Stages and procedure of conciliation under Part III

1. Status of Part III in 2026

Part III (sections 61 to 81) of the Arbitration and Conciliation Act, 1996 still governs conciliation. Section 61 of the Mediation Act, 2023 read with its Sixth Schedule would replace sections 61 to 81 with two sections that treat conciliation as mediation under that Act and save pending conciliations. Section 61 of the Mediation Act was not among the sections brought into force on 9 October 2023, and a later notification could not be confirmed. Answer from Part III and mention the pending change in a line.

2. The stages

• Stage 1: invitation (section 62). The party initiating conciliation sends a written invitation briefly identifying the dispute. Proceedings commence when the other party accepts in writing. A rejection means no conciliation. If no reply comes within 30 days (or the period stated), the initiator may treat it as a rejection and must inform the other party in writing.
• Stage 2: number and appointment (sections 63 and 64). One conciliator unless the parties agree on two or three, who should generally act jointly. With one, the parties agree on the name; with two, each appoints one; with three, each appoints one and they agree on the presiding conciliator. An institution or person may recommend names or appoint directly.
• Stage 3: statements (section 65). The conciliator may ask each party for a brief written statement of the general nature of the dispute and the points at issue, then a further statement of position with documents, each copied to the other side, and any additional information.
• Stage 4: conduct (sections 66 to 72). The conciliator is not bound by the CPC or the Evidence Act (section 66). He conducts the process as he considers appropriate (section 67), may arrange administrative assistance (section 68), may meet or communicate with the parties together or separately (section 69(1)), discloses factual information except what is given in confidence (section 70), and receives suggestions from the parties (section 72). The parties must co-operate in good faith (section 71).
• Place (section 69(2)). Unless the parties have agreed on the place of meetings, the conciliator determines it after consulting the parties, having regard to the circumstances.
• Stage 5: formulation of terms (section 73(1)). When elements of a settlement acceptable to the parties appear, the conciliator formulates terms of a possible settlement, submits them for observations, and may reformulate them.
• Stage 6: settlement agreement (section 73(2) to (4)). If the parties agree, they may draw up and sign a written settlement agreement, with the conciliator's help if asked. When they sign it, it is final and binding on them and persons claiming under them. The conciliator authenticates it and gives each party a copy.
• Stage 7: status (section 74). The settlement agreement has the same status and effect as an arbitral award on agreed terms under section 30. It is enforceable as a decree under section 36 and can be challenged only as an award can.

3. Termination (section 76)

Conciliation proceedings terminate:

• (a) by the signing of the settlement agreement, on its date;
• (b) by the conciliator's written declaration, after consulting the parties, that further efforts are no longer justified;
• (c) by the parties' written declaration to the conciliator that the proceedings are terminated; or
• (d) by one party's written declaration to the other and to the conciliator that the proceedings are terminated.

Non-payment of deposits within 30 days also allows the conciliator to suspend or terminate (section 79(3)).

4. Other provisions

• No parallel proceedings (section 77): during conciliation the parties shall not initiate arbitral or judicial proceedings on the same dispute, except where a party considers them necessary for preserving his rights (for example, to stop limitation running or to obtain urgent interim relief).
• Costs (section 78): fixed by the conciliator on termination and borne equally unless the settlement provides otherwise; each party bears its own other expenses.
• Deposits (section 79): equal advances from each party.
• Confidentiality (section 75) and inadmissibility (section 81) of views, admissions and proposals made in conciliation.
• Conciliator in other proceedings (section 80): not to act as arbitrator, counsel or witness on the same dispute unless the parties agree.

5. The cases

• Haresh Dayaram Thakur v. State of Maharashtra, 2000 INSC 296, (2000) 6 SCC 179. Conciliators drew up terms of settlement which the parties had not signed, and these were treated as an award. The Court held that a successful conciliation ends only when a settlement agreement signed by the parties comes into existence; only such an agreement has the status of an arbitral award. Where a statute prescribes a procedure, the thing must be done in that way or not at all.
• Mysore Cements Ltd. v. Svedala Barmac Ltd., 2003 INSC 166, (2003) 10 SCC 375. A “memorandum of conciliation” and letter recorded during conciliation, while facts were still in dispute, did not fulfil the requirements of section 73 and could not be executed as an award under section 74.

6. Problems

(a) A dispute between A and B is settled through conciliation, but B refuses to sign the settlement agreement. Advise. (November 2021)

Issue. Whether an unsigned conciliated settlement binds B. Law. Section 73(2) and (3): a settlement is final and binding only when the parties sign it; section 74 gives that signed agreement the status of an award; section 76(a) ends the proceedings on signing. Haresh Dayaram Thakur and Mysore Cements insist on strict compliance. Application. However complete the oral understanding, B has not signed. There is no settlement agreement within section 73, nothing with the status of an award, and nothing to execute under section 36. The proceedings have not terminated under section 76(a); A may ask the conciliator to resume, or either party may terminate by written declaration under section 76(d). What B said during conciliation cannot be used against him later (section 81). Conclusion. A cannot enforce the settlement. He may continue conciliation or, after it ends, start arbitration (if there is an agreement) or a suit.

(b) Rakesh and Ramesh have appointed a conciliator and proceedings are in progress. Rakesh now wishes to go to court on the same dispute. Advise Rakesh. (December 2018)

Law. Section 77 bars either party from initiating judicial or arbitral proceedings on the same dispute during conciliation, except where he considers it necessary to preserve his rights. Section 76(d) lets a party terminate by written declaration. Advice. Rakesh should not file a suit while conciliation is pending unless it is needed to preserve his rights, for example because limitation is about to expire or he needs an urgent injunction. Otherwise his proper course is first to send a written declaration to Ramesh and the conciliator terminating the conciliation under section 76(d), and then to sue. Nothing disclosed in the conciliation can be used in the suit (section 81).

(c) Nagesh and Umesh have appointed a conciliator, but cannot agree on where the proceedings should be held. Advise. (December 2018)

Law and advice. Section 69(2): unless the parties have agreed on the place of meetings, the conciliator determines it after consultation with the parties, having regard to the circumstances of the proceedings. Section 69(1) also lets him meet them separately or communicate in writing, so the disagreement need not stall the process. The conciliator will fix the place; if either party finds it unacceptable, he may end the conciliation under section 76(d).

How this is examined

“Termination of conciliation” (short note, June 2019), “stages of conciliation” and “procedure” are answered from sections 62 to 76 in order. The three problems above recur in almost every paper; each is solved by naming the section (73, 77 or 69) and applying it, with Haresh Dayaram Thakur for the signature point.