Conciliation and its Mechanism

Vanshika Arora is a first-year student at Army Institute of Law, Mohali. This article provides the meaning and mechanism of the process of conciliation. 

INTRODUCTION

Conciliation is an alternate dispute resolution (ADR) technique. ADR is an attempt to devise mechanisms that are an alternative to the conventional justice systems. These alternatives are endorsed since the courts cannot take all the burden of administering justice. Some disputes can be amicably settled outside of court, hence sparing money, time, and effort of the aggrieved party as well as the judicial system. The pendency of cases in the courts is another reason that ADR techniques are preferred. A meeting of Chief Ministers and Chief Justices, held in 1993, formed a resolution to undertake and promote methods of ADR such as arbitration, conciliation, mediation, and negotiation. The meeting emphasized that these “out of court” techniques are flexible in terms of procedure, and save a lot of time and expenditure as compared to the traditional court dispute resolution. 

Conciliation

Part III of the Arbitration and Conciliation Act, 1996 deals with the procedure and mechanism of conciliation. According to Wharton’s Law Lexicon, conciliation is the “settling of disputes without litigation”. It is done outside of court, with the help of a third party called the “conciliator”. The parties involved, arrive at a decision themselves, with the assistance of the conciliator, and no administrative or judicial intervention is observed, as is the case with arbitration, wherein the final judgment is decided by the Arbitration Tribunal. 

According to Halsbury’s Law of England, “Conciliation is the process of persuading parties to reach an agreement, and is plainly not arbitration, nor is the chairman of a conciliation board an arbitrator.”

Meaning

Section 61 (Application and Scope): This section of the Arbitration and Conciliation Act, 1996, clearly states that conciliation proceedings can only be carried out in disputes arising out of a legal relationship, that could be contractual in nature. For a dispute to arise out of a legal relationship, the right to sue should exist. Moreover, conciliation proceedings cannot be carried out in such disputes where by virtue of law, conciliation is prohibited. 

Role and Appointment of a Conciliator

Section 63 and 64 lay down the qualification, number, and process of appointment of conciliators. According to Section 63, the number of conciliators may vary from one to three. In the case of more than one conciliator, they must function jointly.

Section 64  provides that for assistance in the appointment of a conciliator, parties can approach a suitable institution for hiring a conciliator. 

Section 66 further provides that the conciliator is not bound by the Code of Civil Procedure(1908) and the Indian Evidence Act(1872).

Role of Conciliator(Section 67): This section provides that the conciliator has to carry the process amicably, in an independent and impartial manner. He can conduct the conciliation proceedings in any manner he deems fit and does not have to adhere to any manner stipulated by any enactment. He may also at any point in time refer the dispute to settlement proceedings, without furnishing any statement enumerating reasons for the same. 

Lastly, the conciliator has to be guided by the principles of objectivity, fairness, and justice.

For better conduct of the proceedings, parties may also seek the administrative assistance of a suitable institution or party, as given under Section 68.

Restrictions on Role of Conciliator

As per Section 80 of the Act, the conciliator shall not act as an arbitrator in any proceeding subject to conciliation. Moreover, he shall not be presented by the parties as a witness in any arbitral or judicial proceedings. 

Procedure

The procedure of conciliation is carried out in the following manner: 

  1. Section 62(Commencement of Conciliation Proceedings): 

This section provides that the party wishing to conciliate shall send a written notice enumerating the objective of conciliation, to the other party. The other party can accept or reject the notice. If rejected, no conciliation proceedings can be carried out. If the sending party does not receive a reply within thirty days, or within such a period as defined under the notice, this should be treated as a rejection. 

  1. Section 65(Submission of Statements to the Conciliator):

This section provides that, upon the election of a conciliator, he can furnish a written statement from both parties, describing the dispute. This statement has to be sent to the opposite parties too. Further, the conciliator may also furnish a written statement, of a party’s position, facts and ground, and any document or evidence corroborating their plea. This statement too has to be exchanged between both the parties. At any stage of the conciliation proceedings, the conciliator may ask for any additional statements.

  1. Section 69 (Communication):

This section provides that the conciliator may communicate with the pirates orally or in a written manner. He may communicate with them together or separately. Also, the place of conciliation shall be decided by the conciliator, unless both parties have mutually agreed upon a place. 

  1. Section 70 (Disclosure of Information):

According to this section, when the conciliator receives any factual information from a party, he shall disclose it to the other and demand any explanation. If a party provides any information, demanding it be kept confidential, the conciliator has an obligation to furnish the same to the other party. 

Settlement

As stated earlier, Section 67 provides that the conciliator may at any point in time refer the case to settlement. Moreover, the parties can also, under Section 72, suggest the settlement of the dispute.

  1. Section 73(Settlement Agreement):

According to the section, when it appears to the conciliator that elements of settlement exist, he may formulate terms of such settlement and submit them to the parties, which can suggest observations for re-formulation. When the parties reach a settlement, they need to draw up and sign a written settlement, which shall be binding upon both parties.  

In the case of Harsh Dayaram Thakur v State of Maharashtra, the Apex Court held that a settlement formulated by the conciliator on his own, in secrecy is sent to the Court in a sealed manner, shall not be valid since the act requires it to be signed by both parties. 

  1. Section 74(Status and Effect of Settlement Agreement):

According to this Section, a settlement agreement shall have the same status and effect as if it were an arbitral award under Section 30 of the Arbitration and Conciliation Act, 1996. Moreover, in the case of Mysore Cements Ltd vs Svedala Barmac Ltd, the Supreme Court held that not every agreement, arrived through any manner in a conciliation proceeding will have the effect of an arbitral award under section 30. Only those agreements that have been concluded “in conformity with the manner stipulated and form envisaged and duly authenticated in accordance with Section 73” can be called an agreement of settlement in the effect of an Arbitral Award. 

Termination of Conciliation Proceedings

Section 76 provides four ways in which conciliation proceedings can be terminated: 

  1. By signing a settlement agreement. The date of settlement is the date of termination.
  2. Written declaration by the conciliator, that states further efforts of conciliation are not justified. The date of declaration is the date of termination.
  3. By a written declaration of the parties, addressed to the conciliator that the proceedings are terminated. The date of declaration is the date of termination.
  4. By a written declaration furnished by one part to the other and the conciliator stating that conciliation proceedings stand terminated. The date of declaration is the date of termination.

Under section 77, parties also have the option to resort to judicial or arbitral proceedings. As a general rule, during the time of conciliation, such restoration is not permitted unless either party considers it important for the protection of its rights. 

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