Conciliation: Meaning, Procedure and Importance

by curiousforlaw

16th January 2021

Conciliation is a process in which the parties to a dispute, with the assistance of a dispute resolution practitioner (the conciliator), identify the issues in dispute, develop options, consider alternatives to reach an agreement. There are different ways to conduct conciliation proceedings. What are they? What is the conciliators’ mode of appointment?

By: Shefali Jha

Introduction

The Arbitration and Conciliation Act, 1996 (“the Act”) is based on the 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 comprehensive legislation was made on the subject of conciliation in India. This bulletin will provide an overview of the conciliation proceedings in India along with the relevant provisions under various statutes.

Definition of conciliation

The term conciliation is not defined in the Act. However, simply put conciliation is a confidential, voluntary and private dispute resolution process in which a neutral person helps the parties to reach a negotiated settlement.

This method provides the disputing parties with an opportunity to explore options aided by an objective third party to exhaustively determine if a settlement is possible. Like arbitration, the Act covers both domestic and international disputes in the context of conciliation. International conciliation is confined only to disputes of “commercial” nature. As per the Act, the definition of international commercial conciliation is exactly similar to that of international commercial arbitration.2 Accordingly, the Act defines international commercial conciliation as conciliation proceedings relating to a dispute between two or more parties where at least one of them is a foreign party.3 The foreign party may be (1) an individual who is foreign national, (2) a company incorporated outside India, or (3) the government of a foreign country.

Conciliation under the Civil Procedure Code,1908 (“CPC”)

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 Before 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 a settlement which may be acceptable to the parties.” Section 89 of the CPC empowers the court to formulate the terms of the 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.

Number of Conciliators and mode of appointment

After an invitation to conciliate is accepted, the next step is for the parties to agree upon the number of conciliators and the manner in which they are to be appointed.

The act envisages there will be only one conciliator unless the parties agree that there shall be two or three conciliators. The maximum number of permissible is three. In case there is more than one conciliator it is incumbent upon them, as a general rule to act jointly.

Rights and duties of the party

1. It is the duty of each party to co-operate with the conciliator in good faith in every sphere of the conciliation proceedings and in particular they should endeavour to comply with requests made by conciliator to submit written materials, provide evidence and attend meetings (Section 71).

2. Each party may on his own initiative or at the invitation of the conciliator, submit suggestions for settlement of the dispute to the conciliator (Section 72).

3. The conciliator and the parties shall keep confidential all matters relating to the conciliation proceedings. Confidentiality also extends to the settlement agreement, except where its disclosure is necessary for purposes of implementation and enforcement (Section 75).

4. The parties shall not during the conciliation proceedings initiate any arbitral or judicial proceedings in respect of a dispute that is the subject-matter of the conciliation proceedings except where the resort to such proceedings is necessary for preserving his rights (Section 77).

Conduct of Conciliation Proceedings

The principal aim of the conciliator shall be to assist the parties in an independent and impartial manner in their attempt to reach an amicable settlement of their disputes. He shall adopt the principles of objectivity, fairness, and justice. He may conduct the conciliation proceedings in a manner he considers appropriate taking into account the circumstances of the case, the wishes expressed by the parties including requests for an oral hearing and need for speedy settlement (Section 67).
In order to facilitate the conduct of the conciliation proceedings, administrative assistance by a suitable institution or person may be arranged by the parties themselves or by the conciliator with the consent of the parties (Section 68).

3.The conciliator is not bound by the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872. These enactments prescribe rigid rules of procedure and evidence which govern court procedures whereas conciliation proceedings are governed by the principles of natural justice.

4.The conciliator may meet or communicate with the parties either together or with each of them separately. Communication between conciliator and parties may be made orally or in writing. The venue of conciliation meetings shall be fixed by the parties mutually, and if they fail to do so such a place shall be determined by the conciliator after consultation with the parties, having regard to the circumstances of the conciliation proceedings (Section 69).

Case Law:

Haresh Dayaram Thakur V. State of Maharashtra

The conciliator held some meetings with the parties in which there was discussion and thereafter drew up a settlement agreement by himself in secrecy and sent the same to court in a sealed cover. Naturally the so-called settlement agreement did not bear the signature of the parties. The High Court refused to even entertain any objection against the said settlement agreement and reiterated the position that the settlement arrived at by the conciliator will be binding on the parties.

The action of the conciliator was challenged before the Supreme Court. The Supreme Court held that in view of the apparent illegalities committed by the conciliator in drawing up the so-called settlement agreement, keeping it secret from the parties and sending it to the Court without obtaining their signatures on the same the order passed by the Bombay High Court confirming the settlement agreement received from the conciliator is wholly unsupportable. The position is well settled that if a statute prescribes a procedure for doing a thing, the thing has to be done according to that procedure.

Termination of Conciliation Proceedings

The conciliation proceedings shall stand terminated in the following circumstances-

1.On settlement – on the date of signing the settlement agreement (Section 76).

2.By consent – on the date of the written declaration of –

3.The conciliator after consultation with the parties to the effect that any further efforts at conciliation are no longer justified; or

4.The parties addressed to the conciliator to the effect that conciliation proceedings are terminated; or

5.A party to the other party and the conciliator, if appointed, to the effect that conciliation proceedings are terminated (Section 76).

6.By Default – The conciliation proceedings shall stand terminated on the date of the written declaration of the conciliator to the parties, on default of parties to pay the advance deposit or supplementary deposit in full within 30 days of call of such deposit, to the effect that conciliation proceedings are terminated [Section 79(3)].

Advantages of conciliation

When compared with arbitration and litigation, following are the advantages of conciliation:

It is more flexible, inexpensive and informal.

• Parties are directly engaged in negotiating a settlement.

• Conciliation enhances the likelihood of the parties continuing their amicable business relationship during and after the proceedings. The reason is that the parties are in a conciliatory mode, away from the hostile environment of a court or an arbitral tribunal where exhaustive arguments take place and reach a mutually acceptable settlement done volitionally, and in a congenial manner. Thus, the end result of a conciliation proceeding is that both parties are relatively pleased with the final outcome.

• In our view, the chances of an appeal after the conclusion of conciliation proceedings are considerably lower as a mutual settlement is arrived at between the parties. However, there is no judicial precedent establishing this.

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.