Section 30: Settling During an Arbitration, and the Award on Agreed Terms

In one line

An arbitrator is allowed to try to get the parties to settle, and if they do, the settlement can be turned into an award that is enforced like any other.

In exam wording: section 30 of the Arbitration and Conciliation Act 1996 provides that it is not incompatible with an arbitration agreement for an arbitral tribunal to encourage settlement of the dispute, permits the tribunal with the agreement of the parties to use mediation, conciliation or other procedures for that purpose, and provides for an arbitral award on agreed terms.

Why the section had to be written at all

The problem section 30 solves is a real one and it is worth seeing before reading the text.

An arbitrator is an adjudicator. If he starts urging the parties to settle, and hears from each of them what they might accept, he has learned things about their positions that a judge would never hear. If the settlement then fails and he goes on to decide the case, the losing party will say he was influenced by what he was told in the settlement discussions, and will attack the award for want of independence under section 12 and for breach of section 18.

So without a provision like section 30, a cautious arbitrator would never encourage settlement at all, and the parties would lose the cheapest outcome available to them.

Section 30(1): permission, and the words that matter

It is not incompatible with an arbitration agreement for an arbitral tribunal to encourage settlement of the dispute and, with the agreement of the parties, the arbitral tribunal may use mediation, conciliation or other procedures at any time during the arbitral proceedings to encourage settlement.

Take it apart.

"It is not incompatible with an arbitration agreement." This is the answer to the objection above. Encouraging settlement is not a departure from the arbitrator's role; the Act says so.

"To encourage settlement of the dispute." The tribunal may encourage. It cannot compel, and section 18 stops it pressing a party into terms.

"With the agreement of the parties." This condition attaches to the second half, the use of mediation, conciliation or other procedures. Encouraging settlement is permitted generally; actually conducting a mediation or conciliation requires the parties' agreement.

"May use mediation, conciliation or other procedures." The Act names both, and by "other procedures" leaves room for anything else that works.

"At any time during the arbitral proceedings." Early, late, or after the evidence.

This is the clearest statutory recognition in Indian law that the ADR methods are not rivals. A student asked how arbitration, conciliation and mediation relate to each other can answer from the statute: section 30 lets one proceeding use all three.