Process of Conciliation

Conciliation is a non-adjudicatory alternative dispute resolution (ADR) process to resolve conflicts between parties. It is a voluntary and confidential method of resolving disputes to facilitate communication, understanding, and agreement between the parties involved.

In conciliation, a neutral third party, known as the conciliator, assists the parties in reaching a mutually acceptable resolution. The conciliator acts as a facilitator, helping the parties identify and explore the issues in dispute, understand each other’s perspectives, and find common ground for agreement.

Conciliation is governed by specific procedures and guidelines, which may vary depending on the jurisdiction or the applicable laws. In India, the process of conciliation is regulated by legislation such as the Arbitration and Conciliation Act.

Principles of Process of Conciliation

The principles of conciliation as discussed under the Arbitration and Conciliation Act are:

Independence and Impartiality (Section 67(1))

The conciliator must maintain independence and impartiality throughout the conciliation process. They should assist the parties unbiasedly and fairly while striving to reach an amicable settlement.

Fairness and Justice (Section 67(2))

The conciliator should adhere to principles of objectivity, fairness, and justice. This involves considering the rights and obligations of the parties, relevant trade practices, and the circumstances surrounding the dispute, including any prior business dealings between the parties.

Confidentiality (Sections 75, 70, proviso)

All matters relating to the conciliation proceedings are to be treated as confidential by the conciliator and the parties involved. If a party provides information with the condition of confidentiality, the conciliator must not disclose that information to the other party without consent.

Disclosure of Information (Section 70)

When the conciliator receives information regarding any facts related to the dispute from one party, they should disclose the substance of that information to the other party. This allows the other party to provide an appropriate explanation.

Cooperation of Parties with Conciliator (Section 71)

The parties are expected to cooperate in good faith with the conciliator. This includes submitting written materials, providing evidence, and attending meetings as requested by the conciliator.

Rules of Procedure (Section 66)

The conciliator is not bound by the procedural rules outlined in the Code of Civil Procedure, 1908, or the Indian Evidence Act, 1872. However, while not strictly bound by technical procedural rules, the conciliator should still uphold the principles of natural justice.

Place of Meeting (Section 69(2))

The parties can agree upon the location for meetings with the conciliator. In the absence of such an agreement, the conciliator will determine the meeting place after consulting with the parties, considering the circumstances of the conciliation proceedings.

Communication between Conciliator and Parties (Section 69(1))

The conciliator may invite the parties to meet, communicate with them orally or in writing, and may choose to engage with the parties collectively or separately as necessary.

What is the Process of Conciliation under the Arbitration and Conciliation Act 1996?

Part 3 of the Arbitration and Conciliation Act 1996 discusses the process of conciliation, which is an alternative method of resolving disputes outside of court. Conciliation is governed by the provisions outlined in the Arbitration and Conciliation Act, 1996 (26 of 1996), as defined in Wharton’s Law Lexicon.

Step 1: Commencement of Conciliation Proceedings

Section 62 of the Act addresses the initiation of conciliation proceedings. To begin the process, one party must send a written invitation to the other party. The conciliation proceedings can only proceed if the other party accepts the invitation. If no response is received within 30 days of sending the invitation, it will be deemed non-acceptance.

Step 2: Appointment of Conciliators

Once the parties have agreed to engage in conciliation proceedings, appointing a conciliator is next. Section 64 covers the appointment of conciliators. If the parties agree, they can appoint a single conciliator. If the parties opt for two conciliators, each party will appoint one. In the case of three conciliators, each party will appoint one conciliator, and the parties together can agree upon a third conciliator who will act as the presiding conciliator.

Step 3: Submission of Written Statements to the Conciliator

The conciliator may request both parties to provide written statements detailing the relevant facts pertaining to the case. Both parties must submit their written statements to the conciliator. Additionally, the parties are required to exchange their written statements with each other.

Step 4: Conduct of the Conciliation Proceedings

Sections 67(3) and 69(1) describe the conduct of conciliation proceedings. The conciliator has the discretion to communicate with the parties through written or oral means. They can choose to meet with the parties collectively or separately. The conduct of the proceedings will be tailored to suit the case’s specific circumstances.

