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CONCILIATION

PART III (SECTIONS 61 -81)


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 a comprehensive
legislation was made on the subject of conciliation in
India.
• The UNCITRAL Rules on Conciliation, 1980 recognized
“the value of conciliation as a method of amicably
settling disputes arising in the context of international
commercial relations” and that adoption of uniform
conciliation rules by “countries with different legal,
social and economic systems would significantly
contribute to the development of harmonious
international economic relations.”
• Accordingly, these rules were closely followed by
the Indian legislators to formulate conciliation rules
under Part III of the Act.
PRINCIPLES OF CONCILIATION

• (1) non-adversary nature of conciliation proceedings


– there is no claimant or plaintiff in conciliation
proceedings,
• (2) voluntary nature of proceedings – any party can
commence and discontinue the proceedings,
• (3) flexible procedure – the conciliator has the
discretion to adopt any procedural law to ensure
speedy and inexpensive conduct of proceedings,
and
• (4) decisions are recommendatory – disputes are
settled by mutual agreement and not by imposed
decisions.
• The term conciliation is not defined in the Act.
However, the intention that can be gather according
to that
• conciliation is a confidential,
• voluntary and
• private dispute resolution process in which a neutral
person helps the parties to reach a negotiated
settlement.
• 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.
• conciliation proceedings relating to a dispute
between two or more parties where at least one of
them is a foreign party. 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.
ROLE OF CONCILIATOR

• the main function of the conciliator is to assist the


parties to reach an amicable settlement.
• For achieving this, a conciliator is obliged to
• (1) act in an independent and impartial manner,
and
• (2) abide by the principles of objectivity, fairness and
justice.
• the conciliator, apart from assisting the parties to
reach a settlement, is also permitted and
empowered to make proposals for a settlement and
formulate/reformulate the terms of a possible
settlement.
ARBITRATION V. CONCILIATION

• arbitration is considered private when compared


with the court system, conciliation is even more
private than arbitration.
• parties to a conciliation proceeding have the
privilege to negotiate and arrive at an amicable
settlement with the assistance of a conciliator in a
less formal setting.
• while section 7(2) requires that an arbitration
agreement be in writing, there is no such express
provision regarding conciliation in the Act.
• section 30 of the Act permits the parties to engage in
conciliation process even during the course of
arbitral proceedings. They may do so suo motu or
under the directions of the arbitrator.
• during arbitral or court proceedings, the parties are
encouraged to initiate conciliation proceedings, but
once conciliation proceedings commence, they are
barred from initiating arbitration or approaching the
court.
CONCILIATION UNDER THE C.P.C

• 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.
• After the insertion of section 89 in the CPC, a court
can refer the case to arbitration, conciliation, judicial
settlement or mediation, “where it appears to the
court that there exist elements of settlement which
may be acceptable to the parties.”
SEC 61 – APPLICATION AND SCOPE

(1) This part shall apply to conciliation of disputes


arising out of legal relationship whether
contractual or not, unless parties have agreed
otherwise
(2) This Part shall not apply where by virtue of any law
in force certain disputes may not be submitted to
conciliation
• Adopts with little variations the UNCITRAL Conciliation
Rules 1980
• Three exceptions to the application of this Part
- Parties agree not to be governed by the Part
- Law for the time being in force provides otherwise
- Law prohibits certain disputes to be submitted to
conciliation
• Sec 30 – not incompatible with arbitration agreement for
arbitral tribunal to encourage settlement of dispute using
mediation, conciliation and other procedures
• Sect 89 CPC – requires court to refer dispute for
settlement by arbitration, conciliation, judicial settlement
and mediation
• Conciliation and Mediation – degree of initiative taken
by the third party
• Conciliation and Arbitration – assist parties in settling
disputes, principles of natural justice, procedure
SEC 62 – COMMENCEMENT OF
CONCILIATION PROCEEDINGS
(1) The Party initiating conciliation shall send a written
invitation to conciliate to the other party, briefly
identifying the subject of dispute
(2) When the other party accepts in writing the
invitation, then conciliation proceedings shall
commence
(3) If other party rejects the invitation, then there shall
be no conciliation proceedings
(4) If the party initiating conciliation does not receive
the reply within 30 days or any other specified
period in invitation, he may elect to treat it as
rejection of invitation to arbitrate and if does so,
inform in writing the other party
SEC 63 – NUMBER OF CONCILIATORS

