As defined by Section 67 of the Arbitration and Conciliation Act (ACA), 1996, conciliation is an alternative dispute resolution (ADR) method where parties attempt to reach a voluntary agreement to resolve their dispute with the help of one or more conciliators. The conciliator's role is to guide discussions and assist the parties in finding mutually acceptable solutions. If a settlement is achieved, it is formalized as a conciliation award, which has the same legal standing as an arbitral award and can be enforced in a manner similar to a court decree.

Voluntary Participation and Good Faith Cooperation:

 In conciliation, as governed by Section 71 of the ACA, the initial participation and subsequent compliance with a conciliator's requests are fundamentally voluntary for all parties involved. There is no legal mechanism to force a party to engage in or adhere to the suggestions made during conciliation. However, once the parties mutually agree to embark on the conciliation process, a significant obligation arises: they are expected to cooperate in good faith throughout the proceedings. This principle of good faith cooperation forms the bedrock for a potentially successful conciliation.

Manifestations of Cooperation: 

Cooperation during conciliation typically involves several key actions from the participating parties. This includes the timely provision of all necessary documents and relevant materials that have a bearing on the dispute. Active and meaningful attendance at scheduled meetings convened by the conciliator is also a crucial aspect of cooperation, allowing for direct interaction and the exchange of perspectives. Furthermore, parties are expected to engage in sincere and genuine discussions, demonstrating a genuine intent to explore potential solutions and ultimately achieve a mutually acceptable resolution to the underlying conflict. Section 71 of the ACA supports this.

Consequences of Non-Cooperation: While there isn't a direct legal penalty for failing to cooperate during conciliation, such a lack of cooperation can have tangible and negative consequences for the process. A reluctance to provide necessary information, consistent absence from meetings, or an unwillingness to engage in meaningful discussions can significantly hinder the progress of the conciliation. In more severe instances, a persistent lack of cooperation from one or both parties may ultimately lead to the frustration of the conciliator's efforts and the eventual termination of the conciliation process without a resolution. Sections 71, 72 &b 76 of the ACA buttress this.

Voluntary Termination by Parties:

 Reflecting its inherent voluntary nature, Section 72 of the ACA explicitly grants either party the unqualified right to terminate the conciliation process at any point in time. This decision to terminate can be made unilaterally by a single party or through a mutual agreement between both parties involved in the dispute. The formal procedure for termination requires the initiating party or parties to submit a written declaration clearly stating their intention to end the conciliation. This declaration must be communicated to both the other party in the dispute and the appointed conciliator. The termination becomes legally effective on the date specified within this written declaration.

Reasons for Termination and Conciliator Withdrawal: 

Various factors can prompt the termination of conciliation proceedings by the involved parties. Common reasons include a growing perception that the conciliation is not yielding meaningful progress towards a settlement, a shift in preference by one or both parties towards pursuing alternative dispute resolution methods such as formal litigation or arbitration, or the emergence and identification of other potential solutions that are deemed more suitable or advantageous for the specific circumstances of the dispute.

Similarly, Section 76 of the ACA provides a mechanism for a conciliator to withdraw from the process if compelling circumstances arise. To initiate a withdrawal, the conciliator is required to submit a written declaration to both parties, clearly articulating their decision to step down from their role. Typical reasons for a conciliator's withdrawal include the discovery of a conflict of interest that could compromise their impartiality, a personal inability to maintain the necessary neutrality throughout the process, or a situation where the parties exhibit a persistent and irreconcilable lack of cooperation, rendering effective conciliation practically impossible.

In the event of a conciliator's withdrawal, the parties retain the option to mutually agree upon the appointment of a new conciliator to continue the process or to explore entirely different avenues for resolving their dispute. Furthermore, if a party harbours concerns about unfair treatment by the conciliator, they have the recourse to raise these concerns directly, request the appointment of a different conciliator, or ultimately terminate the conciliation proceedings and pursue other available dispute resolution mechanisms.

Binding Settlement Agreement: Finally, Sections 30 and 73 of the ACA underscore the significance of a settlement agreement reached through the conciliation process. Such an agreement is recognized as a legally binding document that effectively concludes the dispute resolution process initiated by conciliation. Upon being signed by all the involved parties, the settlement agreement becomes final and legally enforceable, carrying a similar weight and effect as an arbitral award.

The specific terms and conditions of the settlement agreement are determined solely by the mutual consent of the parties themselves, and the agreement may be drafted either directly by the parties or with the assistance and guidance of the conciliator. By affixing their signatures to the settlement agreement, the parties formally agree to fully abide by its terms and undertake to refrain from initiating any further disputes or legal actions concerning the same underlying matter.

