Conciliation is a widely accepted method of Alternative Dispute Resolution (ADR) that enables parties to settle disputes amicably without resorting to formal litigation. In India, conciliation is governed by the Arbitration and Conciliation Act, 1996, particularly under Part III of the Act. It plays a crucial role in promoting speedy, cost-effective, and confidential resolution of civil and commercial disputes.
What is Conciliation?
Conciliation is a voluntary, flexible, and non-adjudicatory process where a neutral third party, known as the conciliator, helps disputing parties to arrive at a mutually acceptable settlement. Unlike arbitration, conciliation does not require a prior agreement between the parties and can be initiated at any time, even after the dispute has arisen.
Legal Framework: Arbitration and Conciliation Act, 1996
Part III: Sections 61 to 81
Conciliation is governed under Part III of the Arbitration and Conciliation Act, 1996. The Act lays down the procedure, powers of the conciliator, and the legal status of the settlement agreement.
Key Provisions Include:
- Section 61: Scope of application – applicable to disputes arising out of a legal relationship, whether contractual or not.
- Section 64: Appointment of conciliators – parties can appoint one or more conciliators by mutual consent.
- Section 73: Settlement agreement – if parties reach a settlement, it is recorded and signed.
- Section 74: Finality and enforceability – settlement agreement has the same status as an arbitral award.
Characteristics of Conciliation
- Voluntary Process: Parties must consent to conciliation.
- Neutral Third Party: The conciliator does not impose a decision but facilitates negotiation.
- Confidential Proceedings: Any information shared during conciliation cannot be disclosed or used in future litigation (Section 75).
- Flexible and Informal: No rigid procedural rules apply, making it easier to reach consensus.
- Enforceable Outcome: The final agreement is binding and has the same legal effect as a court decree.
Difference Between Conciliation and Arbitration
| Basis | Conciliation | Arbitration |
|---|---|---|
| Nature | Non-binding unless agreed | Binding adjudication |
| Role of Neutral | Facilitator of settlement | Decision-maker (Arbitrator) |
| Prior Agreement | Not required | Usually requires an arbitration clause |
| Enforceability | Binding if settlement is signed | Binding as per arbitral award |
Advantages of Conciliation
- Cost-Effective: Less expensive than litigation or arbitration.
- Time-Saving: Faster resolution process.
- Preserves Relationships: Non-adversarial nature helps maintain business and personal relationships.
- High Success Rate: Voluntary and cooperative nature enhances chances of settlement.
- Confidential: Protects sensitive information and reputation.
Legal Status of Conciliation Settlement
As per Section 74 of the Act, the settlement agreement has the same status as an arbitral award on agreed terms, and is enforceable in a court of law just like a decree. This gives parties legal certainty and encourages use of conciliation.