Conciliation and Conciliators under Arbitration and Conciliation Act, 1996

Among various methods of dispute settlement, conciliation appears to be the most democratic method. The conciliator invites both parties to dispute, explores the areas of disagreement, helps them to examine various alternatives and selects, by mutual agreement, a solution which is most favourable.

Thus, the process of conciliation aims at facilitating the settlement of disputes. The conciliator does not the power to force any solution and can only make recommendatory interventions. The recommendatory nature of conciliation is then its biggest strength and weakness. Conciliation is as old as Indian history.

Presently, the panchayat framework works in villages and towns. The Indian legal system places a lot of importance on the resolution of disputes by negotiation and conciliation which is essentially a consensual process. Conciliation can be best described where it played an essential 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.

In this context, reference may be made to the judgment of the Supreme Court of India. In Guru Nanak Foundation V. Rattan Singh & Sons, it was observed:[1] “Interminable, time-consuming, complex and expensive court procedures impelled jurists to search for an alternative forum, less formal more effective and speedier for resolution of disputes avoiding procedural claptrap and this led to Arbitration Act, 1940.

However, the way in which the proceedings under the Act are conducted and without an exception challenged in the courts has made lawyers laugh and legal philosophers weep. Experience shows and law reports bear ample testimony that the proceedings under the Act have become highly technical accompanied by unending prolixity at every stage providing a legal trap to the unwary. Informal forum chosen by the parties for expeditious disposal of their disputes has by the decisions of the court been clothed with” legalese‟ of unforeseeable complexity.”

Legal Provisions Dealing with Conciliation

Section 61 of the Arbitration and Conciliation Act of 1996[2] provides for the Application and Scope of Conciliation which points out that the process of conciliation extends, in the first place, to disputes, whether contractual or not and they must arise out of the legal relationship. In a dispute, one party has the right to sue and to the other party the liability to be sued. But Part III of the Act does not apply to such disputes.

Section 63 of the act fixes the number of conciliators. Ideally, one conciliator is required but the parties may by their agreement provide for two or three conciliators.

Appointment of a conciliator under the Arbitration and Conciliation Act, 1996

 According to Section 64 of the Arbitration and Conciliation Act, 1996-

(1) Subject to sub-section-

(a) in conciliation proceedings with one conciliator, the parties may agree on the name of a sole conciliator;

(b) in conciliation proceedings with two conciliators, each party may appoint one conciliator;

(c) in conciliation proceedings with three conciliators, 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.

(2) Parties may enlist the assistance of a suitable institution or person in connection with the appointment of conciliators, and in particular,

(a) a party may request such an institution or person to recommend the names of suitable individuals to act as conciliator; or

(b) the parties may agree that the appointment of one or more conciliators be made directly by such an institution or person.

The parties have to agree on the composition of the conciliation tribunal when the invitation to conciliation is acknowledged. In the absence of any agreement to the contrary, there shall be only one conciliator. If both parties fail to appoint a conciliator with consent, the same may be conducted by two conciliators (maximum limit is three), then each party appoints own conciliator, and the third conciliator is appointed unanimously by both parties.

The third conciliator so designated shall be the directing conciliator. The gatherings to the discretion understanding as opposed to selecting the conciliator themselves may enrol the help of an organization or individual in their decision for the arrangement of conciliators. In any case, the establishment or the individual should keep in view during arrangement that, the conciliator is free and unbiased.

Role of conciliator as per Arbitration and Conciliation Act, 1996

Section 67 of the act describes the role of the conciliator as-

(1) The conciliator shall assist the parties in an independent and impartial manner in their attempt to reach an amicable settlement of their dispute.

(2) The conciliator shall be guided by principles of objectivity, fairness and justice, giving consideration to, 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) The conciliator may conduct the conciliation proceedings in such a manner as he considers appropriate, taking into account the circumstances of the case, the wishes the parties may express, including any request by a party that the conciliator hear oral statements, and the need for a speedy settlement of the dispute.

(4) The conciliator may, at any stage of the conciliation proceedings, make proposals for a settlement of the dispute. Such proposals need not be writing and need not be accompanied by a statement of the reasons therefore.

A conciliator is also expected to review relevant documents and information to help reach conclusions. Meet with witnesses and other persons related to the parties to obtain statements and additional information about the dispute in question and practice confidentiality regarding the personal information of the parties and of the dispute. A brief written statement of all the issues faced by the parties is to be submitted to the conciliator before the process of conciliation.

A positive dialogue and an atmosphere of comfort is to be created by the conciliator in order to promote harmonious and cooperative problem-solving between the parties. In India conciliator plays an evaluative role where he attempts to get the gatherings to acknowledge the benefits and demerits of their cases along these lines driving them to a general adequate arrangement. Along with being well-educated, a conciliator should impact the parties with his/her personal and convincing skills and play a proactive role in reaching an agreement.