Conciliation Agreement is Binding:

 When people in a disagreement use conciliation and reach an agreement, that agreement is official and they must follow it. This official agreement is called a conciliation award. It has the same legal power as an arbitration award, so it can be made to happen like a court order. However, it is the agreement itself that makes it official, not a judge's decision about the original disagreement. This is explained in Sections 73 and 74 of the ACA.

Conciliation Result Can Be Challenged in Court:

According to Section 77 of the ACA, even though the outcome is binding, it can be challenged in court, similar to how arbitral awards are challenged. The court can review how the settlement was reached, focusing on issues like fraud, coercion, or procedural errors, but generally won't examine the specifics of the agreement itself.

Conciliation is Better than Arbitration? Conciliation is best when parties are willing to negotiate and find a solution together. It's collaborative and less focused on legal battles. Arbitration is better when parties are unwilling to compromise or a legally binding decision is needed. However, it's common to try conciliation first and then move to arbitration if no agreement is reached.

The Same Person Generally Cannot Be a Conciliator and Arbitrator:

According to Section 80 of the ACA, a conciliator generally cannot become an arbitrator in the same dispute unless both parties explicitly agree. This separation of roles is crucial because conciliators actively participate in suggesting solutions and guiding discussions, whereas arbitrators must maintain neutrality and base their decisions solely on presented evidence and legal principles. To uphold fairness and impartiality, the conciliator and arbitrator roles are kept distinct in the same dispute, except when all involved parties provide their clear consent for a change in role.

Costs are Involved in Conciliation:

 As per Section 78 of the ACA, the typical costs associated with conciliation include the conciliator's fees, administrative charges, fees payable to a conciliation institution if utilized, expenses for expert or consultant services if necessary, and other miscellaneous expenses incurred during the conciliation process. The overall cost of conciliation is variable and depends on factors such as the complexity of the dispute, the number of conciliators appointed, and the need for any additional services

Difference Between Conciliator and Arbitrator:

A conciliator helps parties find an agreement by guiding talks and suggesting solutions, acting as a neutral advisor. An arbitrator decides the outcome, like a judge, making a binding ruling based on legal arguments and evidence. Conciliation results in a negotiated settlement; arbitration results in a final, enforceable decision.

Number of Conciliators:

Section 63 of the ACA generally suggests that a single conciliator is usually sufficient for resolving disputes; however, parties have the option to appoint two or three conciliators. When multiple conciliators are involved, they are required to work together collaboratively and refrain from acting independently. Their main objective is to collectively strive for a fair and just resolution, while maintaining impartiality and effectiveness throughout the process, with the ultimate aim of facilitating a mutual agreement between the parties, rather than pursuing individual goals.

Conciliator Appointment Procedures:

According to Section 64 of the ACA, conciliators can be appointed through several methods. Firstly, the disputing parties can reach a mutual agreement to appoint a single conciliator. Secondly, if they cannot agree on a sole conciliator, each party can separately appoint one, and these appointed conciliators will then jointly select a third conciliator to preside over the conciliation process.

Alternatively, if the parties are unable or prefer not to appoint conciliators themselves, they can seek assistance from a conciliation institution or another independent third party. In such cases, the institution may provide a list of potential conciliators from which the parties can make a selection, or the institution may directly appoint a conciliator on behalf of the parties. This flexible system of appointment aims to ensure that conciliation remains an accessible and adaptable method for resolving disputes, tailored to the specific needs and preferences of the involved parties.

Appointment of Conciliators:

Section 64 of the ACA details the appointment process for conciliators, emphasizing the priority of agreement between the parties. Initially, if both parties concur, they can jointly appoint a single conciliator. For multiple conciliators, each party usually appoints one, with the appointment of a third requiring agreement either between the initially appointed conciliators or directly between the parties. In the event the parties cannot agree on an appointment, the authority to appoint defaults to an institution specified in their conciliation agreement; if no such institution is specified, an authorized body will make the appointment. The overarching aim of this process is to ensure that appointed conciliators are neutral and impartial, thereby building trust and confidence from both sides of the dispute.

Scope of Conciliation in India:

Section 61 of the ACA indicates that while conciliation is generally applicable to civil disputes in India, it is not a suitable method for all types of conflicts, as some matters necessitate formal adjudication. Although the law does not explicitly forbid conciliation for particular dispute categories, it is generally considered inappropriate for criminal offenses, tax disputes, and issues involving public policy. Conciliation proves particularly effective for resolving commercial, contractual, family, and employment disputes, offering a more expeditious and less adversarial alternative compared to traditional litigation.

