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Arbitration and Conciliation Act 1996 : All about Conciliation Proceedings

Litigation in India can be endless, therefore foreign corporations seeking to do businesses in India takes adequate precaution at the outset. In any democratic society for protecting and enhancing the rights of the people, Desire for quick and affordable justice is universal. Denial of 'timely justice' amounts to denial of 'justice' itself. Two are integral to each other. Timely disposal of cases is essential for maintaining the rule of law and providing access to justice which is a guaranteed fundamental right.

However, as the present report indicates, the judicial system is unable to deliver timely justice because of huge backlog of cases for which the current judge strength is completely inadequate. On an average a court takes more than decade to decide a civil suit, which ultimately results in 'justice delayed is justice denied.' Since independence, Indian judiciary has suffered from an overwhelming backlog of cases. Further, complexities and inadequacies of court redressal mechanism leads to zeal for Alternative Dispute Resolution Mechanism.

It is the judiciary which plays an important role besides legislative and executive body and India is not an exception. Desire for quick and affordable justice is universal. Justice should be speedy, simple, cheap, affective and substantial. Conciliation is an alternative dispute resolution mechanism which has been given statutory recognition by incorporating provisions in Sections 61 to 81 of Part III of the Arbitration and Conciliation Act, 1996.

Meaning
Part 3rd of the Arbitration and Conciliation Act, 1996. 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.

Definition
Conciliation is an alternative dispute resolution mechanism with the help of conciliator. Conciliator assists the disputing parties to explore potential solutions and find a mutually acceptable solution by lowering tensions and improving communications. Conciliation is an alternative dispute resolution mechanism which has been given statutory recognition by incorporating provisions in Sections 61 to 81 of Part III of the Arbitration and Conciliation Act, 1996.

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. 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.

Objective:
  • The purpose of conciliation proceedings is to reach an amicable, swift and cost-efficient settlement of a dispute.
  • If the parties to a dispute formally agree to submit it to conciliation, ICMA assigns a member of its panel of conciliators as conciliator to the case. The members of this panel are persons of high integrity with wide experience of the international capital market. They are appointed by ICMA's executive committee on an annual basis.
  • The place of the conciliation proceedings is to be agreed upon by the parties, failing which it is determined by the conciliator.
  • The conciliator hears the case and then recommends a settlement proposal to the parties. Following a settlement, or, if no settlement can be reached, the conciliator closes the conciliation proceedings and notifies ICMA and the parties accordingly.
  • The costs of conciliation proceedings, including the remuneration of and the costs incurred by the conciliator as well as ICMA , are normally borne in equal parts by the parties concerned.

Historical Background
Conciliation is as old as the Indian history. In Mahabharata when both parties were determined to resolve the conflict in battle fields, Lord Krishna made efforts to resolve the conflict. Now also, the panchayat system works in the villages. The Indian system places a lot of importance on resolution of disputes by negotiation which is purely conciliatory. Conciliation is essentially a consensual process. Under the Arbitration and Conciliation Act, 1996, it has the statutory sanction.

The best example where conciliation played an integral role is of the highly politically sensitive case of the Beagle channel dispute over the ownership of certain islands in the entrance to the channel between Chile and Argentina. The mediator was the Vatican. The process was remarkable because it was flexible enough to accommodate the changing political environments in both countries and the mediator used a range of tools to great advantage. This process served to protect a fragile peace between the countries and ultimately allowed them to create an agreement that has lasted until this day.

Provisions relating to Conciliation
The procedure to be followed in the conciliation proceedings are mentioned in sections 62 to 81 of the Arbitration and Conciliation Act of 1996. We will be looking at the few important sections to be followed in initial stage of the conciliation proceedings.

Commencement of the proceedings of Conciliation (Section 62)
Section 62 provides for the commencement of proceedings for conciliation. For the purpose of settling the dispute through the process of conciliation all what is required is a proposal in writing and its acceptance thereof. When a proposal is made by one party the other party has the option of the acceptance of proposal or its rejection.

