebuild their relationship. Even where the conciliation proceedings do
not fructify into a settlement, they prove to be useful by enabling the parties to
understand each other’s versions, positions and aspirations in a better perspective.
5. CONFIDENTIALITY – In contradistinction to judicial proceedings conciliation is a
private closed door affair and therefore offers privacy and confidentiality. In fact
confidentiality in conciliation proceedings is a statutory guarantee which makes
conciliation an excellent dispute resolution mechanism.9 The conciliator and the parties
are supposed to keep confidential, all matters relating to the conciliation proceedings. The
parties are also precluded from relying upon or introducing as evidence in subsequent
arbitral or judicial proceedings views expressed or suggestions made by the other party in
respect of a possible settlement of the dispute, admissions made by the other party in the
course of conciliation proceedings, proposals made by the conciliator and the fact that the
other party had indicated his willingness to accept a proposal for settlement made by the
conciliator.10 Even during the course of conciliation proceedings where a party gives any
information to the conciliator subject to a specific condition that it be kept confidential,
the conciliator is not supposed to disclose that information to the other party.11 This
ensures that even in the eventuality of failure of conciliation proceedings neither party is
able to derive undue benefit out of any proposal, view, statement, admission, etc. made
8
Conciliation – Chapter 18 Legal Methods by Dr. G.P. Tripathi , Central Law Publication (2014)
9
S. 75, Arbitration and Conciliation Act, 1996.
10
S. 81, Arbitration and Conciliation Act, 1996.
11
6 S. 70, Arbitration and Conciliation Act, 1996.
 by the opposite party during conciliation proceedings.12 The process of conciliation
provides an opportunity for settlement of disputes without publicity.13 The conciliator is
also precluded from acting as an arbitrator or as a representative or counsel of a party in
any arbitral or judicial proceeding in respect of a dispute that is the subject of the
conciliation proceedings nor can he be presented by the parties as a witness in any
arbitral or judicial proceedings.14
6. ENFORCEABILITY OF CONCILIATION SETTLEMENT AGREEMENT – The
settlement agreement drawn up in conciliation proceedings has the same status and effect
as if it is an arbitral award on agreed terms on the substance of the dispute rendered by an
arbitral tribunal under section 30 of the Arbitration and Conciliation Act, 1996.15 Thus
the settlement agreement in conciliation is executable as a decree of the civil court.16 1 It
is open to any party to apply for execution of the settlement agreement by filing an
execution petition before the civil court. The expeditious enforcement of a conciliation
settlement agreement in a summary manner i.e. by way of execution proceedings in a
civil court is the principal advantage attached with conciliation.17

12
S. 70, Arbitration and Conciliation Act, 1996.
13
A.K. Bansal, “Conciliation: Quick Settlement of Disputes”, (1) Arb. L.R. (Journal) 22 (1999).
14
9 S. 80, Arbitration and Conciliation Act, 1996.
15
S. 74, Arbitration and Conciliation Act, 1996
16
S. 36, of the Arbitration and Conciliation Act, 1996.
17
Ss. 74, 30 and 36, Arbitration and Conciliation Act, 1996
 CONCILIATION VIS-À-VIS OTHER ALTERNATIVE DISPUTE
REDRESSAL SYSTEMS

Conciliation vis-à-vis Arbitration:

Firstly, while arbitration is considered private when compared with the court system, conciliation
is even more private than arbitration. As litigation and arbitration are both means of adjudication,
the judge and the arbitrator render their verdicts and impose them on the parties. While the
parties to an arbitration proceeding are given considerable freedom in terms of deciding the
venue, date, arbitrator, etc., they have no control over the decision making process except in the
case of award on agreed terms.6 In contrast, parties to a conciliation proceeding have the
privilege to negotiate and arrive at an amicable settlement with the assistance of a conciliator in a
less formal setting.

Secondly, while section 7(2) requires that an arbitration agreement be in writing, there is no such
express provision regarding conciliation in the Act. However, this does not hold much relevance
as the process of conciliation commences with the written offer and acceptance to conciliate by
the parties.7 Conversely, in arbitration, even in the absence of a prior written agreement, if the
parties appoint the arbitrator and proceed with arbitration, the requirement of section 7(2) is
taken as complied with.

