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1. ConciliationRelevant Provisions and Case Law (Sections 61 To 81)

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 ConciliationRelevant Provisions and Case Law (Sections 61 To 81)
Sriram Panchu: Mediation Practice and Law - The Path to Successful Dispute Resolution, 2e 2015

SRIRAM PANCHU

Sriram Panchu: Mediation Practice and Law - The Path to Successful Dispute Resolution, 2e 2015 >
Sriram Panchu: Mediation Practice and Law - The Path to Successful Dispute Resolution, 2e 2015 >
Chapter 17 Law in Indialegislation > ARBITRATION AND CONCILIATION ACT, 2015

Chapter 17 Law in India—Legislation

ARBITRATION AND CONCILIATION ACT, 1996

Conciliation—Relevant Provisions and Case Law (Sections 61 To 81)

Part III of the Arbitration and Conciliation Act, 1996 deals with conciliation. It has application when the process is
carried on outside the court-annexed system. In this context, it can also be referred to as private mediation. Section
61 makes this Part applicable to ‘conciliation of disputes arising out of legal relationships, whether contractual or not
and to all proceedings relating thereto.’ However, it is not applicable to certain disputes where, by virtue of any law
for the time being in force, such disputes may not be submitted to conciliation. Section 623 of the Act provides that
a party desiring conciliation may initiate the proceedings by sending a written invitation to the other party to the
dispute to agree for conciliation, identifying the subject matter of the dispute. Upon the other party’s acceptance of
the invitation in writing, the conciliation proceedings are deemed to commence. This is in contrast to the provision
regarding commencement of arbitration proceedings which are deemed to commence the moment one of the
parties seeks reference to arbitration. If the other party fails to reply to the invitation within 30 days, the party
sending the invitation can construe it as a rejection. This difference flows from the concept that conciliation is
essentially a voluntary process.

Sections 634 and 645 of the Act deal with the number of conciliators and the procedure for their appointment.
Though the norm is for the appointment of one conciliator, the parties may agree for the appointment of two or even
three conciliators. In case of more than one conciliator, each of the parties may appoint one, and where a third
conciliator is required, the parties may agree to appoint the third conciliator who would act as the presiding
conciliator. This is different from the position in arbitration, where the third arbitrator is chosen by the two appointed
arbitrators. It is noteworthy that the statute provides that where there is more than one conciliator, they ought, as a
general rule, to act jointly. This is designed to prevent conciliators from having separate communications with the
parties who appointed them. The parties can also enlist the assistance of a suitable institution or person for the
appointment of conciliators.
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ConciliationRelevant Provisions and Case Law (Sections 61 To 81)

Sections 65 to 75 deal with the manner of conduct of the conciliation proceedings and the nature of the conciliation
proceedings, including the role of the conciliator. Section 656 permits the conciliator to request each party to submit
to him a written statement putting forward the case, its general nature, the dispute, issues involved, etc. Each party
is required to furnish a copy of the same to the other party. This holds good for additional submissions and
documentary evidence as well, whether requested for by the conciliator or on the party’s own volition. This further
strengthens the transparency of the process and prohibits any material being furnished to the conciliator behind one
party’s back. However, this does not detract from the possibility of the parties giving the mediator confidential
information.

A reading of Section 667would show that the conciliator is not bound by the strict procedures of the Code of Civil
Procedure or the Indian Evidence Act, 1872 as was observed in Haresh Dayaram Thakur v. State of Maharashtras.
8

As per Section 67,9 the conciliator is to assist the parties in an impartial manner and is enjoined to be guided by
principles of objectivity, fairness and justice, and to give due consideration to the rights and obligations of the
parties, the usages of the trade concerned, the circumstances surrounding the dispute and any previous business
practices between the parties. The conciliator may, at any stage of the proceedings, make proposals for a
settlement of the dispute. Though the conciliator is permitted wide discretion with regard to the procedure, he must
conduct the conciliation in a fair, impartial and appropriate manner, failing which the validity of the settlement may
be jeopardised.

Section 6810 deals with the conciliator or parties seeking administrative assistance for the conduct of the
conciliation.Section 6911 provides for meetings and communications, oral or written, between the conciliator and
the parties either jointly or separately. Section 7012 casts a duty upon the conciliator to disclose the substance of
factual information that he receives from one party to the other party unless he has been requested by the
disclosing party to keep any information confidential. It is important that the parties feel that their instructions
regarding confidentiality will be obeyed, and Section 70 is designed to give them the confidence of the statutory
mandate of confidentiality. This is further buttressed by Section 75 which mandates confidentiality of all matters
relating to the conciliation proceedings including the settlement agreement.

