Unit-4

Distinction between conciliation, negotiation, mediation and arbitration: -

Methods of Alternative Dispute Resolution System

The techniques or modes of ADR, though widely accepted all over the world, may vary from
region to region. This fluctuation depends on the legal framework of a country. The
following are the methods of settlement that are widely accepted:
 Arbitration
 Mediation
 Conciliation
 Negotiation
Arbitration
Arbitration is a mode of ADR wherein the dispute between the parties goes through a
process to achieve an amicable resolution by an impartial third party known as an
'arbitrator,' without recourse to litigation.  In the case of arbitration, the arbitrator, after
reviewing the dispute between the parties comes to a settlement. Such a decision taken by
an arbitrator shall be binding on both parties. Unlike other methods of dispute resolution,
once the parties have submitted a matter to arbitration, neither can withdraw from the
procedure.
Arbitration can either be voluntary or mandatory. In the case of compulsory arbitration, the
parties to the dispute enter into Arbitration either under a statute, an order of the court, or
through a specific clause included in the contractual agreement between the parties.
Whereas on the other hand, in the case of voluntary arbitration, it is up to the discretion of
parties to enter into arbitration. The decision that results from the proceeding is known as
an 'arbitral award.'
Advantages of arbitration:
 Flexibility- Arbitration proceedings are flexible and more economically feasible
compared to litigation.
 Time-Consuming- Arbitration proceedings occur at an expeditious rate as compared to
Litigation; therefore, it saves time for both parties.
 Confidentiality- The disputes which are subject to arbitration are treated with privacy,
and are not released to the public.
 Arbitrator- The parties have the liberty to choose an arbitrator to handle their dispute.
 Enforceability- Arbitration awards are generally easier to enforce as compared to court
verdicts.
Disadvantages of arbitration:
 If arbitration is mandatory as per the contract between the parties, then their right to
approach the court is waived.
 There is a very limited avenue for appeals.
 Arbitration does not provide for the grant of interlocutory applications.
 Arbitration awards are not directly enforceable; they are executable subject to judicial
sanction.
Mediation
Mediation is a mode of dispute resolution, where an amicable decision arises with the help
of a third party known as a 'mediator,' without recourse to the court of law. It is a voluntary
process, and unlike arbitration, it is more flexible; therefore, the parties to the dispute are
under no obligation to agree to the settlement. Thus, an agreement taken via mediation
shall be binding upon the parties, only as long as they agree to it. There may be instances
where parties are advised to adhere to Mediation, however, under such circumstances, the
result is up to the parties. Therefore, Mediation is a process where the parties are in total
control over their final settlement. Here, the mediator only acts as a facilitator and does not
interfere in the decision of the dispute. Therefore, it is a win-win pact.
Advantages of mediation:
 Parties have complete control over the settlement.
 Less stress as compared to litigation and arbitration.
 The relationship between the parties isn't overly damaged.
 Mediation proceedings are confidential.
 The process resolves the dispute quickly.
Disadvantages of mediation:
 Since the decision is at the discretion of the parties, there is the possibility that a
settlement between the parties may not arise.
 It lacks the support of any judicial authority in its conduct.
 The absence of formality- Mediation proceedings are lacking in any procedural formality
since they are not based on any legal principle.
 The truth of an issue may not be revealed.
Conciliation
Conciliation is a method of dispute resolution wherein the parties to a dispute come to a
settlement with the help of a conciliator. The conciliator meets with the parties both
together and separately to enter into an amicable agreement. Here, the final decision may
be taken by reducing tensions, improving communications, and adopting other methods. It
is a flexible process, therefore allowing the parties to define the content and purpose of the
proceeding. It is risk-free and is not binding upon the parties unless they sign it.
Advantages of conciliation:
 Flexibility: Since the conciliation process is informal, it is flexible.
 The conciliator is often an expert in the disputed field.
 Conciliation proceedings, like any other form of ADR, is economical as compared to
litigation.
 The parties to the dispute have the liberty to approach the court of law, if unsatisfied
with the proceeding.
Disadvantages of conciliation:
 The process is not binding upon the parties to the dispute.
 There is no avenue for appeal.
 The parties may not achieve a settlement to their conflict.
Negotiation
Negotiation is a method of dispute resolution whereby a dispute between two individuals or
groups is settled amicably by an impartial third person called as a negotiator, using different
techniques. The negotiator, in this form of resolution, uses various communication methods
to bring the parties of the dispute to a settlement. The primary aim of this type of dispute
resolution is to reach an agreement that is fair and acceptable by the parties. The parties
engage in the dispute with each other until they reach a desirable outcome for all involved.
Advantages of Negotiation:
 Flexibility: since negotiation is an informal process, it is relatively flexible.
  Quick resolutions as compared to litigation.
 It facilitates in maintaining a healthy relationship between the disputing parties.
 Takes place in a private environment
Disadvantages of Negotiation:
 The parties to the dispute may not come to a settlement.
 Lack of legal protection of the parties to the conflict.
 Imbalance of power between the parties is possible in negotiation.
Difference between different types of Alternative Dispute Resolution (ADR) systems:

ADR Methods- Arbitration Mediation Conciliation Negotiation

Neutral Third Facilitator,

Adjudicator Facilitator Facilitator
Party- Evaluator

Nature of the Legally Not legally Not legally Not legally

Proceeding- Binding binding binding binding

Level of
Formal Informal Informal Informal
Formality-

Confidentiality Confidentiality
Level of as Confidentiality as Confidentiality
Confidentiality- determined by based on trust determined by based on trust
law law

Appointment of Conciliator: -
Appointment of Conciliators- Section 64
1. If there is one conciliator in a conciliation proceeding, the parties may agree on the
name of a sole conciliator.
2. If there are two conciliators in a conciliation proceeding, each party may appoint one
conciliator.
 3. If there are three conciliators in a conciliation proceeding, each party may appoint one
conciliator and the parties may agree on the name of the third conciliator who shall act
as the presiding conciliator.
Sub- section (2) of section 64 provides for the assistance of a suitable institution or person in
the appointment of conciliators. Either a party may request such institution or person to
recommend the names of suitable individuals to act as conciliators, or the parties may agree
that the appointment of one or more conciliators be made directly by such institution or
person.

Principles of Procedure
1. Independence and impartiality Sec 67(1)
The conciliator should be independent and impartial. He should assist the parties in an
independent and impartial manner while he is attempting to reach an amicable settlement of
their dispute.

2. Fairness and justice Sec 67(2)

The conciliator should be guided by principles of objectivity, fairness and justice. He should take
into consideration, among other things, the rights and obligations of the parties, the usages of
the trade concerned, and the circumstances surrounding the dispute, including any previous
business practices between the parties.

3. Confidentiality Sec 75, 70, proviso

The conciliator and the parties are duly bound to keep confidential all matters relating to the
conciliation proceedings. Similarly, when a party gives an information to the conciliator on the
condition that it be kept confidential, the conciliator should not disclose that information to the
other party. (Sec 70, proviso)

4. Disclosure of information Sec 70

When the conciliator receives an information about any fact relating to the dispute from a
party, he should disclose the substance of that information to the other party. The purpose of
this provision is to enable the other party to present an explanation which he might consider
appropriate.

5. Cooperation of parties with conciliator Sec 71

The parties should in good faith cooperate with the conciliator. They should submit the written
materials, provide evidence and attend meetings when the conciliator requests them for this
purpose.

6. Rules of procedure Sec 66

The conciliator is not bound by the rules contained in the Code of Civil Procedure, 1908 or the
Indian Evidence Act, 1872. Though the conciliator is not bound by the technical rules of
procedure, he should not ignore the principles of natural justice.
7. Place of meeting Sec 69(2)
The parties have freedom to fix by their agreement the place where meetings with the
conciliator are to be held. Where there is no such agreement, the place of meeting will be fixed
by the conciliator after consultation with the parties. In doing so the circumstances of the
conciliation proceedings will have to be considered.
8. Communication between conciliator and parties - Sec 69(1)
The conciliator may invite the parties to meet him or may communicate with them orally or in
writing. He may do so with the parties together or with each of them separately.