Thirdly, section 30 of the Act permits the parties to engage in conciliation process even during
the course of arbitral proceedings. They may do so suo motu or under the directions of the
arbitrator. In case the conciliation concludes successfully, the arbitrator is to record the
settlement in the form of an arbitral award. Such an award, which is prepared on agreed terms, is
given similar status to that of any other award.8 However, section 77 of the Act bars any arbitral
or court proceedings in respect of a dispute which is the subject matter of conciliation
proceedings.9 This essentially means that during arbitral or court proceedings, the parties are
encouraged to initiate conciliation proceedings, but once conciliation proceedings commence,
they are barred from initiating arbitration or approaching the court. Clearly, the purpose of
sections 30 and 77 of the Act is to encourage parties to resort to nonformal conciliation
proceedings in preference to the formal court and arbitral proceedings.
Conciliation Vis-À-Vis Mediation:
Mediation is nothing but negotiation facilitated by a third party who assists the parties in moving
to resolution. Conciliation is also a process of arriving at a settlement with the assistance of a
third party/conciliator.18

The difference between conciliation and mediation has been an important issue in ADR
jurisprudence. One obvious reason is that there are striking similarities between mediation and
conciliation.19 The source of morality in both mediation and conciliation is the liberty and spirit
of the parties to evaluate their respective cases, understand their interests and arrive at a
negotiated settlement with the assistance of a neutral third party. Albeit, the two terms are used
distinctly yet the fundamental philosophy and the basic process in both mediation and
conciliation are similar. Both, conciliation and mediation can be described as negotiation
facilitated by a third party. They both focus on amicable resolution of disputes and aim at
maintenance of relationships between the parties. In fact, at times the two terms are used
synonymously or interchangeably.20

In respect of the UNCITRAL Model law on International Commercial Conciliation it has been
stated that “in practice, proceedings in which the parties are assisted by a third person to settle a
dispute, are referred to by expressions such as conciliation, mediation, neutral evaluation, mini-
trial or similar terms. Various techniques and adaptations of procedures are used for solving
disputes by conciliatory methods that can be regarded as alternatives to more traditional judicial
dispute resolution. The Model Law uses the term “conciliation” to encompass all such
procedures. Practitioners draw distinctions between these expressions in terms of the methods
used by the third person or the degree to which the third person is involved in the process.
However, from the viewpoint of a legislator, no differentiation needs to be made between the
various procedural methods used by the third person. In some cases, the different expressions
seem to be more a matter of linguistic usage than the reflection of a singularity in each of the
procedural method that may be used.21

While in many countries no distinction is made between conciliation and mediation, in India the
introduction of the term mediation and conciliation separately in section 89 CPC shows that
theses terms are to be understood and treated differently. To some extent there may be
overlapping between the two yet there is fine line of distinction between them as well.22

In this regard, it may be emphasized that the role of a conciliator is distinct from the role of a
mediator. A mediator’s task is to primarily facilitate the negotiations and discussions between
parties, and guide them to their own self-proposed solution. The mediator is usually regarded as

18
4 Ashwanie Kumar Bansal, Arbitration and ADR 19 (Universal Law Publishing Co. Pvt. Ltd., Delhi, 2005).
19
Ghanshyam Singh, “Mediation: A Choice of Dispute Settlement in India”, X (1) MDU L. J. 41 (2005)
20
Ibid.
21
UNCITRAL Model Law on International Commercial Conciliation With Guide to Enactment and Use, 2002
22
P.M. Bakshi, “Conciliation in Indian Law”, 2 Comp. L.J. (Journal) 50 (1996).
having a facilitative role and will not provide advice on the matters in dispute. A mediator is a
therefore merely a facilitator. The conciliator however plays a more interventionist role,
therefore for clarity and consistency it would be better if the process where the dispute resolution
practitioner gives advice or plays a more interventionist role in addition to facilitating
negotiations is designated as ‘conciliation’.23

In the Indian perspective also, in conciliation, unlike in mediation, the conciliator plays a more
active role and may, at any stage of conciliation proceedings, make proposals for settlement of
the dispute. Even the Indian Supreme Court has held that the mediator is a mere facilitator
whereas the conciliator by making proposals for a settlement of the dispute and by formulating
or re-formulating the terms of a possible settlement has a greater role than a mediator. Therefore
in India a conciliator can play a more pro-active, interventionist and evaluative role, on account
of his legal authority "to make proposals for settlement of the dispute" and to formulate and
reformulate the terms of the settlement agreement.24 The concept of conciliation under Indian
law is therefore consistent with Rules for Conciliation promulgated by the UNCITRAL25

23
P. Chandrashekhara Rao, The Arbitration and Conciliation Act – A Commentary (Universal Law Publishing
Company Pvt. Ltd., Delhi, 1997)
24
S. 67, Arbitration and Conciliation Act, 1996.
25
6 Anil Xavier, “Mediation : Its Origin and Growth in India”, 27 Hamline J. Pub. L. & Pol'y 275 (2006)
 CONCLUSION

The introduction of conciliation as a means of alternate dispute resolution in the Act is definitely
a positive step towards encouraging parties to opt for it. Taking into consideration the time effort
and money involved in pursuing cases before a court or an arbitrator in India, conciliation should
act as the perfect means for resolving disputes, especially those of commercial nature. Hence,
parties should prior to initiating arbitration or judicial proceedings, opt for conciliation as a
means for resolving disputes. In case conciliation proceedings fail, only then should the
disputants look at arbitration or litigation to resolve the dispute.