INTRODUCTION

Alternate Dispute Resolution ("ADR") refers to all methods of resolving a dispute which are alternatives for litigation in the courts. ADR1 includes arbitration, mediation, conciliation, negotiation, expert determination, early neutral evaluation by a third person, etc. Conciliation, a well-accepted method of ADR, is by which the parties to a dispute use the services or take the assistance of a neutral and impartial third person or institution, called a conciliator, as a means to help them to reduce the extent of their differences and to arrive at an amicable settlement or acceptable solution according to a compromise rather than an award or decree by force of law. Conciliation is not defined under the Arbitration and Conciliation Act, 1996 ("AC Act"). It can be defined as a non-contentious and non-binding procedure in which an impartial third party - the conciliator - assists the parties by understanding the pros and cons of the respective positions taken by them and helps them in reaching a mutually agreed settlement of the dispute. Unlike courts, tribunals and arbitrators, the conciliator does not give a decision; his function is to induce the parties in the dispute to come to a settlement.

In this article author shall analyse the nature of Conciliation proceedings and its effect on Initiation of Arbitration Proceedings such as Appointment of Arbitrator under section 11 of the AC Act and Power to refer parties to arbitration where there is an arbitration agreement.

BRIEF DISCUSSION OF CONCILIATION PROCEEDINGS

The part 3 of the Arbitration and Conciliation Act, 1996, pertains to provisions with respect to Conciliation from section 61 to Section 81. Major provisions are like the arbitration provision. Here we shall analyse only provisions that are different from arbitration.

Commencement of Conciliation Proceedings2 shall be upon written invitation by one party to another after identifying the subject of dispute. It shall commence after the acceptance in writing by other party to conciliate. If other party rejects, then no conciliation proceedings can be undertaken. If the initiating party does not receive any reply within 30 days, then invitation be considered rejected.

Number of Conciliator3 shall be one unless the parties agree that there shall be two or three conciliators. So, interestingly there can be even number of conciliators if parties choose, which is not possible in the arbitration proceedings.

Role of the Conciliator4 is to assist the parties in reaching an amicable settlement agreement and make proposal for settlement of disputes. Each party at the invitation of the conciliator shall submit their suggestion5 for the settlement of the dispute.

Conclusion of the conciliation proceeding is the Settlement Agreement6 , acceptable to the parties. Conciliator shall formulate a possible settlement and submit to the parties for their observation. Conciliator shall make changes according to the observation of the parties. Finally, Conciliator shall draw up and sign the written agreement, which shall have the same binding effect7 as an arbitral award rendered by an arbitral tribunal under section 30 of the AC Act. These proceedings are confidential8 including settlement agreement except its disclosure is necessary for purposes of implementation and enforcement, like Section 42A of the AC Act. These proceedings can be terminated either by parties or conciliator after consultation with each other.

Interestingly, a person appointed as a conciliator shall not act as an arbitrator or counsel of a party in arbitral of judicial proceedings, and cannot be presented as a witness by the parties in any arbitral or judicial proceedings relating to the disputes.9 Any evidence presented, suggestions made by the parties, proposals by the conciliator shall not be relied upon or introduced in the arbitral or judicial proceedings.

CONCILIATION PROCEEDINGS ARE DIRECTORY, NOT MANDATORY

The pre-condition of mutual discussion is only a directory requirement and not a mandatory one. Section 77 of the AC Act states that despite conciliation proceedings going on, the existence of the same will not prevent any of the parties to exercise its rights in accordance with law.10

In the case of Saraswati Construction Co. v. Cooperative Group Housing Society11 it was held that conciliation as the prior requirement for invoking arbitration even if not complied with, the same cannot prevent reference to arbitration, because, the procedure/pre-condition has to be only taken as a directory and not a mandatory requirement.