Procedure of Conciliation
1. Commencement of conciliation proceedings Section 62
The conciliation proceedings are initiated by one party sending a written invitation to the other
party to conciliate. The invitation should identify the subject of the dispute. Conciliation
proceedings are commenced when the other party accepts the invitation to conciliate in
writing. If the other party rejects the invitation, there will be no conciliation proceedings. If the
party inviting conciliation does not receive a reply within 30 days from the date, he sends the
invitation, he may elect to treat this as rejection of the invitation to conciliate. If he so elects, he
should inform the other party in writing.

2. Submission of statements to conciliator Section 65

The conciliator may request each party to submit to him a brief written statement. The
statement should describe the general nature of the dispute and the points at issue. Each party
should send a copy of such statement to the other party. The conciliator may require each party
to submit to him a written statement of his position and the facts and grounds in its support. It
may be supplemented by appropriate documents and evidence. The party should send a copy
of such statements, documents and evidence to the other party.
 3. Conduct of conciliation proceedings Section 69(1), 67(3)
The conciliator may invite the parties to meet him. He may communicate with the parties orally
or in writing. He may meet or communicate with the parties together or separately. (Sec 69(1))

In the conduct of conciliation proceedings, the conciliator has some freedom. He may conduct
them in such manner as he may consider appropriate. But he should take into account the
circumstances of the case, the express wishes of the parties, a party request to be heard orally
and the need of speedy settlement of dispute. (Sec 67(3))

4. Administrative assistance Section 68

Section 68 facilitates administrative assistance for the conduct of conciliation proceedings. The
parties and the conciliator may seek administrative assistance by a suitable institution or the
person with the consent of the parties.
Case laws relating to Conciliation-

1. Haresh Dayaram Thakur v. State of Maharashtra and Ors. while dealing with the provisions
of Sections 73 and 74 of the Arbitration and Conciliation Act of 1996 in paragraph 19 of the
judgment as expressed thus the court held that-
"19. From the statutory provisions noted above the position is manifest that a conciliator is a
person who is to assist the parties to settle the disputes between them amicably. For this
purpose, the conciliator is vested with wide powers to decide the procedure to be followed by
him untrammeled by the procedural law like the Code of Civil Procedure or the Indian Evidence
Act, 1872. When the parties are able to resolve the dispute between them by mutual
agreement and it appears to the conciliator that their exists an element of settlement which
may be acceptable to the parties he is to proceed in accordance with the procedure laid down
in Section 73, formulate the terms of a settlement and make it over to the parties for their
observations; and the ultimate step to be taken by a conciliator is to draw up a settlement in
the light of the observations made by the parties to the terms formulated by him. The
settlement takes shape only when the parties draw up the settlement agreement or request the
conciliator to prepare the same and affix their signatures to it. Under Sub-section (3) of Section
73 the settlement agreement signed by the parties is final and binding on the parties and
persons claiming under them. It follows therefore that a successful conciliation proceeding
comes to end only when the settlement agreement signed by the parties comes into existence.
It is such an agreement which has the status and effect of legal sanctity of an arbitral award
under Section 74”.