Initiating the Conciliation Process:

Section 62 of the ACA stipulates that the conciliation process commences with a written invitation from one party to the other, proposing the use of conciliation. Upon receiving this invitation, the other party has the option to accept it, reject it, or suggest modifications to the proposed process. Critically, if the receiving party rejects the invitation or fails to provide a response within 30 days from the date of the invitation (or within any other timeframe explicitly stated in the invitation), the conciliation process cannot be initiated. This highlights the fundamentally voluntary nature of conciliation and the essential requirement of mutual consent between the parties for the process to move forward.

Qualifications of a Conciliator:

Contrary to what one might expect, and as supported by ACA Sections 31 and 64 regarding arbitrator qualifications by analogy, conciliators are not required to be professional arbitrators, retired judges, or hold any official judicial position. Instead, a conciliator can be a legal expert, a specialist in the relevant field of the dispute, or simply any neutral third party who possesses effective dispute resolution skills, provided they are chosen by the mutual agreement of the parties. This reflects the flexible and informal nature of conciliation, where the primary requirements are impartiality and the ability to skilfully guide the discussions between the disputing parties towards a mutually acceptable resolution, rather than formal qualifications.

Conciliation is Strictly Confidential:

As emphasized by ACA Sections 75 and 81, conciliation is a strictly confidential process. Any statements made, documents produced, or evidence shared by the parties during conciliation are legally protected and cannot be used as evidence in any subsequent arbitration or court proceedings. This confidentiality extends to all communication that occurs throughout the conciliation process, as well as the terms of any settlement agreement reached. The fundamental purpose of this confidentiality is to foster an environment of open and honest dialogue, allowing parties to feel secure in negotiating freely without the concern that their words or disclosures might be used against them in future legal battles.

Core Principles Guiding a Conciliator's Actions:

According to Section 67 of the ACA, a conciliator is obligated to uphold the principles of natural justice by acting objectively, fairly, and impartially throughout the conciliation proceedings. This includes guaranteeing all parties an equal opportunity to present their respective cases, maintaining neutrality while guiding productive discussions, considering relevant trade customs and established business practices, and acknowledging any prior agreements or existing relationships between the parties. Ultimately, a competent conciliator ensures a fair and balanced process that encourages the parties to reach a mutually agreeable resolution.

Conciliation Not tied to Formal Legal Procedures:

As outlined in ACA Sections 66 and 67, conciliation operates independently of formal court procedures and strict legal frameworks such as the Code of Civil Procedure or the Bhartiya Sakshya Adhiniyam (BSA), 2023. This process is characterized by its flexibility, allowing discussions and negotiations to proceed without rigid documentation requirements or strict legal justifications, and its informality, enabling the exchange of proposals without strict adherence to procedural rules. Furthermore, conciliation is adaptable, allowing the process to be customized to suit the specific context and relationships of the involved parties. This informal approach promotes a more cooperative and efficient route to resolution when compared to traditional litigation, which is bound by strict legal protocols.

A Conciliation Settlement Can Be Turned into an Arbitral Award:

As per ACA Section 74, a settlement agreement reached through conciliation can be transformed into an arbitral award, thereby gaining legal enforceability under arbitration laws. This conversion offers several advantages, including enhanced finality to the agreement, reducing the likelihood of future disputes, and providing the settlement with the legal weight of a court judgment, which simplifies its enforcement. Ultimately, this process allows for a structured and legally recognized resolution without the necessity of engaging in traditional court litigation, significantly strengthening the legal power and practical impact of the settlement agreement.

Difference Between Settlement Agreement and Arbitral Award:

As indicated in ACA Sections 73 and 74, a settlement agreement in conciliation is a documented resolution reached directly by the disputing parties through their voluntary participation, functioning as a contract rather than a judicially imposed decision. In contrast, an arbitral award is a binding determination issued by an arbitrator, akin to a court judgment but rendered outside the traditional court system, based on legal arguments and presented evidence rather than solely on mutual agreement. The fundamental distinction lies in the origin of the resolution: settlement agreements arise from the consensus of the parties themselves, whereas arbitral awards are imposed by a neutral third party to resolve the underlying dispute.

Written By: Md.Imran Wahab, IPS, IGP, Provisioning, West Bengal
Email: [email protected], Ph no: 9836576565