Conciliation and Conciliators under Arbitration and Conciliation Act, 1996 | Law Optional Notes for UPSC PDF Download

Conciliation as a Dispute Resolution Method

Conciliation is highlighted as a democratic method of dispute settlement where a neutral third party, the conciliator, assists conflicting parties in reaching a mutually agreeable solution. Unlike arbitration, the conciliator's role is recommendatory rather than authoritative.

Historical Significance of Conciliation

Conciliation has deep roots in Indian history, with the panchayat system exemplifying its application in resolving disputes at local levels. Notably, conciliation has played a pivotal role in resolving politically sensitive international disputes, such as the Beagle Channel conflict between Chile and Argentina.

Legal Framework for Conciliation

• The Arbitration and Conciliation Act of 1996 outlines the legal provisions governing conciliation processes. Section 61 emphasizes the applicability of conciliation to contractual and non-contractual disputes arising from a legal relationship, excluding certain types of disputes.
• Section 63 allows for the appointment of one or more conciliators based on the parties' agreement, enabling flexibility in the conciliation process.
• In essence, conciliation offers a non-adversarial and consensual approach to dispute resolution, promoting efficiency and effectiveness in addressing conflicts outside traditional court procedures.

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

Section 64 of the Arbitration and Conciliation Act, 1996 outlines the procedure for appointing a conciliator.

In conciliation proceedings:

• With one conciliator, parties can jointly select a sole conciliator.
• With two conciliators, each party can appoint one conciliator.
• With three conciliators, each party appoints one conciliator, and they jointly select the third conciliator who acts as the presiding conciliator.

Parties can seek help from an institution or individual for appointing conciliators:

• A party can ask the institution or individual to suggest suitable conciliators.
• The parties can agree to let the institution or individual directly appoint one or more conciliators.

Composition of the conciliation tribunal:

• Agreement on the composition is required when accepting the invitation to conciliation.
• Default: only one conciliator unless parties decide otherwise.

If both parties fail to agree on a conciliator, the process involves:

• Each party appointing their own conciliator.
• Unanimous appointment of a third conciliator who acts as the directing conciliator.

Parties opting for the conciliator selection process:

• May involve an institution or individual for assistance.
• The appointed conciliator must be independent and impartial.

Role of Conciliator as per Arbitration and Conciliation Act, 1996

• The conciliator's role, as outlined in Section 67 of the Arbitration and Conciliation Act, 1996, involves assisting parties independently and impartially to reach a friendly resolution of their dispute.
• Guided by principles of objectivity, fairness, and justice, the conciliator considers factors like parties' rights, trade usages, and circumstances of the dispute to facilitate a settlement.
• Conducting conciliation proceedings appropriately, the conciliator adapts to the case's circumstances, parties' wishes, and the need for a prompt resolution.
• Empowered to propose settlements at any stage, these proposals can be oral and need not be accompanied by detailed reasons.
• The conciliator reviews relevant documents, meets witnesses, and maintains confidentiality to aid in decision-making.
• Fostering a positive dialogue and comfortable environment, the conciliator encourages cooperative problem-solving between parties.
• In India, the conciliator plays an evaluative role, helping parties understand their cases' strengths and weaknesses to reach a satisfactory agreement.
• Besides being well-educated, effective conciliators rely on personal skills to influence parties and proactively guide them towards a resolution.

Restrictions on the Role of Conciliator – Section 80

• Clause (a) prohibits the conciliator from serving as an arbitrator or as a representative or counsel of a party in any arbitral or judicial proceeding concerning a dispute that is the subject of the conciliation proceedings.
• Clause (b) prohibits the parties from calling upon the conciliator to testify as a witness in any arbitral or judicial proceedings.

Commencement of Conciliator Proceedings

• Initiating Conciliation: Either party in a dispute can start the conciliation process by inviting the other party to resolve their issues through conciliation.
• Acceptance and Rejection: The process officially begins when the invited party accepts the invitation. If rejected, no conciliation proceedings will take place for that specific dispute.
• Invitation Details: The invitation must clearly state the subject of the dispute. Failure to respond within 30 days is considered a rejection of the offer to conciliate.

Commencement Process under Section 62

• Written Invitation: The party initiating conciliation sends a written invitation to the other party, briefly outlining the dispute's subject.
• Initiation of Proceedings: Conciliation proceedings start when the other party accepts the invitation in writing.
• Rejection: If the invitation is declined, conciliation will not proceed.
• Non-Response: If there is no reply within the specified time frame, the initiating party can consider it a rejection and notify the other party accordingly.

Termination of Conciliation Proceedings under Section 76

• Settlement Agreement: Proceedings end when parties sign a settlement agreement on the agreement date, or when the conciliator declares further efforts unnecessary.
• Termination Declarations: Parties or the conciliator can declare the termination in writing, signaling the end of conciliation.
• Amicable Settlement: Proceedings conclude when parties reach a friendly resolution, and a duly authenticated copy of the settlement agreement is handed over.
• Finality of Agreement: The Act does not allow for the review of settlement agreements or any party to retract from their commitments once the settlement is in written form.

Principle of Confidentiality

• Essence of Confidentiality in Conciliation:
  • Confidentiality is a core aspect of conciliation, ensuring privacy and trust among involved parties.
• Confidentiality Obligations:
  • Parties and the conciliator are bound to maintain confidentiality regarding all proceedings and materials.
  • They must refrain from discussing details, opinions, or admissions of other involved parties.
• Legal Perspective:
  • Section 75 mandates confidentiality in conciliation, extending to the settlement agreement.
  • Disclosure is permissible only when necessary for implementation and enforcement.
• Role of Conciliator:
  • A conciliator cannot act as a witness during the proceedings.

Case Laws Relating to Conciliation

Haresh Dayaram Thakur v. State of Maharashtra and Ors. AIR 2000 SC 2281

• A conciliator assists parties in settling disputes amicably without being bound by procedural laws like the Code of Civil Procedure or the Indian Evidence Act.
• Successful conciliation concludes when a settlement agreement, akin to the legal sanctity of an arbitral award under Section 74, is signed by the parties.

Mysore Cements Ltd. V. Svedala Barmac Ltd. AIR 2003 SC 3493

• Section 73 of the Act mandates the Conciliator to formulate possible settlement terms upon identifying elements of agreement between parties.
• If parties agree on the terms, they must draw up and sign a written settlement agreement authenticated by the Conciliator.
• In cases where all requirements of Section 73 are not fulfilled, as observed from the records, the conciliation process is deemed incomplete.

Conclusion

• The conciliation process, as an alternative dispute resolution mechanism, brings significant advantages to parties involved, primarily due to its expeditious and cost-effective nature in comparison to lengthy litigation. Simplicity is a key feature, contributing to its appeal. However, the success of conciliation relies on factors such as the parties' attitudes, the conciliator's skills, and a conducive environment supported by infrastructure for facilitating the conciliation procedure. Reciprocity emerges as a defining characteristic in the analytical evaluation of the conciliation process.
• For the establishment of a healthy business relationship, mutual understanding is crucial, and resolving disputes through settlement stands out as the ultimate goal, leading to success in conciliation. Unlike arbitration, conciliation is non-binding and confidential, with no formal court involvement. Its increasing popularity stems from its flexibility, offering an alternative for various disputes and sparing parties from resorting to the formal court system.
• Importantly, conciliation allows parties the freedom to withdraw without compromising their legal positions at any stage of the proceedings. Positioned as a boon, conciliation proves to be a superior method for dispute resolution, as it empowers the parties to independently arrive at a settlement. By individualizing optimal solutions, conciliation guides parties toward a mutually satisfactory common agreement.