2. In Mysore Cements Ltd. v. Svedala Barmac Ltd it was said that Section 73 of the Act speaks
of Settlement Agreement. Sub-section (1) says that when it appears to the Conciliator that
there exist elements of 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 observation. After
receiving the observations of the parties, the Conciliator may reformulate the terms of a
possible settlement in the light of such observations. In the present case, we do not find there
any such formulation and reformulation by the Conciliator, under Sub- section (2), if the parties
reach a settlement agreement of the dispute on the possible terms of settlement formulated,
they may draw up and sign a written settlement agreement. As per Sub-section
(3) when the parties sign the Settlement Agreement, it shall be final and binding on the parties
and persons claiming under them respectively. Under Sub-section (4), the Conciliator shall
authenticate the Settlement Agreement and furnish a copy thereof to each of the parties. From
the undisputed facts and looking to the records, it is clear that all the requirements of Section
73 are not complied with.
Statements to conciliator:
Section 65: Submission of statements to conciliator.
65. (1) The conciliator, upon his appointment, may request each party to submit to him a brief
written statement describing the general nature of the dispute and the points at issue. Each
party shall send a copy of such statement to the other party.
(2) The conciliator may request each party to submit to him a further written statement of his
position and the facts and grounds in support thereof, supplemented by any documents and
other evidence that such party deems appropriate. The party shall send a copy of such
statement, documents and other evidence to the other party.
(3) At any stage of the conciliation proceedings, the conciliator may request a party to submit to
him such additional information as he deems appropriate.
Explanation. —In this section and all the following sections of this Part, the term “conciliator”
applies to a sole conciliator, two or three conciliators, as the case may be.

Interaction between conciliator and parties: -

Section 69: Communication between conciliator and parties.
69. (1) The conciliator may invite the parties to meet him or may communicate with them orally
or in writing. He may meet or communicate with the parties together or with each of them
separately.
(2) Unless the parties have agreed upon the place where meetings with the conciliator are to be
held, such place shall be determined by the conciliator, after consultation with the parties,
having regard to the circumstances of the conciliation proceedings.
Role of Conciliator: -
Concept of Conciliation and Role Of Conciliator
Conciliation is defined as an alternative dispute resolution mechanism that is designed to
resolve a dispute among the parties through a non-adjudicatory and non- Antagonistic way. It
involves the neutral third party who makes the disputant parties arrive at a conclusion and a
satisfactory dispute settlement. ADR plays a crucial role in overcoming the drawback of the
conventional mechanism of dispute resolution that is court proceedings. It also helps in dealing
with the condition of the pendency of cases in the Indian Judiciary. The various modes of
dispute resolution under the ADR mechanism are Mediation, Conciliation, Arbitration,
Negotiation, and Lok Adalat. ADR has many advantages over the courtroom proceeding such as
it is less time consuming, cost-effective, free from the technicalities of courts, no fear of court
of law, efficient and effective, helps in maintaining good relationships between the parties. The
main motive of ADR is to promote socio-economic and political justice which have been
enshrined in the preamble of the Constitution of India.
Conciliation is a voluntary mechanism and the conciliator who makes the parties resolve the
dispute cannot force the parties to come to an end of the dispute with a solution. The parties
are not bound to follow the solution and advice given by the conciliator. The decision of the
conciliator cannot be pressurized upon the parties to the dispute. Conciliation is a less formal
and comparatively easy process from old conventional methods and other alternative dispute
resolution processes. The conciliator provides the parties with an appropriate solution in order
to resolve the dispute efficiently and effectively. This process is less time consuming and cost-
effective as no legal procedures are to be followed and no formal technicalities are involved in
this dispute resolution process. The solutions provided by the third neutral party to the dispute
is always kept in mind that it is best suitable for the interest and priorities of the disputant
parties. Usually, all the matters of civil nature are appropriate for conciliation and it is an
affordable mechanism under alternative dispute resolution mechanisms other than the
conventional process of litigation in courtrooms.
The process of conciliation begins with the acceptance to choose to resolve the dispute through
the process of conciliation. One party who initiates to resolve the dispute by the process of
conciliation has to send a written agreement to the other party stating the subject matter of the
dispute. The commencement of the process of conciliation begins when the other party to
whom the one party has notified to conciliate the disputing matter. Ordinarily, there is one
conciliator in the process until and unless parties agree for two or three. The conciliator has an
option to seek a written draft from the disputant parties which describes the point of dispute
and its nature. There is an instant need to recognize the utility of the ADR mechanism and
observe its benefits in order to resolve the disputes between the parties.