Section 7113 requires the parties to cooperate in good faith by providing written materials, evidence and attending
meetings. Section 7214 states that each party may on his own or at the initiative of the conciliator submit
suggestions for settlement. However, it must be borne in mind that the process is voluntary, and parties are under
no obligation to make an offer for settlement.

Section 7315 deals with the settlement agreement. It provides that where the conciliator is of the opinion 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 their observations. After receiving the observations of the parties, the
conciliator may reformulate the terms of a possible settlement in the light of such observations. If settlement is
 Page 3 of 6

ConciliationRelevant Provisions and Case Law (Sections 61 To 81)

reached, the parties may draw up the settlement agreement either by themselves or with the assistance of the
conciliator and, once such settlement agreement is signed by the parties, it becomes final and binding upon them.
The conciliator shall then authenticate the settlement agreement and furnish a copy to each of the parties.

Section 73 as worded can lead to an interpretation that in all cases it is a necessary part of the process that the
conciliator should formulate a possible settlement, and may reformulate it after getting the response of the parties.
This would be a confining and restrictive interpretation. There will be cases where the matter is proceeding
smoothly, and the parties are on their own moving to a settlement without the conciliator drawing up the terms and
reformulating them. Indeed, giving the conciliator such a leading role may limit the creativity and participation of the
parties. There is no good reason to focus the discussion exclusively on the draft proposed by the conciliator. The
rigid wording in this Section invites challenges to the settlement agreement on the ground that the conciliator did not
formulate or reformulate the terms of settlement. In fact, that appears to have already taken place. In the case of
Mysore Cements v. Svedla Barmac ,16 the Supreme Court scrutinised in minute detail the procedure followed in a
conciliation proceedings, did not find formulation and reformulation by the conciliator, and therefore held that
Section 73 had not been complied with. The award based on such conciliation was set aside on this among other
grounds. Thus an informal and flexible process is likely to be reduced to legal straightjacketing, caused by inexpert
drafting of the statute and a judicial decision which followed the letter of the law. It would have been better if the
Supreme Court had interpreted the Section such that the parties have liberty to arrive at a settlement even if the
conciliator did not formulate or reformulate proposals, or even to arrive at a settlement ignoring the proposals of the
conciliator. Where the parties do not react favourably to the conciliator’s proposals, it will be counterproductive to
give him the primary role in formulating or reformulating them. Therefore, there is much to be said in favour of
treating this provision as just one possible method of conducting the process and not to treat it as mandatory or
even directory.

Section 7417confers upon the settlement agreement the status and effect of an arbitral award as if it were an award
on agreed terms rendered by an arbitral tribunal on the substance of the dispute under Section 30 of the Act. In the
event that a party does not act in accordance with the award, the court will enforce it by the coercive processes with
which it executes a decree of the court. This provision has contributed a great deal to strengthening confidence in
the process since parties have the assurance of implementation through the court. In some other jurisdictions
where such provision is absent, non-observance of the settlement agreement entails another round of litigation to
enforce the agreement.

Section 7518 clothes the conciliation proceedings with confidentiality, and carries a non-obstante clause that it shall
be preserved notwithstanding anything contained in any other law in force in India. Confidentiality is enjoined not
only upon the conciliator and the parties but also upon the settlement agreement, except to the extent that the
disclosure is required for the purposes of implementation or enforcement. While Section 70 deals with safeguarding
information revealed by one party in confidence, Section 75 is wider and shields all matters pertaining to the
conciliation proceedings. Section 81 further reinforces the confidentiality of the proceedings by rendering
inadmissible in evidence views, admissions, proposals, etc., made by the parties in the proceedings.19
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ConciliationRelevant Provisions and Case Law (Sections 61 To 81)

Section 7620 deals with the termination of the conciliation proceedings. Proceedings terminate on the date of the
agreement or on the written declaration of the conciliator, or both parties, or even one party, stating that the
proceedings are terminated. It highlights the voluntary nature of the conciliation proceedings wherein the right of the
parties to terminate the conciliation proceedings at any stage is recognised. Where the conciliator decides to
terminate the proceedings, he needs to consult with the parties before he does so, but does not need their
concurrence.

Section 7721imposes an embargo upon the parties taking recourse to arbitral or judicial proceedings on the dispute
which is the subject matter of the conciliation proceedings, except where such proceedings are necessary to
preserve their rights. Under this category, applications can be made for interim orders to preserve property, secure
the amount in dispute, interim injunction, appointment of receiver and for other measures of protection. There is
another reason why it may become necessary to file a suit, and that is where the law of limitation would operate to
bar the suit. The Act does not provide that the time taken in conciliation proceedings extends the period of
limitation; the Limitation Act, 1963 also does not provide for this situation. Lacking such provision, the position is
that limitation is not so extended. It will, therefore, be necessary to file such suit when it is anticipated that the time
for instituting the same will run out during the course of the conciliation. This is an area requiring legislative remedy
to avoid suits being filed even while conciliation is being tried. No harm would be caused if such period is excluded
from the computation of period of limitation.