• There shall be one conciliator unless the parties


agree for two or three
• More than one conciliator, they have to act jointly
SEC 64 - APPOINTMENT OF
CONCILIATORS
(1) Subject to Sub-section (2)
(a)One conciliator, parties agree on the name
(b)Two conciliators, each party may appoint one
(c) Three conciliators, each party may appoint one, and
parties agree on a third (presiding conciliator)
(2) Parties may enlist assistance of institution or person
for appointment, and
(a)Request them for name of individuals
(b)Agree on the appointment made by them
The institution or person shall give due regard to secure
the appointment of independent and impartial
conciliators and for sole and third conciliator, not from
the nationalities if the parties
SEC 65 – SUBMISSION OF STATEMENTS
TO CONCILIATOR
(1) The conciliator may request each party to submit
a brief written statement describing the general
nature of the dispute and the points at issue; send
a copy to other party
(2) Conciliator may request parties to submit to him
further written statements supplemented by
documents and evidence; copy to other parties
(3) At any stage of the conciliation proceedings, the
conciliator shall request a party to submit to him
such additional information
S 66 – CONCILIATOR NOT BOUND BY

Conciliator not bound by Code of Civil Procedure,


1908 and The Indian Evidence Act, 1872
SEC 67 – ROLE OF CONCILIATOR
(1) Conciliator shall assist in an independent and impartial
manner in the parties’ attempt to reach an amicable
settlement of their dispute
(2) Conciliator shall be guided by principles of objectivity,
fairness and justice, giving consideration to rights and
obligations of the parties, usages of trade and
circumstances surrounding the dispute
(3) Conciliator conduct the proceeding in a manner he
thinks appropriate, taking into account circumstances
of case, wishes of the parties, including request for oral
hearing and need for speedy settlement
(4) At any stage of proceeding, conciliator make
proposals for settlement of dispute; need not be writing
or accompanied by statement of reasons
SEC 68 – ADMINISTRATIVE ASSISTANCE

The parties or the conciliator with the consent of the


parties arrange for suitable administrative assistance
by suitable institution or person to facilitate the
conduct of the conciliation proceedings
SEC 69 – COMMUNICATION BETWEEN
CONCILIATORS AND PARTIES
(1) Conciliator may invite the parties to meet him or
may communicate to them orally or in writing ;
meet and communicate with both parties
together or separately
(2) If parties have not agreed upon place where
meetings to be held, determined by conciliator
after consultation with parties and having regard
to circumstances of conciliation proceedings
SEC 70 – DISCLOSURE OF INFORMATION

• When conciliator receives factual information


concerning the dispute from a party, he shall
disclose the substance of information to other party
in order that the party may have appropriate
opportunity to present any explanation which he
considers appropriate.
• Party gives info subject to a specific condition to
keep it confidential, conciliator shall not disclose the
info to other party.
SEC 71 – COOPERATION OF PARTIES
WITH CONCILIATOR
• The parties shall in good faith cooperate with
conciliator
• They shall endeavor to comply with the requests by
the conciliator to submit written materials, provide
evidence and attend meetings.
SEC 72 – SUGGESTIONS BY PARTIES
FOR SETTLEMENT OF DISPUTE
Each party may on his own initiative or at the
invitation by conciliator submit to conciliator
suggestions for the settlement of disputes
SEC 73 – SETTLEMENT AGREEMENT

