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Principles and Procedure of Conciliation

Part 3rd of the Act deals with conciliation. Conciliation means the settling of disputes without litigation. Conciliation is a process by which discussion between parties is kept going through the participation of a conciliator. The main difference between arbitration and conciliation is that in arbitration proceedings the award is the decision of the Arbitral Tribunal while in the case of conciliation the decision is that of parties arrived at with the assistance of the conciliator.

The law relating to conciliation has been codified for the first time in India on the pattern of UNCITRAL Conciliation Rules.

Application And Scope- Section 61

  1. This part shall apply to conciliation of disputes arising out of legal relationship, whether contractual or not and to all proceedings.
  2. This part shall not apply where by virtue of any law for the time being in force certain disputes may not be submitted to conciliation.
Section 61 points out that the process of conciliation extends, in the first place, to disputes, whether contractual or not. But the disputes must arise out of legal relationship. It means that the dispute must be such as to give one party the right to sue and other party the liability to be sued. The process of conciliation extends, in the second place, to all proceedings relating to it. But Part 3rd of the Act does not apply to such disputes as cannot be submitted to conciliation by virtue of any law for the time being in force.

Number And Qualifications of Conciliators- Section 63

Section 63 fixes the number of conciliators. There shall be one conciliator. But the parties may by their agreement provide for two or three conciliators. Where the number of conciliators is more than one, they should as a general rule act jointly.

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’s 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.

Settlement

  1. Settlement of dispute – Sec 67(4), 72, 73

    The role of the conciliator is to assist the parties to reach an amicable settlement of the dispute. He may at any stage of the conciliation proceedings make proposals for the settlement of the dispute. Such proposals need not be in writing and need not be accompanied by a statement of reasons. (Sec. 67(4)) Each party may, on his own initiative or at the invitation of the conciliator, submit to the conciliator the suggestions for the settlement of the dispute. (Sec. 72)

    When it appears to the conciliator that there exist elements of a settlement likely to be accepted by the parties, he shall formulate the terms of a possible settlement and submit them to the parties for their observations. After receiving the observations of the parties, the conciliator may reformulate the terms of a possible settlement in the light of such observations. (Sec 73(1)) If the parties reach agreement on the settlement of a dispute, a written settlement agreement will be drawn up and signed by the parties.

    If the parties request, the conciliator draw up or assist the parties in drawing up the settlement agreements. (Sec 73(2)) When the parties have signed the settlement agreement, it becomes final and binding on the parties and persons claiming under them. (Sec 73(3)) The conciliator shall authenticate the settlement agreement and furnish its copy to each of the parties. (Sec 73(4)

  2. Status and effect of settlement agreement – Sec 74

    Section 74 provides that the settlement agreement shall have the same status and effect as an arbitral award on agreed terms under Section 30. This means that it shall be treated as a decree of the court and shall be enforceable.

Restrictions on Role of Conciliator – Section 80

Section 80 places two restrictions on the role of the conciliator in the conduct of conciliation proceedings:

  1. Clause (a) of Section 80 prohibits the conciliator to act as an arbitrator or as a representative or counsel of a party in any arbitral or judicial proceeding in respect of a dispute which is subject of the conciliation proceedings.
  2. Clause (b) of Section 80 prohibits the parties to produce the conciliator as a witness in any arbitral or judicial proceedings.

Termination of Conciliation Proceedings – Section 76

Section 76 lays down four ways of the termination of conciliation proceedings. These are:

  1. The conciliation proceedings terminate with the signing of the settlement agreement by the parties. Here the date of termination of conciliation proceedings is the date of the settlement agreement. (Sec 76(a))
  2. The conciliation proceedings stand terminated when the conciliator declares in writing that further efforts at conciliation are no longer justified. Here the date of termination of conciliation proceedings is the date of the declaration. (Sec 76(b))
  3. The conciliation proceedings are terminated by written declaration of the parties addressed to the conciliator to the effect that the conciliation proceedings are terminated. Here the date of termination of conciliation proceedings is the date of the declaration. (Sec 76(c))
  4. The conciliation proceedings are terminated when a party declares in writing to the other party and the conciliator, that the conciliation proceedings are terminated. Here the date of termination of conciliation proceedings is the date of the declaration. (Sec 76(d))

Resort To Arbitral or Judicial Proceedings – Sec 77

As a general rule, the parties cannot initiate arbitral or judicial proceedings during the conciliation proceedings in respect of a dispute which is the subject matter of the conciliation proceedings. But in exceptional cases a party may initiate arbitral or judicial proceedings if in his opinion such proceedings are necessary for preserving his rights.

Costs – Sec 78

Costs means reasonable costs relating to the following:
  1. The fee and expenses of the conciliator and witness requested by the conciliator with the consent of the parties
  2. Any expert advice requested by the conciliator with the consent of the parties
  3. Any assistance provided to sec 64(2)(b) and sec 68
  4. Any other expenses incurred in connection with the conciliation proceedings and the settlement agreement. (Sec 78(2))
It is the conciliator who fixes the costs of the conciliation proceedings upon their termination and gives written notice of it to the parties. (Sec78 (1)) The costs are borne by the parties in equal shares. (Sec 78(3))

Deposits – Sec 79

The conciliator may estimate the costs likely to be incurred and direct each party to deposit it in advance in an equal amount. During the conciliation proceedings, the conciliator may demand supplementary deposits from each party. If the require deposits are not paid in full by both parties within 30 days, the conciliator may either suspend the proceedings or terminate the proceedings by making a written declaration to the parties.

The termination of proceedings become effective from the date of declaration. Upon termination of the proceedings, the conciliator shall render to the parties accounts of deposits received and return the unexpected balance to the parties.

Case Laws Relating To Conciliation

  1. Haresh Dayaram Thakur v. State of Maharashtra and Ors. AIR 2000 SC 2281
    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-
    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 untrammelled 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 proceedings 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. Mysore Cements Ltd. V. Svedala Barmac Ltd. AIR 2003 SC 3493
    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 reformulates 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.

Conclusion The process of conciliation as an alternate dispute redressal mechanism is advantageous to the parties in the sense that it is cost effective and expeditious, it is simple, fast and convenient then the lengthy litigation procedure and it eliminates any scope of biasness and corruption.

The parties who wish to settle their disputes they can be provided great intensive by the process of conciliation. In order to enable the conciliator to play his role effectively ,the parties should be brought together face to face at a common place where they can interact face to face and with the conciliator, separately or together without any distraction and with only a single aim to sincerely arrive at the settlement of the dispute.

Conciliation is a boon and it is a better procedure to settle any dispute as in this process it is the parties who by themselves only come to the settlement of the dispute and the role of the conciliator is to bring parties together and to make an atmosphere where parties can themselves resolve their disputes. Conciliation tries to individualize the optimal solution and direct parties towards a satisfactory common agreement.

In conciliation, the conciliator plays a relatively direct role in the actual resolution of a dispute and even advises the parties on certain solutions by making proposals for settlement.

Thus I would like to conclude with a saying: Do conciliate, therefore, whenever there are differences, and sooner it is done, the better.

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