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The Arbitration and Conciliation Act, 1996, as the name itself suggests, deals with two types of proceedings; domestic arbitration and conciliation proceedings. While provisions relating to domestic arbitration are contained in Part 1 which includes Sections 1 to 43, the conciliation proceedings which includes Sections 61 to 81 (Part II deals with enforcement of foreign awards). On perusal of the provisions of the Act, it is apparent that there is a clear distinction in the statute between arbitration proceedings and conciliation proceedings.
Conciliation’, as defined in Halsbury’s Laws of England, “Is a process of persuading parties to reach an agreement, and is plainly not arbitration, nor is the chairman of a Conciliation Board an arbitrator.”
Conciliation undoubtedly is the most commonly accepted form of alternative dispute resolution mechanism. It is essentially a non-judicial power as against arbitration which may be in a judicial or non-judicial form. Briefly speaking conciliation may be defined as a process of setting of disputes without recourse to Court of law or litigation.
Meaning Of Conciliation
Briefly stated, conciliation means any third party assisted alternate dispute resolution (ADR) approach. He discusses the details of the dispute with the parties and on the basis of facts collected, he himself draws up and proposes a solution, which in his opinion is most fair and reasonable. It differs from mediation, the mediator only assists the parties to resolve their dispute without, however, himself drawing up a solution. It is far less informal than the process of conciliation.
Conciliation is generally a voluntary process and discussions made in the process of conciliation are not binding on the parties unless the parties themselves agree to treat as binding. It is an (ADR) process of settling the dispute outside the Court.
Features Of Conciliation
The main features of conciliation under the Arbitration and Conciliation Act, 1996 are as follows:
- The process is non-adversary in nature there being no plaintiff or defendant or claimant or opposite party.
- It is voluntary in nature, depending on parties to agree or not to agree with the solution drawn up by the conciliator.
- The conciliator has discretion to decide the procedure so as speedy and less expensive disposal of the dispute. Thus it is fairly flexible.
In conciliation, the causes of dispute or differences are first identified and then resolved by the conciliator thus protecting the interests of the parties. The process of conciliation being flexible and more or less informal, the parties readily agree to get their disputes resolved through this method. When the parties enter upon conciliation and reach an agreement on a settlement of dispute, the agreement so reached has the status and effect as if it was an arbitral award. The Act also provides confidentiality in respect of all matters in the conciliation proceedings.
Application & Scope Of Conciliation In India
Section 61 of the Arbitration and Conciliation Act of 1996, provides for the Application and Scope of Conciliation.
Section 61 points out that the process of conciliation extends, in the first place, to disputes, whether contractual or not. But the disputes must arise out of the legal relationship. It means that the dispute must be such as to give one party the right to sue and to the other party the liability to be sued. The process of conciliation extends, in the second place, to all proceedings relating to it.
But Part III of the Act does not apply to such disputes as cannot be submitted to conciliation by the virtue of any law for the time being in force.
Appointment Of Conciliators
Section 64 deals with the appointment of the conciliators.
Where the parties agree to take recourse to conciliation with one conciliator, the conciliator so appointed will be called the sole conciliator and he will be named by the parties themselves. When the parties prefer conciliation proceedings to be conducted by two conciliators, each party may appoint (name) one conciliator. However, where the parties opt for conciliation by three conciliators, each party may appoint one conciliator and both the parties may agree upon the name of the third conciliator who shall act as the presiding conciliator.
Section 64 sub section 2, also provides for institutional appointment of conciliators, that is, the parties may seek the assistance of suitable institutions or persons for appointment of conciliator/conciliators, if they so desire. The institutions would maintain a panel of skilled negotiators who have special expertise in different fields so that they may make the services of well qualified conciliators available to the parties needing their assistance for appointment of suitable persons as conciliators
In case of sole or third conciliator’s appointment, the appointing institution has to take into consideration the advisability of appointing a person of a nationality other than the nationalities of the parties in dispute. This proviso is intended to ensure impartiality and independence of the conciliator.
Number & Qualification Of Conciliators–
Section 63 fixes the number of conciliators. There shall be one conciliator. But the parties may by their agreement provide for two or three conciliators. Where the number of conciliators is more than one, they should as general rule act jointly.
Principles of Conciliation Procedure
Independence And Impartiality– Section 67(1)
According to it the conciliator should be independent and impartial. He should assist the parties in an independent and impartial manner while he is attempting to reach an amicable settlement of their dispute.
Fairness and justice- Section 67(2)
According to it the conciliator should be guided by the principles of fairness and justice. He should take into consideration, among other things, the rights and obligations of the parties, the usages of the trade concerned, and the circumstances surrounding the dispute including any previous business practices between the parties.
Confidentiality- Section 70
According to it the conciliator and the parties are duly bound to keep confidential all matters relating to conciliation proceedings. Similarly when a party gives information to the conciliator on the condition that it be kept confidential, the conciliator should not disclose that information to the other party.