Section 67: Role of conciliator.

67. (1) The conciliator shall assist the parties in an independent and impartial manner in their
attempt to reach an amicable settlement of their dispute.
(2) The conciliator shall be guided by principles of objectivity, fairness and justice,
giving consideration to, among other things, the rights and obligations of the parties, the usages
of the trade concerned and the circumstances surrounding the dispute, including any previous
business practices between the parties.
(3) The conciliator may conduct the conciliation proceedings in such a manner as he
considers appropriate, taking into account the circumstances of the case, the wishes the parties
may express, including any request by a party that the conciliator hear oral statements, and the
need for a speedy settlement of the dispute.
(4) The conciliator may, at any stage of the conciliation proceedings, 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 therefor.

Duty of the parties to co-operate: -

Section 71. Co-operation of parties with conciliator. —The parties shall in good faith co-
operate with the conciliator and, in particular, shall endeavor to comply with requests by the
conciliator to submit written materials, provide evidence and attend meetings.
Suggestions by parties: -
Section 72. Suggestions by parties for settlement of dispute. -Each party may, on his own initiative or at
the invitation of the conciliator, submit to the conciliator suggestions for the settlement of the dispute.

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. 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.
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. 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 by the opposite party during
conciliation proceedings. The process of conciliation provides an opportunity for settlement of
disputes without publicity. 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.
Section 75.   Confidentiality
Notwithstanding anything contained in any other law for the time being in force, the conciliator
and the parties shall keep confidential all matters relating to the conciliation proceedings.
Confidentiality shall extend also to the settlement agreement, except where its disclosure is
necessary for purposes of implementation and enforcement.

