Conciliation: What It Is, and How Proceedings Begin
Chapter Fifty-One
Syllabus topic 3.2, "Conciliation"
Pages 259 to 263 of 377
In one line
Conciliation is a neutral third person helping two parties reach their own settlement, and in India it has a complete statutory code of its own in Part III of the arbitration Act.
In exam wording: Part III of the Arbitration and Conciliation Act 1996, sections 61 to 81, applies to the conciliation of disputes arising out of legal relationships, whether contractual or not, section 62 governing the commencement of proceedings and sections 63 and 64 the number and appointment of conciliators.
What conciliation is, and how it differs from what surrounds it
Conciliation is a process in which a neutral third person, the conciliator, assists the parties to reach an amicable settlement of their dispute. The conciliator decides nothing. Whatever emerges is what the parties themselves agree.
Set that against the two things it is most often confused with.
Against arbitration. An arbitrator adjudicates: he hears both sides and makes an award that binds them whether they like it or not. A conciliator cannot impose anything. Chapter 10 makes the general distinction.
Against mediation. This is harder in India than elsewhere, and chapter 590 works it through properly. In the international literature a mediator is often described as purely facilitative, helping the parties talk, while a conciliator may be more active and propose terms. Indian law reflects that: section 67(4) expressly permits a conciliator to make proposals for a settlement at any stage. But the two words have also been used interchangeably in Indian statutes for decades, so do not build too much on the label alone.
The reason Part III matters is that it makes conciliation worth doing. A settlement reached in an unstructured negotiation is a contract; a settlement reached under Part III has, by section 74, the same status and effect as an arbitral award on agreed terms, which means it is enforceable as a decree. Chapter 570 works that through.
Section 61: what Part III applies to
Section 61(1): save as otherwise provided by any law for the time being in force and unless the parties have otherwise agreed, this Part shall apply to conciliation of disputes arising out of legal relationship, whether contractual or not, and to all proceedings relating thereto.
Section 61(2): this Part shall not apply where by virtue of any law for the time being in force certain disputes may not be submitted to conciliation.
Three points.
"Whether contractual or not" matches section 7(1) for arbitration agreements. The relationship need not be a contract.
"Unless the parties have otherwise agreed" makes Part III a default code. Parties may adopt their own conciliation rules, or an institution's.
Section 61(2) is the conciliation counterpart of section 2(3), chapter 250. Just as some disputes cannot be arbitrated, some cannot be conciliated, and the Act defers to other laws rather than making its own list.
Conciliation: What It Is, and How Proceedings Begin
Section 62: how a conciliation starts
This is the section most likely to be tested on its detail, because it contains a rule with a number in it.
Section 62(1): the party initiating conciliation shall send to the other party a written invitation to conciliate under this Part, briefly identifying the subject of the dispute.
Section 62(2): conciliation proceedings shall commence when the other party accepts in writing the invitation to conciliate.
Section 62(3): if the other party rejects the invitation, there will be no conciliation proceedings.
Section 62(4): if the initiating party does not receive a reply within thirty days from the date on which he sends the invitation, or within such other period of time as specified in the invitation, he may elect to treat this as a rejection, and if he so elects he shall inform the other party in writing accordingly.
Four things to carry away, and each is a fair question.
Conciliation is wholly consensual at the outset. It commences on written acceptance. Contrast arbitration, where a party bound by an arbitration agreement can be compelled: section 8 makes the court refer them.
Silence is not consent. Under sub-section (4) the initiator may elect to treat thirty days' silence as a rejection. Note the word: it is an election, not an automatic lapse, and having elected he must inform the other party in writing.
The thirty days can be varied by specifying another period in the invitation.
Contrast section 21, chapter 320. An arbitration commences when the request is received by the respondent, whatever he thinks of it. A conciliation commences only when the invitation is accepted in writing. The difference is the difference between adjudication and settlement.
Section 63: how many conciliators
Section 63(1): there shall be one conciliator unless the parties agree that there shall be two or three conciliators.
Section 63(2): where there is more than one, they ought, as a general rule, to act jointly.
Compare section 10 for arbitrators, chapter 270. There the number must not be even and the default is a sole arbitrator. Here two conciliators are expressly permitted, because a conciliator does not decide anything and so cannot deadlock. That contrast is worth a sentence in an answer: the odd-number rule exists only where somebody has to decide.
"Ought, as a general rule, to act jointly" is unusually soft language for a statute, and deliberately so.
Section 64: appointing them
Section 64(1), subject to sub-section (2):
Conciliation: What It Is, and How Proceedings Begin
- (a) with one conciliator, the parties may agree on the name of a sole conciliator;
- (b) with two conciliators, each party may appoint one;
- (c) with three conciliators, each party may appoint one and the parties may agree on the name of the third, who shall act as the presiding conciliator.
Section 64(2): parties may enlist the assistance of a suitable institution or person in connection with the appointment of conciliators, and in particular:
- a party may request such an institution or person to recommend the names of suitable individuals to act as conciliator; or
- the parties may agree that the appointment of one or more conciliators be made directly by such an institution or person.