Step 5: Administrative Assistance

Section 68 of the Act addresses the option of seeking administrative assistance. The parties or the conciliator may seek assistance from an institution or individual if necessary. However, the consent of the parties is required to engage in such administrative assistance.

Termination of Conciliation Proceedings – Section 76

Section 76 of the Arbitration and Conciliation Act provides four ways in which conciliation proceedings can be terminated:

Termination by Signing of Settlement Agreement (Section 76(a))

Conciliation proceedings end when the parties involved sign a settlement agreement. The date of termination is considered to be the date on which the settlement agreement is signed.

Termination by Conciliator’s Declaration (Section 76(b))

The conciliation proceedings can be terminated if the conciliator declares in writing that further efforts at conciliation are no longer justified. The date of termination is the date of the conciliator’s declaration.

Termination by Written Declaration of Parties (Section 76(c))

The parties have the authority to terminate the conciliation proceedings by providing a written declaration to the conciliator stating that they wish to end the proceedings. The date of termination is the date of the declaration.

Termination by Party’s Written Declaration to Other Party and Conciliator (Section 76(d))

A party can unilaterally terminate the conciliation proceedings by sending a written declaration to both the other party and the conciliator, expressing their intention to terminate the proceedings. The date of termination is the date of the declaration.

Case Laws Relating to Conciliation Process

Haresh Dayaram Thakur v. State of Maharashtra and Ors.

In the case of Haresh Dayaram Thakur v. State of Maharashtra and Ors. (AIR 2000 SC 2281), the Supreme Court examined the provisions of Sections 73 and 74 of the Arbitration and Conciliation Act 1996. In paragraph 19 of the judgment, the court made the following observations:

According to the statutory provisions mentioned above, it is evident that a conciliator’s role is to assist the parties in settling their disputes amicably. The conciliator is granted broad powers to determine the procedure to be followed without being bound by procedural laws such as the Code of Civil Procedure or the Indian Evidence Act 1872.

When the parties are able to reach a mutual agreement, and the conciliator believes that there is a potential settlement acceptable to the parties, the conciliator should follow the procedure outlined in Section 73. This involves formulating the settlement terms and presenting it to the parties for their observations. The final step for the conciliator is to draft the settlement based on the parties’ observations.

The settlement becomes legally binding only when the parties themselves draw up the settlement agreement or request the conciliator to prepare it and affix their signatures. As per Sub-section (3) of Section 73, once the parties sign the settlement agreement is considered final and binding on them and any individuals claiming under them.

Mysore Cements Ltd. v. Svedala Barmac Ltd. 

In the case of Mysore Cements Ltd. v. Svedala Barmac Ltd. (AIR 2003 SC 3493), the court discussed Section 73 of the Arbitration and Conciliation Act. The court made the following observations:

Section 73(1) states that when the conciliator believes that there are elements of a possible settlement that may be acceptable to the parties, they should formulate the terms of the potential settlement and present them to the parties for their observations. Upon receiving the parties’ observations, the conciliator may reformulate the settlement terms accordingly.

However, in the present case, the court did not find any such formulation and reformulation by the conciliator, as required under Sub-section (1). Sub-section (2) states that if the parties reach a settlement agreement based on the possible terms of settlement formulated, they may draft and sign a written settlement agreement. Sub-section (3) clarifies that when the parties sign the settlement agreement, it becomes final and binding on them and any individuals claiming under them. Furthermore, Sub-section (4) requires the conciliator to authenticate the settlement agreement and provide each party with a copy.

Conclusion

Conciliation is a valuable alternative dispute resolution process guided by the Arbitration and Conciliation Act. It involves a neutral conciliator assisting parties to settle. The process begins with a written invitation, followed by the appointment of a conciliator. Written statements are exchanged, and the conciliator conducts proceedings based on fairness and justice. Confidentiality is maintained throughout. 

The goal is to reach a settlement agreement, which becomes final and binding when the parties sign. Conciliation allows parties to resolve disputes amicably, avoiding litigation while preserving relationships. It offers a structured and flexible approach, empowering parties to actively participate in finding mutually acceptable resolutions.