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
- This part shall apply to conciliation of disputes arising out of legal
relationship, whether contractual or not and to all proceedings.
- 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
Appointment of Conciliators- Section 64
- If there is one conciliator in a conciliation proceeding, the parties
may agree on the name of a sole conciliator.
- If there are two conciliators in a conciliation proceeding, each party
may appoint one conciliator.
- 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
Principles of Procedure
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.
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.
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)
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.
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.
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.
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.
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
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.
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
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))
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 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
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)
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:
- 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
- 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:
- 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
- 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))
- 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))
- 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
means reasonable costs relating to the following:
- The fee and expenses of the conciliator and witness requested by the
conciliator with the consent of the parties
- Any expert advice requested by the conciliator with the consent of the
- Any assistance provided to sec 64(2)(b) and sec 68
- 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
- Haresh Dayaram Thakur v. State of Maharashtra and Ors. AIR 2000
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
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.
- 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
- 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.
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.
would like to conclude with a saying: Do conciliate, therefore, whenever there
are differences, and sooner it is done, the better.