Conciliation

Posted on by user

Introduction
Conciliation is an institutionalised form of alternative dispute resolution (ADR) in which the parties, with the assistance of an impartial third person (the conciliator), seek a consensual settlement of their dispute. Unlike arbitration, conciliation does not culminate in a binding determination imposed by the third person; instead, it produces a negotiated settlement that the parties may record and enforce as a contract or have made part of a court decree. In the Indian context conciliation plays a critical role across commercial disputes, family matters, labour-industrial relations and court‑annexed dispute resolution because it saves time, preserves relationships and reduces litigation costs while remaining amenable to court scrutiny and enforcement.

Core Legal Framework
– Code of Civil Procedure, 1908 (CPC) — Section 89: provides courts with power to refer parties to alternative dispute resolution mechanisms, expressly listing conciliation among the options to settle suits outside litigation. The correct invocation of Section 89 often leads courts to direct parties to mediation/conciliation panels, court‑annexed conciliators or institutional ADR.
– Arbitration and Conciliation Act, 1996 — Part III (generally Sections 61–81): contains the statutory framework for conciliation where the parties have agreed to resolve their disputes by conciliation under the Act. Key statutory features include initiation of conciliation, conduct of conciliator, settlement agreement, and the effect of a settlement agreement (i.e., when it is reduced to writing and signed it becomes binding on the parties).
– Legal Services Authorities Act, 1987 — Sections concerning Lok Adalats (establishment and award): Lok Adalats are a statutory vehicle for settlement; awards are treated as deemed decrees and are enforceable like a civil court decree once accepted by the parties.
– Statutory conciliation machinery in labour law: The Industrial Disputes Act, 1947 and related State laws create a statutory conciliation infrastructure — conciliation officers, boards and compulsory settlement steps — which is distinct in procedure and effect from commercial conciliation under the Arbitration Act.

Practical Application and Nuances
How conciliation operates in day‑to‑day practice and how it interfaces with courts and contracts:

  1. Court‑annexed conciliation (Section 89 CPC)
  2. When to invoke: At the stage of framing of issues or even at any interlocutory stage, parties or the court may point to Section 89 and suggest conciliation. Parties frequently file a joint application requesting referral or the court frames an issue whether the suit is amenable to ADR.
  3. Procedure: Courts usually refer the matter to a court‑annexed conciliator/mediation centre or direct parties to an institutional conciliation body. The referral is often recorded; courts monitor for a fixed period and then either record the settlement and decree it or resume proceedings.

  4. Practical example: In a landlord–tenant or partition suit the court may stay proceedings for a short referral period to allow the conciliator to explore settlement — if parties agree, they submit terms and the court converts them into a consent decree. If no settlement, litigation continues.

  5. Contractual/Commercial conciliation under the Arbitration & Conciliation Act

  6. Drafting and activation: Multi‑tier clauses commonly require negotiations → conciliation → arbitration. Practitioners must ensure clear trigger events, time-limits for each tier, and an agreed procedure for appointing conciliators.
  7. Conduct: The conciliator may meet parties jointly and separately, suggest settlement terms and draft settlement agreements — but has no power to render a final award unless parties convert the settlement into an arbitral award by agreement.
  8. Enforcement: A settlement agreement, once signed, is a contract. Parties commonly incorporate an express clause permitting that, in case of non‑performance, the settlement be recorded as an arbitral award on agreed terms (where the Arbitration Act permits) or converted into a consent decree by a court or an award by a Lok Adalat (where applicable).

  9. Example: In a construction dispute, parties may use conciliation to agree milestones and release schedules; the conciliator may propose payment schedules reflecting objective assessments of performance which the parties record as a binding settlement.

  10. Labour and industrial conciliation

  11. Compulsory stage: Under labour law, conciliation by conciliation officers or boards is typically a mandatory pre‑condition to reference to adjudication. Practitioners must comply with statutory notice and conciliation steps; failure may invalidate subsequent proceedings or delay adjudication.

  12. Confidentiality and admissibility

  13. Practical rule: Conciliation communications are generally treated as confidential and “without prejudice” in practice. However, Indian law does not uniformly confer a statutory blanket privilege equivalent to evidence law protections; the scope of admissibility remains governed by the Arbitration Act, court practice and precedent. Practitioners should expressly contract for confidentiality and restrict the use of settlement negotiations in subsequent proceedings.

  14. When conciliation is unsuitable

  15. Public law or non‑negotiable statutory rights: Conciliation cannot extinguish rights of a public nature (e.g., certain regulatory or criminal sanctions) where public interest or mandatory statutory provisions prevent private compromise.
  16. Power imbalance and urgency: Where interim relief, freezing orders or injunctions are necessary, parties should first secure protection from courts before engaging in conciliation. In cases of coercion, fraud, or where one party lacks capacity, conciliation outcomes may be set aside.

Landmark Judgments
Note: Conciliation is treated within the broader ADR jurisprudence of the Supreme Court; courts have repeatedly emphasised the desirability of settlement by ADR while guarding against compulsion and protecting procedural fairness.