Disclosure Of The Information– Section 70
According to it when the conciliator receives information about any fact relating to the dispute from a party, he should disclose the substance of that information to the other party. The purpose of this provision is to enable the other party to present an explanation which he might consider appropriate.
Co-operation Of The Parties With Conciliator– Section 71
According to it the parties should in good faith cooperate with the conciliator. They should submit the written materials, provide evidence and attend meetings when the conciliator requests them for this purpose.
Procedure Of Conciliation
Commencement of the conciliation proceedings– Section 62
According to it the conciliation proceedings are initiated by one party sending a written invitation to the other party to conciliate. The invitation should identify the subject of the dispute. Conciliation proceedings are commenced when the other party accepts the invitation to conciliate in writing. If the other party rejects the invitation, there will be no conciliation proceedings. If the party inviting conciliation does not receive a reply within thirty days of the date he sends the invitation or within such period of time as is specified in the invitation, he may elect to treat this as rejection of the invitation to conciliate. If he so elects he should inform the other party in writing accordingly.
Submission of Statement to Conciliator- Section 65
According to it the conciliator may request each party to submit to him a brief written statement. The statement should describe the general nature of the dispute and the points at issue. Each party should send a copy of such a statement to the other party. The conciliator may require each party to submit to hima further written statement of his position and the facts and grounds in its support. It may be supplemented by appropriate documents and evidence. The party should send the copy of such statements, documents and evidence to the other party. At any stage of the conciliation proceedings, the conciliator may request a party to submit to him any additional information which he may deem appropriate.
Conduct of Conciliation Proceedings- Section 69(1) and 67(3)
According to it the conciliator may invite the parties to meet him. He may communicate with the parties orally or in writing. He may meet or communicate with the parties together or separately. In the conduct of the conciliation proceedings, the conciliator has some freedom. He may conduct them in such a manner as he may consider appropriate. But he should take in account the circumstances of the case, the express wishes of the parties, a party’s request to be heard orally and the need for speedy settlement of the dispute.
Administrative assistance- Section 68
It facilitates administrative assistance for the conduct of conciliation proceedings. Accordingly, the parties and the conciliator may seek administrative assistance by a suitable institution or the person with the consent of the parties.
Difference Between Conciliation and Arbitration
Though like arbitration, conciliation is also another means of settling disputes, the two differ in many vital aspects. The only similarity that appears between the two is that a ‘third person’ is chosen or nominated by the parties to resolve their disputes.
Russel, in his Book on Arbitration has brought out the distinction between functioning of an arbitrator and conciliator in the following words:-
“An arbitrator is not a conciliator. He cannot ignore the law, or misapply it in order to do what he thinks is just and reasonable. Unlike a conciliator, an arbitrator, is a tribunal constituted by parties to decide disputes in accordance with the law.”
The main points of difference between arbitration and conciliation may be stated as follows:
- In case of arbitration, a prior ‘agreement in writing to submit to arbitration disputes which have arisen or which may arise in future, is necessary. But conciliation may be resorted to without the existence of such prior agreement and it generally relates to disputes which have already arisen.
- As a corollary of this, it follows that there being a prior arbitration agreement between the parties, both of them are bound by the agreement. But in case of conciliation, since a written invitation is made by one party, the other party may or may not accept the same.
- While the role of conciliator is to help and assist the parties to reach an amicable settlement of their dispute, the arbitrator does not merely assist the parties but he also actively arbitrates and resolves the dispute by making an arbitral award.
- In case of conciliation a party may require the conciliator to keep the factual information confidential and not disclose it to the other party, but it is not so in arbitration as the information given by a party is subjected to scrutiny by the other party. Thus there is no question of confidentiality in case of arbitration awards.
- A settlement agreement may be made by the parties themselves and the conciliator shall authenticate the same. An arbitration award on the other hand, is not merely a settlement agreement but it is a judgment duly signed by the arbitrator.
- The conciliation proceedings may be unilaterally terminated by a written declaration by a party to the other party and the conciliator, but arbitration proceedings cannot be so terminated.
- Conciliator is subjected to certain disabilities under Section 80 of the Act and he cannot act as arbitrator or as a council or a witness in any arbitral or judicial proceedings but there are no such disabilities imposed on an arbitrator or parties to arbitral proceedings.
- The arbitration proceedings or awards may be used as evidence in any judicial proceedings but the conciliation proceedings cannot be used as evidence in any arbitral or judicial proceedings.
- Last but not the least, an arbitrator has to decide according to law, but a conciliator can conciliate irrespective of law.
The introduction of conciliation as a means of alternate dispute resolution in the Act is definitely a positive step towards encouraging parties to opt for it. Taking into consideration the time, effort and money involved in pursuing cases before a court or an arbitrator in India, conciliation should act as the perfect means for resolving disputes, especially those of commercial nature.
Hence, parties should prior to initiating arbitration or judicial proceedings, opt for conciliation as a means for resolving disputes. In case conciliation proceedings fail, only then should the disputants look at arbitration or litigation.