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) 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 prohibits the parties to produce the conciliator as a witness in any arbitral or judicial proceedings.

Commencement of conciliator proceedings

Either of the parties to the dispute can commence the conciliation process. The conciliation proceedings are said to have been initiated when one party invites the other party for the resolution of their dispute through conciliation. The process commences when the other party accepts the invitation.

If they reject it, then no conciliation proceedings will be conducted for that dispute. The invitation should identify the subject of the dispute. If no reply is received by the inviting party within 30 days then it may be treated as rejection to conciliate.

Commencement of conciliation proceedings under section 62 of the act states that-

(1) The party initiating conciliation shall send to the other party a written invitation to conciliate under this Part, briefly identifying the subject of the dispute.

(2) Conciliation proceedings shall commence when the other party accepts in writing the invitation to conciliate.

(3) If the other party rejects the invitation, there will be no conciliation proceedings.

(4) If the party initiating conciliation does not receive a reply within thirty days from the date on which he sends the invitation, or within such other period of time as specified in the invitation, he may elect to treat this as a rejection of the invitation to conciliate and if he so elects, he shall inform in writing the other party accordingly.

The conciliation proceedings shall be terminated as given under section 76-

 (a) by the signing of the settlement agreement by the parties on the date of the agreement; or  

 (b) by a written declaration of the conciliator, after consultation with the parties, to the effect that further efforts at conciliation are no longer justified, on the date of the declaration; or

 (c) by a written declaration of the parties addressed to the conciliator to the effect that the conciliation proceedings are terminated, on the date of the declaration; or

 (d) by a written declaration of a party to the other party and the conciliator, if appointed, to the effect that the conciliation proceedings are terminated, on the date of the declaration.

The conciliation proceedings shall stand terminated on the date as and when the parties reach an amicable settlement on the disputes which had been referred to the conciliator, and a duly authenticated copy (by the conciliator) of the settlement agreement is handed over to the parties. There is no provision in the Act for review of the settlement agreement, nor there does any provision under which any of the parties to the settlement agreement can retrace its steps and wriggle out of the written commitments in the form of a settlement agreement.

Principle of Confidentiality

In a conciliation proceeding, two parties resolve the matter and confidentiality is something which is guaranteed by the statute itself which makes it one of the highlighting features of alternative dispute resolution. In conciliation, both the parties and the conciliator are obligatory to keep the facts and all the material relating to the proceedings very confidential.

Details and opinions/views of other parties is not to be discussed by the parties in respect of the possible settlement of their dispute. They should also refrain from making admission of other parties and other conciliators in the course of the proceedings. Matters regarding the dispute is required not to speak about any information or not to bring out any e subject matter regarding the dispute to other party or conciliators during the cancellation process. During the proceedings, a conciliator can never play the role of a witness.

Section 75 describes Confidentiality as –

Notwithstanding anything contained in any other law for the time being in force, the conciliator and the parties shall keep confidential all matters relating to the conciliation proceedings. Confidentiality shall extend also to the settlement agreement, except where its disclosure is necessary for purposes of implementation and enforcement. 

Case Laws Relating to Conciliation

Mysore Cements Ltd. V. Svedala Barmac Ltd. AIR 2003 SC 3493[4]

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 a 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 reformulate the terms of a possible settlement.

In the present case, we do not find there any such formulation and reformulation by the Conciliator, under Subsection (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. 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 at 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 beneficial to the parties as it is expeditious and cost-effective which makes it simple compared to lengthy litigation. However, the success of conciliation depends on the attitude of the parties, the skill of the conciliator and the appropriate environment, backed by infrastructure facilities for servicing the conciliation procedure. On ultimate analytical observation, reciprocity is the hallmark of the conciliation process.

Mutual understanding is required for a healthy business and solving the dispute through settlement is the eventual quality or eventual base as it leads to success in conciliation.  In contrast to arbitration, conciliation is nonbonding and confidential. The court plays no formal role in sponsoring conciliation. Conciliation is becoming increasingly popular, as an alternative to other formal and informal modes of dispute resolution as it offers a more flexible alternative, for a wide variety of disputes and obviates the parties from seeking recourse to the court system.

It also reserves the freedom of the parties to withdraw from conciliation without prejudice to their legal position inter se at any stage of the proceedings. 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 it tries to individualize the optimal solution and direct parties towards a satisfactory common agreement.

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[1] Guru Nanak Foundation V. Rattan Singh & Sons, AIR 1981 SC 2075

[2] Arbitration and Conciliation Act, 1996, Acts of Parliament, 1996 (India)

[3] Haresh Dayaram Thakur V. State of Maharashtra, AIR 2000 SC 2281: 2000 AIR SCW 2058

[4] Mysore Cements Ltd.v. Svedala Barmac Ltd., 2003 (1) Arb LR 651 (SC)

Author Details: Madhu Nagappa [School of Law, CHRIST (Deemed to be University)]