  1. S. R. Bommai & Ors. v. Union of India — while not an ADR case per se, the Supreme Court has emphasised judicial encouragement of amicable settlement in appropriate matters (principle: courts should, where possible, facilitate settlement and relieve court burden). (Use as guiding principle — for ADR, the court’s duty to explore settlement is routinely recognised.)
  2. Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. Pvt. Ltd., (Supreme Court) — this and subsequent decisions on multi‑tier dispute resolution clauses illustrate that courts will give effect to contractual dispute resolution sequences (negotiation → conciliation → arbitration) if parties have agreed upon them, but courts will not permit artful delay of adjudication where interim relief is needed. The principle: multi‑tier clauses are enforceable if they are clear, and courts will respect the parties’ agreed pathway to conciliation/arbitration.
  3. ONGC Ltd. v. Western Geco International Ltd. / Saw Pipes Ltd. (indicative jurisprudence) — shows judicial insistence that parties cannot avoid jurisdictional consequences by tactical litigation if the dispute falls squarely within agreed ADR procedures; yet courts retain jurisdiction to protect interim rights.

(Practitioners should consult up‑to‑date case law for recent Supreme Court rulings that directly address procedural defaults in conciliation and the enforceability of settlement agreements since jurisprudence in this area has evolved.)

Strategic Considerations for Practitioners
1. Drafting tips for conciliation clauses
– Be explicit about the sequence (negotiation → conciliation → arbitration), time limits for each stage, seat and governing law of conciliation, confidentiality, method of appointing conciliator(s) and whether the conciliator can propose terms.
– Include a mechanism to convert an agreed settlement into an arbitral award or consent decree (e.g., “if settlement is reached, the parties agree that such settlement shall be recorded as an arbitral award on agreed terms under the Arbitration and Conciliation Act, 1996” or “the parties shall apply to court for a consent decree”).

  1. Choosing and appointing the conciliator
  2. Choose conciliators with domain expertise and forensic credibility. In commercial disputes an ex‑judge or senior counsel may be persuasive; in technical disputes, an industry expert helps craft workable solutions.

  3. Agree an appointment procedure (institutional admin vs party‑nominated vs court appointed) and disclosure requirements to avoid later challenge on impartiality.

  4. Managing evidentiary posture

  5. Preserve rights: Before conciliation starts, secure any urgent interim relief required (injunction, preservation, urgent interim arbitration relief). Avoid creating waiver by conduct — include explicit reservation of rights in the conciliation initiation notice.

  6. Document the process: Even though negotiations are confidential, maintain a careful record of proposals and agreed terms so that, once settlement is reached, it can be crisply drafted and signed.

  7. Turning settlement into enforceable relief

  8. Preferred routes: (a) record settlement as a consent decree before the court (most commonly used in civil litigation); (b) convert settlement into an arbitral award on agreed terms under the Arbitration Act (where parties have agreed); (c) seek enforcement as a contractual obligation in a civil suit; (d) get it recorded as an award by a Lok Adalat, where permissible.

  9. Pitfall: relying on the conciliator’s informal note rather than a properly executed settlement instrument can create enforcement problems. Ensure formal signature, witness, and clear performance mechanics (timelines, milestones, escrow arrangements, security).

  10. Ethical and tactical considerations

  11. Avoid over‑reliance on conciliator’s proposals as determinative; parties must retain agency over final terms.
  12. Beware of “roofing” — i.e., allowing conciliation to be used as delay tactic. If the other side uses conciliation to stall, document bad faith and be ready to ask the court to continue adjudication.
  13. If counsel intends to use evidence gathered during conciliation later, understand admissibility rules and preserve alternative paths to obtaining evidence legitimately.

Common Pitfalls to Avoid
– Vague conciliation clauses: Ambiguity about whether conciliation is mandatory or directory leads to litigation and delay.
– No confidentiality clause: Without express confidentiality, sensitive negotiation positions may be exposed in later proceedings.
– Failure to secure interim relief first: If the dispute involves risk of dissipation, do not rely solely on conciliation to protect assets.
– Poorly drafted settlement terms: Omitting enforcement mechanisms, timelines, remedies for breach, and escrow/trust structures renders settlements difficult to implement.
– Ignoring statutory bars: Do not attempt to conciliate matters barred from private settlement by statute (public interest litigation, certain family law issues, criminal offences where parties cannot compound offences).

Conclusion
Conciliation is a pragmatic, flexible and widely used ADR mechanism in India. Statutory anchors — Section 89 CPC and Part III of the Arbitration and Conciliation Act, 1996 — empower courts and parties to resolve disputes out of court while preserving enforceability. For practitioners, success in conciliation turns on meticulous clause drafting, strategic sequencing (protective interim relief first), careful selection of conciliators, explicit confidentiality and conversion of settlements into enforceable instruments. Properly managed, conciliation preserves commercial relationships, reduces litigation costs and achieves outcomes that courts or arbitral tribunals may be ill‑placed to fashion.