January 17, 2022

Dispute Resolution Mechanism – Conciliation

Companies Act

Every person has the right to be heard- the right to a fair trial! However, knowing the efficiency of the courts, people avoid filing cases at court, due to lengthy proceedings. Moreover, with thousands of cases flowing in everyday the judges find it more difficult since there aren’t enough judges available in court which pushes them to take more cases than necessary. Other issues faced by the courts would be- the nature of the matter (some cases take longer that the other), lack of evidence, delay in matter (adjournment, parties not present, judge unavailable) and so on. This led to the creation of alternate dispute mechanisms/ out-of-court- settlements, which mainly included- arbitration, mediation, conciliation and Lok Adalats.

The aim of creating such forums was to reduce the burdens of the courts, and ensure speedy trials for simple matters. The court has thousands of cases to look into, some require more attention than others, therefore having this bifurcation of matter would unhinge some of their burden. This article focuses on the importance of conciliation as an alternative dispute mechanism.

Conciliation is an alternative form of dispute resolution, which enjoys statutory backing. It has been established under Part III of the Arbitration and Conciliation Act 1996, under Sections 61-81. Conciliation is the mechanism which allow parties to reach a common ground by promoting a dialogue between them through the help of a Conciliator. This is ground on which arbitration differs, since its similar to a court litigation where parties are pitted against each other. The Act places a wide range of power on the Conciliator.

Part III starts off with the section 61 i.e., application and scope (of the section), stating that -whether the dispute is contractual or not, it must arise from a legal relationship or in relation thereof. This is then followed by section 62 which lays down the process for commencement of the proceedings; the invitation sent by the party inviting the conciliation must be a written one, that should be accepted by the other party, and this must be done within a period of 30 days. In a situation where the (other party) does not accept the invitation or does not receive the reply within the 30-day period, it can be treated as a rejection to conciliate. The parties are free to decide if they would want either 1, 2 or 3 conciliators, granted that they both jointly agree on the same (Section 63 and 64), moreover it should be noted that the conciliators must not have any conflict of interest, otherwise the entire purpose of the mechanism would be lost.

As mentioned above, the conciliators power is wide in nature; section 66 states that they are not bound by the Indian Evidence Act or the CPC, and as per Section 67 their primary duty is to ensure that an amicable settlement is reached. A conciliator must be guided by the principles of fairness, objectivity, trade and custom usage, the business practices between the parties and anything relating to the dispute while conducting the proceedings and should be done in a manner that is best fit for the given situation keeping in mind the speedy redressal of the dispute. Under section 80, the conciliator is prohibited from acting as an arbitrator or as a representative to the parties with respect to the conciliation proceedings, and moreover cannot be presented as a witness to any arbitral or judicial proceedings unless agreed upon by the parties. Furthermore, section 68 provides administrative assistance that can be arranged either by the parties or conciliator(s).

The proceedings must be done in a proper manner, and all duties of the parties and conciliator must be carried out in good faith (Section 71), all relevant information should be disclosed to the parties, unless said information is confidential (Section 70). Section 73 is the most important proviso in this part as it lays down the rules to be followed in a settlement agreement. The section states that although the duty of to formulate the terms of the settlement agreement lies with the conciliator, the agreement can be subjected to reformulation over time. It is also possible that the parties reach a settlement beforehand, and the conciliator can assist them in signing the agreement or also draw up the same.

It is important to note that the settlement agreement is final and binding in nature as mentioned under section 74 of the Act, this means that the agreement has the same status and effect as that of an arbitral award under section of the Act. This also implies that the parties are prohibited from initiating arbitral or other judicial proceedings during the conciliatory proceedings as mentioned under section 77, however such initiation would only be valid if it is necessary to preserve the right of the parties.

Conciliation is a relatively simple method of dispute resolution mainly to ensure that the parties are open and frank during the proceedings. The aim is to create a comfortable environment for parties to come to an amicable settlement. This is why courts also push parties to other forms of out-of-court- settlements, before they present a lengthy case in court, simply for the reason that the matter might just be resolved if the parties would just listen to the other in a comfortable environment, which would lead to faster and amicable settlements.

Author Details: Janavi Venkatesh (OP Jindal Global University)

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