(1) Conciliator feels that there exists elements of a


settlement acceptable to the parties, he shall
formulate the terms of a possible settlement and
submit to parties for their observations; based on it
reformulate the terms of a possible settlement
(2) If parties reach agreement on a settlement of dispute,
draw up and sign a written settlement agreement; if
requested conciliator may draw or assist parties in
drawing up the settlement agreement
(3) It shall be final and binding on the parties and persons
claiming under him
(4) Conciliator authenticate the settlement agreement
and furnish copy to each party
• Haresh Dayaram Thakur v. State of Maharashtra (2000)
- Conducted discussions with parties and drew a
settlement agreement himself in secrecy without
signature of parties and sent it to Court
- Held : The Statute prescribes a procedure for doing
a thing, which has to be done accordingly and
held that the order of high court confirming the
settlement agreement was wholly unsustainable

• Mysore Cements Ltd. v. Svedala Barmac Ltd. (2003)


- The Memorandum of Conciliation proceedings and
Letter of Comfort cannot be enforced
- Cannot be assigned status of a settlement
agreement, fall short of essential legal pre-requisites
SEC 74 – STATUS AND EFFECT OF
SETTLEMENT AGREEMENT
The settlement agreement shall have the same status
and effect as if it is an arbitral award on agreed
terms on the substance of dispute rendered by the
arbitral tribunal under Section 30
SEC 75 - CONFIDENTIALITY

• The conciliator and the parties shall keep


confidential all matters relating to the conciliation
proceedings.
• Confidentiality shall extend to the settlement
agreement also
• Except where its disclosure is necessary for purposes
of implementation and enforcement
SEC 76 – TERMINATION OF
CONCILIATION PROCEEDINGS
The conciliation proceedings shall be terminated –
(a)By signing of settlement agreement by parties
(b)By a written declaration by conciliator, after
consultation with parties, to the effect that further
efforts at conciliation are no longer justified
(c) By a written declaration by parties addressed to
conciliator to the effect that the conciliation
proceedings are terminated
(d)By a written declaration of a party to other party
and conciliator to the effect that the conciliation
proceedings are terminated
SEC 77 – RESORT TO ARBITRAL OR
JUDICIAL PROCEEDINGS
• The parties shall not initiate during conciliation
proceedings, any arbitral or judicial proceedings in
respect of a dispute that is subject- matter of
conciliation proceedings
• Except if it is necessary for preserving his rights
SEC 78 - COSTS
(1) Upon termination of conciliation proceedings, the
Conciliator shall fix the costs of the conciliation and
give written notice to parties
(2) Cost means reasonable costs relating to –
(a)The fee and expenses of the conciliator and witnesses
requested by conciliator with the consent of parties
(b)Any expert advice requested by conciliator with
consent of parties
(c) Assistance provided pursuant to sec 64 and 68
(d)Other expenses incurred in connection with the
conciliation proceedings and the settlement
agreement
(3) Costs borne equally by parties unless settlement
agreement provides for different apportionment
SEC 79 - DEPOSITS

(1) Conciliator direct each party to deposit an equal


amount as an advance for the costs
(2) During the conciliation proceedings, conciliator
may direct supplementary deposits in an equal
amount from each party
(3) If the required deposits are not made in full within
thirty days, conciliator may suspend or may make a
written declaration for the termination of
proceedings
(4) Upon termination, conciliator shall render
accounting to the parties and return unexpended
balance to the parties
SEC 80 – ROLE OF CONCILIATOR IN
OTHER PROCEEDINGS
• The conciliator shall not act as an arbitrator or as a
representative or counsel of a party in any arbitral
or judicial proceedings in respect of a dispute that is
subject of the conciliation proceedings
• The conciliator shall not be presented by the parties
as a witness in any arbitral or judicial proceedings
SEC 81 – ADMISSIBILITY OF EVIDENCE
IN OTHER PROCEEDINGS

The Parties shall not rely on or introduce as evidence in


any arbitral or judicial proceedings (even if not related
to the dispute that is subject to conciliation
proceedings) –
(a)Views expressed or suggestions made by the other
party in respect of a possible settlement of dispute
(b)Admissions made by other party in course of the
conciliation proceedings
(c) Proposals made by the conciliator
(d)The fact that the other party had indicated his
willingness to accept a proposal for settlement
made by the conciliator