Part III (S.61-81) of the Arbitration and Conciliation Act, 1996 provides a comprehensive statutory framework for conciliation. It is based on the UNCITRAL Conciliation Rules, 1980. Conciliation under Part III applies to disputes arising out of legal relationships, whether contractual or otherwise, and applies to both domestic and international disputes.
Why: Part III institutionalises conciliation as a statutory ADR mechanism with clear rules on appointment, procedure, confidentiality, and enforceability, giving settlements the same status as arbitral awards.
Legal Framework
| Section | Content |
|---|---|
| S.61 | Application: disputes arising from legal relationships (contractual or otherwise) |
| S.62 | Commencement: party sends written invitation; proceedings begin on acceptance |
| S.63 | Number: one conciliator (unless parties agree on two or three) |
| S.64 | Appointment: parties may agree; no specific qualification prescribed |
| S.65 | Submission of statements: brief written statement of general nature of dispute |
| S.67 | Role of conciliator: assists impartially; may propose settlement; guided by fairness, objectivity, justice |
| S.69 | Procedure: conciliator determines manner; may meet jointly or separately |
| S.70 | Administrative assistance with party consent |
| S.73 | Settlement agreement: signed by parties; authenticated by conciliator |
| S.74 | Status: final and binding; same status as arbitral award on agreed terms under S.30 |
| S.75 | Confidentiality mandatory |
| S.76 | Termination of proceedings |
| S.77 | Costs: each party bears own costs (unless settlement provides otherwise) |
| S.78 | Deposits: conciliator may request advance deposit |
| S.79 | Role in subsequent proceedings: conciliator shall not act as arbitrator or counsel in later proceedings |
| S.80 | Admissibility: parties shall not invoke conciliation communications in arbitral/judicial proceedings |
| S.81 | No waiver of immunity: same good-faith immunity as arbitrator |
Appointment of Conciliators (S.63-64)
| Aspect | Rule |
|---|---|
| Number | One (default); two or three if parties agree (S.63) |
| Selection (sole) | Parties may agree on one person; or each nominates one and both agree |
| Selection (two) | Each party appoints one (S.64(2)) |
| Selection (three) | Each party appoints one; two appointed conciliators appoint the third (S.64(3)) |
| Qualifications | No statutory qualifications; parties choose based on expertise |
| Nationality | Any; no restriction |
| Independence | Conciliator must disclose any circumstances affecting impartiality (S.66) |
Powers and Functions of Conciliator (S.67-70)
| Power/Function | Detail |
|---|---|
| Assist parties | Primary function; facilitate amicable settlement (S.67(1)) |
| Guided by principles | Objectivity, fairness, justice; existing usages of trade (S.67(2)) |
| Propose settlement | May at any stage formulate proposals; need not state reasons (S.67(4)) |
| Determine procedure | Conducts as considered appropriate (S.69(1)) |
| Separate meetings | May communicate with parties separately (S.69(3)) |
| Administrative help | May request institutional/personal assistance with consent (S.70) |
| Cannot impose | Has no power to impose settlement on parties |
| Cannot compel evidence | No power to summon witnesses or order discovery |
Procedure (S.62, S.65, S.69)
| Stage | Provision | Detail |
|---|---|---|
| Initiation | S.62(1) | One party sends written invitation to conciliate |
| Acceptance | S.62(2) | Other party accepts in writing; proceedings commence |
| Rejection/No response | S.62(4) | If invitation rejected or no response within 30 days, no conciliation |
| Statements | S.65 | Each party submits brief written statement; supplementary documents may be submitted |
| Conduct | S.69 | Conciliator determines manner; no fixed rules |
| Settlement proposals | S.67(4) | May formulate at any stage |
| Recording | S.73 | Settlement drawn up and signed by both parties + conciliator |
Settlement (S.73-74)
| Aspect | Position |
|---|---|
| Form | Written, signed by both parties, authenticated by conciliator (S.73(3)) |
| Content | Records the terms of settlement |
| Status | Same as arbitral award on agreed terms under S.30 (S.74) |
| Binding | Final and binding (S.74) |
| Enforcement | Enforceable as decree under S.36 |
| Appeal | No appeal |
| Challenge | Extremely limited (fraud, lack of consent only) |
Termination (S.76)
| Event | Effect |
|---|---|
| Settlement signed (S.76(1)) | Proceedings terminate |
| Conciliator's declaration that further efforts unjustified (S.76(2)) | Terminates |
| Parties' joint declaration (S.76(3)) | Terminates |
| One party's written declaration to other and conciliator (S.76(4)) | Terminates |
Recall Check
- When do conciliation proceedings commence under S.62?