In recommending or appointing, the institution or person shall have regard to such considerations as are likely to secure the appointment of an independent and impartial conciliator and, with respect to a sole or third conciliator, shall take into account the advisability of appointing a conciliator of a nationality other than the nationalities of the parties.
Notice what is absent. There is no section 11 for conciliation: no power in a court to appoint a conciliator when the parties cannot agree. That is not an oversight. Arbitration produces a binding award, so the process must be capable of going forward against an unwilling party; conciliation produces only what the parties accept, so there is nothing to force.
The nationality provision echoes section 11(9), and the independence and impartiality language echoes section 11(8) and section 12.
Conciliation and arbitration, started side by side
| Arbitration, Part I | Conciliation, Part III | |
|---|---|---|
| Basis | An arbitration agreement, section 7 | An invitation accepted in writing, section 62 |
| Can it be forced on a party | Yes, section 8 | No; rejection ends it, section 62(3) |
| Commences | When the request is received, section 21 | When the invitation is accepted in writing, section 62(2) |
| Silence | Does not stop the arbitration | May be elected to be a rejection after thirty days, section 62(4) |
| Number | Not an even number; default one, section 10 | One, unless the parties agree on two or three, section 63 |
| If the parties cannot agree on the neutral | The court appoints, section 11 | No such power; an institution may assist, section 64(2) |
| Outcome | An award, binding whether or not accepted | A settlement agreement, only if the parties sign it, section 73 |
A worked example
A supplier and a hospital are in dispute over an equipment contract. There is no arbitration clause. On 2 May the supplier's advocate sends the hospital a letter headed "Invitation to conciliate under Part III of the Arbitration and Conciliation Act 1996", identifying the dispute as non-payment for two ultrasound machines.
Conciliation: What It Is, and How Proceedings Begin
Has a conciliation commenced? Not yet. Under section 62(2) it commences only when the hospital accepts in writing.
The hospital says nothing for six weeks. Under section 62(4) the supplier, having received no reply within thirty days, may elect to treat the silence as a rejection, and if he so elects he shall inform the hospital in writing. It is an election: he could equally wait.
The hospital then writes accepting. The conciliation commences on that acceptance.
How many conciliators? One, under section 63(1), unless they agree on two or three. Suppose they agree on two: that is permitted here, though it would be forbidden for arbitrators by section 10(1). Under section 64(1)(b) each party appoints one.
They cannot agree on a name for a sole conciliator. There is no court to go to. Under section 64(2) they may ask a suitable institution or person to recommend names, or agree that the institution appoint directly, and that institution must have regard to what will secure an independent and impartial conciliator.
Could the supplier have forced the hospital into conciliation? No. A rejection ends the matter under section 62(3). Contrast an arbitration clause, which would have let it apply under section 8 or section 11.
What beginners get wrong
A conciliation cannot be forced on anybody. Section 62(3), and there is no section 11 equivalent.
It commences on written acceptance, not on sending the invitation. Contrast section 21.
Thirty days' silence is not automatically a rejection. The initiator must elect and must inform in writing.
Two conciliators are allowed, unlike two arbitrators.
Part III is a default code. It applies unless the parties otherwise agree, and not at all where another law forbids conciliation of the dispute.
Quick revision
- 61(1): Part III applies to conciliation of disputes arising out of legal relationships, whether contractual or not, save as otherwise provided by law and unless the parties otherwise agree. 61(2): not where another law forbids submission to conciliation.
- 62: a written invitation briefly identifying the subject; proceedings commence on written acceptance; rejection ends it; thirty days' silence, or another period specified, may be elected to be a rejection, and the election must be communicated in writing.
- 63: one conciliator unless the parties agree on two or three; where more than one, they ought as a general rule to act jointly.
- 64(1): one, by agreement; two, one each; three, one each and an agreed presiding conciliator. 64(2): an institution or person may recommend or, by agreement, appoint, having regard to independence and impartiality and, for a sole or third conciliator, to the advisability of a different nationality.
- There is no court power to appoint a conciliator.
Conciliation: What It Is, and How Proceedings Begin
Test yourself
1. When do conciliation proceedings commence? When the other party accepts the written invitation to conciliate in writing, under section 62(2). Sending the invitation is not enough.
2. The other party ignores the invitation for two months. What can the initiator do? Under section 62(4), having received no reply within thirty days of sending the invitation, or within any other period specified in it, he may elect to treat that as a rejection, and if he so elects he must inform the other party in writing.
3. Why may there be two conciliators when there cannot be two arbitrators? Because an arbitral tribunal decides, and section 29 requires a majority, so section 10(1) forbids an even number to prevent deadlock. A conciliator decides nothing, so an even number causes no difficulty, and section 63(1) permits two.
4. Who appoints a conciliator if the parties cannot agree on a name? Nobody can be compelled to. There is no equivalent of section 11. Under section 64(2) the parties may enlist a suitable institution or person to recommend names, or agree that the institution or person appoint directly.
5. Does Part III apply to every dispute? No. Section 61(1) makes it subject to any other law and to the parties' contrary agreement, and section 61(2) excludes disputes which by virtue of any law for the time being in force may not be submitted to conciliation.
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