Rejection does not always have to be expressed it may be implied. If the party who sends the proposal does not receive any follow up or reply within a period of thirty days or other stipulated period it shall amounts to rejection and hence the process of conciliation will not commence.

Number of conciliators (Section 63)
Once the proposal is accepted by the other party the next important step is to have a conciliator. Section 63 of the 1996 act provides that there under usual circumstances there will be only one conciliator. And in no case the number of conciliators shall exceed three [section 63(2)] which is the maximum limit and the general rule is that they shall act jointly

Appointment of conciliators (Section 64)
There are two ways that are provided for the appointment of conciliators:
  1. First, the parties may on a mutual agreement appoint the conciliator according to the guidelines provided in section 64 (I):
    1. A sole conciliator:The parties may with their understanding mutually agree upon the name of the sole conciliator;
    2. Two conciliators: according to this provision each of the party may appoint one conciliator;
    3. Three conciliators: according to this a third conciliator may be appointed who will act as the presiding conciliator.
       
  2. Second, the parties may take advice and take assistance of an institution or person for the appointment of conciliators.
Section 65: It deals with Submission of statements by the parties to conciliator.

Section 66: This section provides that Conciliator is not bound by the procedures envisaged in CPC , or Evidence Act.

Section 67: This section talks about the role of a Conciliator. These roles include acting impartially, fairly, independently and strive towards reaching an amicable resolution of the dispute.

Section 69: This section deals with the communication between the parties and the conciliator.

Section 71: This section provides that that the parties should act in good faith and co-operate with the Conciliator

Section 73: This section provides for the provision of the Settlement agreement and its components.

Section 75: This sections deals with the important principle of Confidentiality.

Section 76: This section talks about the termination of proceedings which can be done by the signing of the settlement agreement or by a declaration by a written declaration of a party to other party.

Section 78: It talks about the costs that are included in the conciliation proceedings.

Section 81: This section deals with evidence and its admissibility of certain kinds of evidence which cannot be used in other proceedings like proposals made by the conciliator or the fact that the other party was willing to accept a proposal.

Sections 62: 81 of the Arbitration and Conciliation Act thus provide a complete and a comprehensive procedure for Conciliation.From initiation of the process of Conciliation to the settlement of dispute , evidence , roles of Conciliator etc. are completely covered in the aforesaid sections.

Famous Conciliation Cases in India
  • Case: Gujarat Ambuja Cement Pvt. Ltd. v. U.B. Gadh
  • Petitioner : Gujarat Ambuja Cement Pvt. Ltd. v/s Respondent : U.B. Gadh

Facts:
The petitioner has challenged an award passed by the labour court.

Issue:
When do the conciliation proceedings begin when ambiguity is there?

Held:
There are two separate procedures for conciliation proceedings. The first instance, where a notice of strike is given by the workers. Rule 76 and 77 provide for the same. Under Rule 76 the conciliation officer attempts to:
  • Interview both the employer and employee
  • Aim to settle the dispute
Rule 11 covers conciliation proceedings in situations not covered by Rule 76 and 77.
  • Case: Subhashbhai Bhanabhai Patel And Others v. State Of Gujarat And Others
  • Petitioner : Subhashbhai Bhanabhai Patel
  • Respondent : State of Gujarat, Reliance Industries Limited

Facts:
The conciliation proceedings between the Union and Reliance Industries Limited did not succeed. Then the Conciliation Officer drew a failure report. However, the report was not submitted to the third respondent, State of Gujarat. The dispute was pending. The statutory authority also did not act according to law. Under section 33A of the Industrial Disputes Act, the authorities refused to register the complaint. The Industrial Tribunal was to be notified about it. Under article 226 of the constitution, the respondents filed a writ petition.