- What is the legal status of a settlement agreement under S.73-74?
- Can a conciliator later act as arbitrator in the same dispute?
Key Cases
Mysore Cements Ltd v Svedala Barmac Ltd (2003) Mysore-Cements-v-Svedala-Barmac-2003 Issue: Whether a conciliation settlement agreement can be challenged or set aside. Rule: A settlement agreement under S.73 has the status of an arbitral award on agreed terms. It can be challenged only on extremely limited grounds (fraud, coercion affecting consent). Held: Since the settlement is consensual (parties signed voluntarily), it cannot be set aside merely because one party later regrets the terms. The finality under S.74 is absolute.
Haresh Dayaram Thakur v State of Maharashtra (2000) Haresh-Dayaram-Thakur-v-State-of-Maharashtra-2000 Issue: Whether conciliation under Part III requires consent of both parties. Rule: Conciliation is entirely consensual. Proceedings commence only upon acceptance of the invitation (S.62). Held: No party can be compelled to conciliate. If invitation is rejected, proceedings do not commence.
Distinctions
| Basis | Conciliation (Part III, 1996 Act) | Conciliation (Industrial Disputes Act, 1947) |
|---|---|---|
| Applicable to | All disputes from legal relationships | Industrial disputes only (employer-workmen) |
| Initiated by | Parties (S.62) | Government appoints conciliation officer (S.4) |
| Voluntariness | Fully voluntary | Government may direct conciliation |
| Conciliator | Chosen by parties | Government-appointed officer |
| Time limit | No statutory limit | 14 days for officer's report (S.12) |
| Settlement status | Deemed arbitral award (S.74) | Binding settlement (S.12(3)); if fails, referred to tribunal |
| Confidentiality | S.75 (statutory) | Not explicitly provided |
| Subsequent arbitration | Conciliator barred from being arbitrator (S.79) | Officer has no role in adjudication |
Flashcards
Q: On which international instrument is Part III of the 1996 Act based? A: UNCITRAL Conciliation Rules, 1980.
Q: How many conciliators are appointed by default? A: One (S.63), unless parties agree on two or three.
Q: Can a conciliator impose a settlement on parties? A: No. The conciliator may propose solutions but cannot impose. Settlement requires voluntary agreement and signing by both parties.
Q: What is the effect of S.79? A: The conciliator shall not act as arbitrator, representative, or counsel of a party in any subsequent arbitral or judicial proceedings relating to the same dispute.
Q: Can statements made during conciliation be used as evidence? A: No. S.80 prohibits parties from relying on views, proposals, admissions, or statements made during conciliation in subsequent proceedings.
Q: What happens if one party refuses the invitation to conciliate? A: Under S.62(4), if the invitation is rejected or no response is received within 30 days, there is no conciliation. Proceedings simply do not commence.
Exam Scenario
A and B undergo conciliation. The conciliator proposes a settlement: A pays Rs. 30 lakhs; B withdraws all claims. Both sign the settlement agreement. Later, A discovers that B had concealed material information about the dispute during conciliation. Can A challenge the settlement?
Approach: Under S.73-74, the settlement has the status of an arbitral award on agreed terms (S.74). It is final and binding. However, if the settlement was obtained through fraud or suppression of material facts (vitiating free consent), A may challenge it. The grounds are analogous to S.34(2)(b) (public policy: fraud). Cite Mysore Cements v Svedala Barmac (2003): settlement cannot be set aside merely because one party regrets the terms. But fraud is different from regret. If A can prove that B's concealment was material and induced the settlement (analogous to S.17 of the Indian Contract Act), the court may set aside the settlement as vitiated by fraud. The burden of proof lies on A to demonstrate (a) concealment, (b) materiality, (c) reliance, and (d) prejudice.