Conciliation

15.1 Conciliation under the New Law

The new law (in sections 61 to 81 contained in Part III) make express provisions as to conciliation by agreement of the parties - a matter on which there has so far been no statute in India.

Unlike an arbitrator, a conciliator does not give a decision but his main function is to induce the parties themselves to come to settlement. An arbitrator is expected to give a hearing to the parties, but a conciliator does not engage in any formal hearing, though he may informally consult the parties separately or together. The arbitrator is vested with the power of final decision and in that sense it is his contribution that becomes binding. In contrast, a conciliator has to induce the parties to come to a settlement by agreement.

An arbitrator generally decides after a contest between the parties while in the case of conciliation the final result depends on the will of the parties. Therefore, at the end of the proceedings, emotional harmony between the parties may not suffer much, in the case of conciliation.

Under Section 61(1) of the new law, conciliation can be resorted to in relation to "disputes arising out of a legal relationship, whether contractual or not".

A party initiating conciliation can, under Section 62 of the new law, send to the other party a written invitation to conciliation. Conciliation commences when the other party accepts in writing this invitation. If it does not accept it, then there will be no conciliation (section 62 of the new law).

1. There will be only one conciliator, unless the parties agree to two or three.

2. Where there are two or three conciliators, then as a rule, they ought to act jointly.

3. Where there is only one conciliator, the parties may agree on his name

4. Where there are two conciliators, each party may appoint one conciliator.

5. Where there are three conciliators, each party may appoint one, and the parties may agree on the name of the third conciliator, who shall act as presiding conciliator.

6. But in each of the above cases, the parties may enlist the assistance of a suitable institution or person.

The above provisions are contained in section 63 and 64(1) of the new law.

Section 64(2) and proviso of the new law lay down as under :-



1. Parties may enlist the assistance of a suitable institution or person regarding appointment of conciliator. The institution may be requested to recommend or to directly appoint the conciliator or conciliators.

2. In recommending such appointment, the institutions etc. shall have regard to the considerations likely to secure an "independent and impartial conciliator".

3. In the case of a sole conciliator, the institution shall take into account the advisability of appointing a conciliator other than the one having the nationality of the parties.

Section 37 provides that an appeal shall lie from certain orders. No second appeal will lie from an order passed in an appeal. However, the right to appeal to the Supreme Court is not affected.

Incidentally, the new list of appealable orders is slightly narrower than that contained in Section 39 of the Arbitration Act, 1940.

In sections 65 to 73, the new law contains provisions spread over a number of sections as to the procedure of the conciliator. Their gist can be stated in short form :-



1. The conciliator, when appointed, may request each party to submit a statement, setting out the general nature of the dispute and the points at issue. Copy is to be given to the other party. If necessary, the parties may be asked to submit further written statement and other evidence.

2. The conciliator shall assist the parties "in an independent and impartial manner", in their attempt to reach an amicable settlement. See Section 67(1) of the new law.

3. The conciliator is to be guided by the principles of "objectivity, fairness and justice". He is to give consideration to the following matters :-
   
   

   1. rights and obligations of the parties;

   2. trade usages; and

   3. circumstances surrounding the dispute, including previous business practices between the parties. [Section 67(2) of the new law].

4. He may, at any stage, propose a settlement, even orally, and without stating the reasons for the proposal. [section 67(4)].

5. He may invite the parties (for discussion) or communicate with them jointly or separately. [Section 68].

6. Parties themselves must, in good faith, co-operate with the conciliator and supply the needed written material, provide evidence and attend meetings, [Section 71].

7. If the conciliator finds that there exist "elements of a settlement which may be acceptable to the parties", then he shall formulate the terms of a possible settlement and submit the same to the parties for their observation.

8. On receipt of the observations of the parties, the conciliator may re-formulate the terms of a possible settlement in the light of such observation.

9. If ultimately a settlement is reached, then the parties may draw and sign a written settlement agreement. At their request, the conciliator can help them in drawing up the same. [See Sections 73(1) and 73(2)].

1. The settlement agreement signed by the parties shall be final and binding on the parties. [See Section 73(1)].

2. The agreement is to be authenticated by the conciliator. [See Section 73(4)].

3. The settlement agreement has the same status and effect as if it were an arbitral award rendered by the arbitral tribunal on agreed terms. [See section 74 read with section 30 of the new law].

The net result is that the settlement can be enforced as a decree of court by virtue of section 36 of the new law.

Under section 72 of the new law, a party may submit to the conciliator his own suggestions for the settlement of a dispute. Such suggestions may be submitted by him on his own initiative or on the conciliator's request.

The net result of section 66, Section 67 (2) and Section 67(3) of the new law can be stated as follows :-



1. The conciliator is not bound by the Code of Civil Procedure or the Evidence Act.

2. The conciliator is to be guided by the principles of objectivity, fairness and justice.

3. Subject to the above, he may conduct the proceedings in such manner as he considers appropriate, taking into account.
   
   

   1. the circumstances of the case;

   2. wishes expressed by the parties;

   3. need for speedy settlement.

1. Factual information received by the conciliator from one party should be disclosed to the other party, so that the other party can present his explanation, if he so desires. But information given on the conditions of confidentiality cannot be so disclosed.

2. Notwithstanding anything contained in any other law for the time being in force, the conciliator and a party shall keep confidential "all matters relating to the conciliation proceedings". This obligation extends also to the settlement agreement, except where disclosure is necessary for its implementation and enforcement. (Section 75 of the new law).

In any arbitral or judicial proceedings (whether relating to the conciliated dispute or otherwise), the party shall not rely on, or introduce as evidence

1. views expressed or suggestions made by the other party for a possible settlement;

2. admissions made by the other party in the course of conciliation proceedings;

3. proposal made by the conciliator; and

4. the fact that the other party had indicated his willingness to accept a settlement proposal (Section 81 of the new law).

During the pendency of conciliation proceedings, a party is debarred from initiating arbitral or judicial proceedings on the same dispute, except "such proceedings as are necessary for preserving his rights". (Section 77 of the new law) (There is no mention of arbitral or judicial proceedings which are already initiated).

Unless otherwise agreed by the parties, the conciliator cannot act as arbitrator, representative or counsel in any arbitral or judicial proceedings in respect of the conciliated dispute. Nor can he be "presented" by any party as a witness in such proceedings. (Section 80 of the new law).

The new law also contains provisions on certain other miscellaneous matters, such as costs and deposit (Section 78 and 79 of the new law).

Section 85 (1) of the new Law expressly repeals the Arbitration Act, 1940 and also the two enactments of 1937 and 1961, relating to foreign awards. However, as provided in section 85(2) clause (a), the provisions of the repealed enactments shall apply in relation to arbitration proceedings, "which commence on or after this Act came into force." This is subject to contrary agreement between the parties. For arbitration proceedings which commence on or after the new Act (that is to say, on or after the 25th January, 1996), the new Act shall apply. This repeal clause does not itself lay down what is deemed to be the date of commencement of arbitrations. However, in Chapter V of the new Act, section 21 provides that arbitral proceedings in respect of a particular dispute commence, when notice to refer to arbitration is received by the respondent. Section 21 may not apply in a literal manner to section 85, but probably its substance may be utilised by way of analogy. In any case, the broad result of the saving regarding pending arbitrations is that the Act of 1940 continues to be of utility their entire life span (including proceedings in court after the award) is exhausted. Of course, even for pending arbitrations, the parties can adopt the new Law by mutual agreement, and this may be a desirable course, because the new Law is an improvement over the Act of 1940 on several matters.