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Power of a Tribunal to Recognize a Settlement

Article 39 A of the Constitution of India clearly provides that:
The state shall secure the operation of the legal system promotes justice, on a basis of equal opportunity, and shall, in particular provide free legal aid by suitable legislation or schemes or in any other way, to ensure that opportunities for securing justice are not denied to any citizen by reason of economic or other disabilities.

In order to give effect to this directive principle, various kinds of alternate dispute resolution methods have been set up by the parliament. In order to resolve the disputes outside the court, different methods have been provided in the arbitration and conciliation Act 1996. In the past few years there have been a rapid growth in settlement of legal disputes through ADR mechanism and it has been further aided by enacting the said act.

While on one hand there are adjudicatory mechanism such as Arbitration, on the other hand there are various non adjudicatory mechanism as well such as conciliation, negotiation, mediation etc. The former one has been realized to be more costly, formal and time taking than the latter ones and therefore Section 30 has been provided under the said act under which even after recourse to arbitration has been taken, still settlement can be resorted to as well.

The courts have therefore keeping in mind the legislatures objective has given finality to settlement agreements. The settlements which are done either prior to or post the arbitral proceedings count up to around 30% of of the arbitration that have been administered[1].

Power Of Tribunal To Recognize A Settlement Under The Act

In the contemporary commercial world, settlement as a method of dispute resolution has become a much needed resort as it ensures that the issue is settled and we can't believe between the parties in such a matter that both are satisfied with the outcome. Therefore, settlements have been profoundly used and welcomed by the tribunals (courts) and the litigants as well.

The courts have become very free and unhesitating in in recognizing the settlement agreements as final under the act. This also includes an arbitral award. These settlement agreements are the outcome of a possible compromise between the parties which is carved out by a conciliator. The agreement is drawn up by him on the basis of videos evidences that have been presented, written statements etc. It is then given to the parties and in case if any changes are required then on the basis of the comments of the parties, it is reformulated[2].

Further as per Section 73 of the Act this concerned agreement is deemed to be final and binding. Under section 30 of the arbitration and concilation act 1996, power has been given to the tribunal to recognize a settlement. As per the section the arbitrary tribunal can resort to mediation or conciliation or any other dispute resolution mechanism to encourage the settlement[3] (Section 30(1)).

Conciliation here means that the dispute between the parties is settled without any kind of litigation. Here the help of a third party is taken and this method is mostly considered as an informal method which helps in lessening the tension that has arose between the parties. Therefore section 30 of the act encourages such method such as conciliation wherein a conciliator is appointed to reach for potential solution. Furthermore, apart from conciliation, the court also has the power to resort to mediation.

Under this method, a mediator who is a trained professional or attorney helps in reaching a common ground after discussing the various issues involved. He can be appointed either by the court or by the parties themselves with their mutual consent. In addition to this, the court has the power to use any other method as well, which may for instance include negotiation. This method of dispute resolution is very flexible wherein direct or indirect communication is done between the parties and ultimately they reach a common ground.

The shape of entire process of negotiation is handled by the parties themselves, therefore this method is aimed at dynamically protecting their interests and is considered to be hugely successful. This power under Section 30 has been given to the tribunals so that they can encourage settlements which will further facilitate an atmosphere of cooperation and friendly relations[4].

Further power under Section 30(2) of the Arbitration and Conciliation Act, 1996 has been provided to the tribunal (court) to terminate the proceedings once the settlement has been recorded vis-�-vis arbitral award, on the terms that have been agreed by the parties. It is pertinent to note here that once the settlement agreements have been recorded by the parties that are involved in the dispute in order to settle the same, it comes to be known as consent awards and these consent awards are therefore considered as being based on the mutual settlement terms agreed by the parties thereto.

Under section 30 of the arbitration and conciliation act 1996 therefore a power has been provided to the tribunals to recognize these consent awards. This power of the tribunal to recognize settlement has facilitated a wider scope as now the dispute can be solved through various techniques of conciliation, negotiation and mediation via non adjudicatory methods.

The power of tribunal to recognize a settlement can be better understood through the case of Haresh Dayaram Thakur vs state of Maharashtra, extracted here:
"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 there 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 proceeding comes to an 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."

On the basis of the above extracted paragraphs from the judgment It can be said that if the requirements under section 73 of the Act have been fulfilled then the settlement agreement exist and furthermore under section 30 of the Act, it acquires the effect and the status of arbitrary award which is based on the consented terms on the points of dispute.

This stand was again Reiterated in the case of Mysore Cements Limited vs Svedela Barman Ltd[5] wherein supreme court held that if requirements of Section 73 have been fulfilled then a status and effect of arbitral award that has been given by the tribunal is deemed to be acquired. Then in the case of State of Jharkhand vs Gitanjali Enterprises It was observed by the High court of Jharkhand that although dispute settlement has been given in both section 30 as well as section 73 that although the later run is only concerned with conciliation proceedings and therefore it will not have any bearing on the former section.

This power that has been provided to the tribunals to encourage the dispute settlement using procedures of conciliation, negotiation, mediation etc. have targeted improving the relationship between the involved parties. This is because of the fact that India as a country is eyeing Settle don't sue and through this power of the tribunals a settlement reached via non-adjudicatory methods are recognized and prove feasible. It preserves the bona fide relation of the parties.

It is undoubted that whenever such a kind of dispute arises there is always either party which has an upper hand. This however does not imply that that particular party will win and the other one will lose however with this power of the tribunal to recognize a settlement it can be analyzed that it is a step towards a more peaceful method of resolution of the dispute that has arose between them parties.

The court me take resort to any other method of dispute resolution so that settlement can be reached. It is pertinent to note here that this power is a boon for the parties as an opportunity as provided to them wherein they can present their views standing on an equal footing and they can reach a particular ground which is beneficial for both and which will finally resolve the differences that have led to the dispute. Time and again the tribunals has resorted to this method and there are a catena of cases regarding the same.

Therefore, based on the above-mentioned points and after perusing them, it can be concluded that this power that has been provided to the tribunals (courts) has acted as a new stone in the entire process of dispute resolution under which the courts have been given the power to resort to settlement by using various non adjudicatory methods such as mediation, conciliation etc. This power is a boon and not just this, it is also a necessity in the contemporary times where tribunals and courts are dealing with a huge no. of dispute cases everyday.

Given the fact that this method of settlement is less time consuming and less formal, this power has been widely used by the tribunals (courts). Along with this power, there is another advantage for the parties involved as because of the common ground reached by virtue of this power conferred, their exists a win- win situation, which at the end of the day helps in amicable settlement between the parties. By virtue of this section, the arbitral tribunal may terminate the proceedings that are going on and resort to the non-adjudicatory method, at any time.

  1. Eugen Salpius, The Decision to Settle, 69 ARB. 155, 155-58 (2003)
  2. P.C. Markanda, Law relating to Arbitration and Conciliation: Commentary on the Arbitration and Conciliation Act, 1996, LexisNexis Butterworths Wadhwa, Nagpur, Seventh Edition (2009)
  3. Section 30(1) of Arbitration and Conciliation Act,1996
  4. Christoph H. Schreuer, The ICSID Convention: A Commentary (2009)
  5. 2003 (2) SCC 1028

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