The appellants were dismissed from the respondent's company. They were demanding a higher amount for signing a long-term agreement. A new executive body was elected in 2002. The appellants did not contest the said election. Thus, they ceased to be the member of the Executive body. They also misrepresented themselves in court to get favourable orders.

Issue:
  • Whether prior approval is required to dismiss a workman who was previously an office-bearer of Union?
Held:
The court dismissed the appeal. It was held that "if a workman ceased to be office-bearer of Union, then his dismissal does not require approval under section 33(2)(b) of the Act."
  • Case: M/S Imi Norgren Herion (Pvt.) Ltd. v. Labour Court, U.P. Noida, And Ors.
  • Petitioner : M/S Imi Norgren Herion (Pvt.) Ltd.
  • Respondent : Labour Court, U.P. Noida
Facts:
The petitioner had terminated the respondent's contract. Both the parties agreed to reconcile. The conciliation proceedings started in 2015. The respondent withdrew his claim in the conciliation proceedings to avoid litigation. Both the parties settled the matter. It was also registered. Additionally, the petitioner paid Rs. 3,45,376 to the respondent for settlement. Thus, the petitioner contended that by entering into an agreement the respondent could not start a conciliation case.

Issue:
  • Whether the respondent has any further claim after settlement?

Held:
The court referred to various sections of the Payment of Wages Act, 1936. Under section 6-D of the Act, [4] the proceedings before the Labour Court or tribunal shall be deemed to have commenced on the date of reference of the dispute to adjudication and concluded on the date on which the award becomes enforceable under section 6-A.[5]

The tribunal has the authority to decide the jurisdiction once the reference for adjudication is made. Neither the conciliation officer has the authority to decide the jurisdiction based on the merits of the case. The registered settlement between the parties denotes that the dispute came to an end. There lies no merit in the instant petition by the respondent. Thus, the court dismissed the petition.

Summary and Concluding Remarks
In any democratic society for protecting and enhancing the rights of the people, it is the judiciary which plays an important role besides legislative and executive body and India is not an exception. However, for any progressive society, dispute should be resolved so far as possible at minimum cost both in terms of money and time and justice should be speedy, simple, cheap, and substantial. Having dissatisfied with the formal and adversarial justice system by court, alternative dispute resolution mechanism was evolved which gives people involvement in the process of resolving their dispute.

Conciliation is extra judicial, means to settle disputes in a friendly manner. In a developing country like India, where the backlog of the court is keeps on mounting, conciliation can pay an important role in reducing the burden of the courts. However, even two decade after enactment of Arbitration & Conciliation Act 1996, the Act has failed to serve the purpose what its legislators intended it to be. Besides reducing the burden on the Courts and giving speedy justice to people, alternative dispute resolution mechanism has been introduced for a number of other reasons.

Alternative disputes resolution mechanisms are relatively inexpensive in comparison with the ordinary legal process. These mechanisms, therefore, help litigants who are unable to meet the expenses involved in the ordinary process of dispute resolution through Courts. Furthermore, ADR mechanisms enhance the involvement of the community in the dispute resolution process. Conciliation offers a more flexible alternative to arbitration as well as litigation, for resolution of disputes in the widest range of contractual relationships, as it i is an entirely voluntary process.

Our judicial system is neither ineffective nor alone responsible for huge backlog of pending cases. We must not forget the increased inflow of cases in all courts of the country. Litigation is not the only means of resolving disputes. We need to re-look and strengthen our own available alternative mechanism with positive framework.

Conciliation is unquestionably a better option than arbitration as the experience in past few years has shown that arbitration is neither inexpensive nor time saving. In cases where court has been given the authority to review the outcome, the advantage does not appear to be real on account of first spending time before the arbitration tribunals and then in courts. Conciliation is a more amicable way to settle disputes without harming the personal relations as well. Thus, the pros of Conciliation are categorically more than arbitration which asserts my stand that it is for the better.

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