Resort to judicial proceedings: -

Section 77 of the Act bars the “initiation” of any arbitral or judicial proceedings in respect of a
dispute that is the subject matter of conciliation proceedings, except for the purpose of
“preserving” their rights. The term “initiation” in Section 77 clearly supports the provision in
Section 30. That is, when the arbitral or judicial proceedings are on, the parties are even
encouraged to initiate conciliation proceedings but when the conciliation proceedings are on,
they are barred from initiating arbitral or judicial proceedings. The reasons of the provision
were given in the “Commentary on the Revised Draft UNCITRAL Conciliation Rules: Report of
the Secretary General” as follows, the Article 16 deals with the delicate question whether a
party may resort to Court litigation or arbitration whilst the conciliation proceedings are under
way…. Article 16 emphasizes the value of serious conciliation effort by expressing the idea that,
under normal circumstances, Court or arbitration proceedings should not be initiated as might
adversely affect the prospects of an amicable settlement. However, the Article also takes into
account that resort to Courts or to arbitration does not necessarily indicate unwillingness on
the part of the initiating party to conciliate. In view of the fact that, under article 15(d), an
unwilling party may terminate the conciliation proceedings at any time, it may well be that, if a
party initiates Court or arbitral proceeding, he does so for different reasons. For example, a
party may want to prevent the expiration of a prescription period or must meet the
requirement, contained in some arbitration rules, of prompt submission of a dispute to
arbitration. Instead of attempting to set out a list of possible grounds, Article 16 adopts a
general and subjective formula: “…except that a party may initiate arbitral or judicial
proceedings where, in his opinion, such proceedings are necessary for preserving his rights.”
From the above study, it is evident that the real purpose of provisions in Sections 30 and 77 of
the 1996 Act is, to encourage resort to non-formal conciliation in preference to the formal
Court and arbitral proceedings. Secondly, resort to arbitral or judicial proceedings was
permitted as an exception to meet the cases of requirements of the general law of limitation or
of “time-bar clauses” like the Atlantic Shipping Clause Atlantic Shipping and Trading Company
Vs Dreyfus and Company or interim measures of protection.
In the case of Ravindra Kumar Verma v BPTP Limited (2015) 147 DRJ 175, the Delhi High Court
has held the clause providing for conciliation or mutual discussion before invocation of
arbitration to be directory and not mandatory in view of Section 77 of the act. The court held
that there should be no bar on filing proceedings to refer a matter to arbitration if this is
necessary to preserve the parties' rights (e.g., limitation). However, in certain cases, there may
be an effective need for conciliation. In such cases, the parties should be directed to take up the
agreed procedure for conciliation and mutual discussion in a time-bound and reasonable period
before proceeding with arbitration.
In another case before the Delhi High Court, (Union of India v M/s Baga Brothers 2017 SCC
OnLine Del 8989) a party had challenged an award on the grounds that the pre-condition of
conciliation provided under the contract was not resorted to before invoking arbitration. The
court dismissed the contention while relying on Ravindra Kumar Verma (supra), holding the said
pre-arbitral step to be directory. The Delhi High Court has followed this decision by holding
similar clauses to be directory and has proceeded with the appointment of an arbitrator. Both
the Allahabad and Rajasthan High Courts have taken a view similar to that of the Delhi High
Court.
Thus, in order to avoid disputes over dispute resolution clauses, it is essential that they be
drafted with the utmost care and caution. Pre-arbitral steps entailing a time-bound process,
mediation before a specific authority or conciliation under the act are more likely to stand the
test of judicial scrutiny instead of open-ended and vague pre-arbitral steps. Just like the courts,
the tribunal will consider the parties' conduct leading up to the invocation of arbitration and if it
concludes that a direction to follow pre-arbitral steps will be an empty formality, it will proceed
with arbitration. The other option for the tribunal would be to direct the parties to follow the
specified pre-arbitral process within a fixed timeframe and suspend arbitration in the
meantime. This would allow the parties to meet the desired objective of exploring an amicable
resolution without compromising the arbitration.
Costs: -
Section 78. Costs.
(1) Upon termination of the conciliation proceedings, the conciliator shall fix the costs of the
conciliation and give written notice thereof to the parties.
(2) For the purpose of sub-section (1), "costs" means reasonable costs relating to—
(a) the fee and expenses of the conciliator and witnesses requested by the conciliator with the
consent of the parties;
(b) any expert advice requested by the conciliator with the consent of the parties;
(c) any assistance provided pursuant to clause (b) of sub-section (2) of section 64 and section
68.
(d) any other expenses incurred in connection with the conciliation proceedings and the
settlement agreement.
(3) The costs shall be borne equally by the parties unless the settlement agreement provides for
a different apportionment. All other expenses incurred by a party shall be borne by that party.

Rule-making power of High Court and Central Government.: -

Section 82.   Power of High Court to make rules.
The High Court may make rules consistent with this Act as to all proceedings before the Court
under this Act.
Section 83. Removal of difficulties.
(1) If any difficulty arises in giving effect to the provisions of this Act, the Central Government
may, by order published in the Official Gazette, make such provisions, not inconsistent with the
provisions of this Act as appear to it to be necessary or expedient for removing the difficulty:
Provided that no such order shall made be after the expiry of a period of two years from the
date of commencement of this Act.
(2) Every order made under this section shall, as soon as may be after it is made, be laid before
each Houses of Parliament.
Section 84. Power to make rules.
(1) The Central Government may, by notification in the Official Gazette, make rules for carrying
out the provisions of this Act.
(2) Every rule made by the Central Government under this Act shall be laid, as soon as may be,
after it is made before each House of Parliament while it is in session, for a total period of thirty
days which may be comprised in one session or in two or more successive sessions, and if,
before the expiry of the session immediately following the session or the successive sessions
aforesaid, both Houses agree in making any modification in the rule or both Houses agree that
the rule should not be made, the rule shall thereafter have effect only in such modified form or
be of no effect, as the case may be; so, however, that any such modification or annulment shall
be without prejudice to the validity of anything previously done under that rule.