Sections 7822 and 7923 deal with administrative matters such as costs and deposits. If the parties do not make the
payments contemplated under the Section, the conciliator can suspend or terminate the proceedings until such time
that the parties make payment.

Section 8024deals with the role of the conciliator in other proceedings and declares that, unless otherwise agreed
between the parties, the conciliator shall not act as an arbitrator, representative, counsel or witness of any of the
parties in any arbitral or judicial proceeding relating to the same dispute that has been the subject matter of the
conciliation proceedings. This matter will be examined further in the subsequent discussion on Section 30 of the
Act.25

Section 8126 deals with admissibility of evidence in other proceedings with regard to the conciliation. The Section
makes it clear that none of the parties can seek to introduce evidence regarding the conciliation in any arbitral or
judicial proceedings (whether or not related to the subject matter of the conciliation) as to the views expressed,
suggestions made, admissions, proposals and indications of willingness to accept a proposal. This is yet another
measure to protect confidentiality.

The Bombay High Court (Goa Bench) in Gajanan v. Raghurai Thamba 27 held that a conciliator cannot be called
as a witness in view of Section 80 and 81 of the Arbitration and Conciliation Act. The Court held that allowing such
practice would wholly undermine the effectiveness of the very mechanism.
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ConciliationRelevant Provisions and Case Law (Sections 61 To 81)

3 Section 62 is modelled on Article 2 of the UNCITRAL Conciliation Rules with the exception that the UNCITRAL
Conciliation Rules make room for a party to make an oral acceptance to an invitation to conciliate, and state that it is
advisable for such party to confirm the acceptance in writing. The Indian Act makes no such provision.

4 Section 63 is identical to Article 3 of the UNCITRAL Conciliation Rules.

5 Section 64 and Article 4 of the UNCITRAL Conciliation Rules are identical.

6 Section 65 is modelled on Article 5 of the UNCITRAL Conciliation Rules. While the Rules only require each party to
make available the statement to the other party, the Act requires the parties to make available to each other a copy of
all statements, documents and other evidence.

7 Section 66 does not have a corresponding provision in the UNCITRAL Conciliation Rules.

8 AIR 2000 SC 2281 [LNIND 2000 SC 838]: (2000) 6 SCC 179 [LNIND 2000 SC 838].

9 Section 67 and Article 7 of the UNCITRAL Conciliation Rules are identical.

10 Section 68 and Article 8 of the UNCITRAL Conciliation Rules are identical.

11 Section 69 and Article 9 of the UNCITRAL Conciliation Rules are identical.

12 Section 70 and Article 10 of the UNCITRAL Conciliation Rules are identical.

13 Section 71 and Article 11 of the UNCITRAL Conciliation Rules are identical.

14 Section 72 and Article 12 of the UNCITRAL Rules are identical.

15 Section 73 is modelled on Article 13 of the UNCITRAL Conciliation Rules. In addition to what the Rules provides, the
Act requires the conciliator to authenticate the settlement agreement.

16 AIR 2003 SC 3493 [LNIND 2003 SC 323]: (2003) 10 SCC 375 [LNIND 2003 SC 323].

17 Section 74 does not have a corresponding provision in the UNCITRAL Conciliation Rules.

18 Section 75 of the Act is modelled on Article 14 of the UNCITRAL Conciliation Rules. The Section starts off with a non-
obstante clause unlike the Article. This is an effort to ensure confidentiality of the process which in turn will encourage
parties to opt for conciliation.

19 The issues relating to confidentiality are dealt with in detail in Chapter 9.

20 Section 76 and Article 15 of the UNCITRAL Conciliation Rules are identical.

21 Section 77 and Article 16 of the UNCITRAL Conciliation Rules are identical.

22 Section 78 and Article 17 of the UNCITRAL Conciliation Rules make similar provisions for costs. The Section however,
has some minor changes.

23 Section 79 and Article 18 of the UNCITRAL Conciliation Rules are identical.

24 Section 80 and Article 19 of the UNCITRAL Conciliation Rules are identical.

25 For a discussion on Arb-Med and Med-Arb, see Chapter 14.

26 Section 81 and Article 20 of the UNCITRAL Conciliation Rules are identical.

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ConciliationRelevant Provisions and Case Law (Sections 61 To 81)

27 Writ Petition No. 15/2007, decided on 07.03.2007 by the Goa Bench of the Bombay High Court.

End of Document