IF THERE IS NO PRESCRIBED TIME LIMIT FOR CONCILIATION PROCEEDINGS IN THE AGREEMENT

This issue was resolved by Hon'ble Delhi High Court in case of Ravindra Kumar Verma v. M/S. BPTP Ltd.12 wherein no time frame was mentioned with respect to completion of mutual discussion /conciliation proceedings. The court held that "Parties must resort to mutual discussions within a time bound reasonable period. In case, mutual discussions or conciliation proceedings do not successfully conclude within the time bound reasonable period of say three months, thereafter arbitration proceedings for determination of the rights can be continued. I note that I am fixing a period in this case because contractually no period has been prescribed for mutual discussion/conciliation procedure." With the observation of Hon'ble Court, this can be inferred that conciliation procedure require a time frame within the legislative ambit and in the agreement also.

CONCLUSION

The author is of the opinion that conciliation proceedings are not getting the desired results as expected by the legislator. It has just become a procedural formality before Arbitration Proceedings. The author suggests that firstly, there must be institutionalised conciliation proceedings as recommended by the by NITI Aayog13 to all PSUs/ departments issuing public contracts to setup a conciliation committee comprising of independent subject experts to ensure speedy disposal of pending or new cases. A provision of this effect should be made in the Contract agreement as a mechanism of resolution of disputes. Only the National Highway Authority of India established such committee14, which was a huge success. Till Now, 108 cases have been referred to CCIE and claims worth Rs, 13,349 cr. have been successfully settled for an amount of Rs. 3,743 cr. NHAI is working on a fast track mode to resolve all the disputes through conciliation.15 Every PSU must setup such committees so that settlement rates can be improved and conciliation doesn't become just a formality.

Secondly, there must be some time frame within the legislative ambit as mentioned in Ravindra Kumar Verma (supra) case which will ease the proceedings and will be convenient for the parties also. Conciliators must furnish a failure notice to the parties in case the former are not in a condition to reach to a settlement acceptable to the parties within a reasonable period. If the conciliation proceedings are improved by way of legislative backing, then it can prove beneficial industries and economy.

Footnotes

1 Section 89, Settlement of dispute outside of the court, Code of Civil Procedure, 1908.

2 Section 62, Commencement of conciliation proceedings, Arbitration and Conciliation Act, 1996.

3 Section 63, Commencement of conciliation proceedings, Arbitration and Conciliation Act, 1996.

4 Section 67, Role of Conciliator, Arbitration and Conciliation Act, 1996.

5 Section 72, Suggestion by parties for settlement of disputes, Arbitration and Conciliation Act, 1996.

6 Section 73, Settlement Agreement, Arbitration and Conciliation Act, 1996.

7 Section 74, Status and Effect of Settlement Agreement, Arbitration and Conciliation Act, 1996.

8 Section 75, Confidentiality, Arbitration and Conciliation Act, 1996.

9 Section 80, Role of Conciliator in Other Proceedings, Arbitration and Conciliation Act, 1996.

10 Section 81, Admissibility of evidence in other proceedings, Arbitration and Conciliation Act, 1996.

11 Saraswati Construction Co. v. Cooperative Group Housing Society, 1995 (57) DLT 343: 1994 RLR 458.

12 Ravindra Kumar Verma v. M/S. BPTP Ltd., 2014 SCC OnLine Del 6602, (2015) 147 DRJ 175.

13 Initiatives on the measures for the revival of the construction sector. https://niti.gov.in/writereaddata/files/circular_notification/InitiativesConstruction%20Sector.pdf

14 Establishment of a Conciliation & Settlement Mechanism for Contractual Disputes under the contract agreements with the Contractors/ Concessionaires/ Consultants in NHAI - Panel of Independent Experts and Constitution of Conciliation Committees. https://morth.nic.in/sites/default/files/circulars_document/Conciliation%20&%20settelment%20Machanism%20for%20disputs%20Panel%20of%20Independant%20Experts%20conciliation%20committee%20reg_compressed.pdf

15 NHAI expedites settlement of claims through Conciliation https://pib.gov.in/PressReleseDetailm.aspx?PRID=1632105

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.