CONCILIATION AS A MECHANISM FOR THE RESOLUTION OF BUSINESS DISPUTES

ABSTRACT

All alternative dispute resolution mechanisms are based on party autonomy. Conciliation is one such mechanism wherein an independent and impartial third party enables the disputants to arrive at a settlement. Unlike mediation, the neutral conciliator proposes solutions and persuades the disputants to reach a mutual and friendly agreement. This process is voluntary, flexible, confidential and time-and-cost-effective as opposed to the cumbersome and much delayed litigation process. This article argues in favour of conciliation as a means for settlement of business disputes, and it summarises the statutory provisions relating to conciliation in India.

Keywords: Voluntary, State forums, Compoundable offences, Multi-tier dispute resolution.

INTRODUCTION

Business disputes are disputes in which one of the disputant parties is a business entity. It is not limited only to contractual disputes but also includes matters relating to environment, antitrust, offences committed by the business entity etc. Business dispute is usually time-sensitive, involves large amount of money and parties intend to continue doing transactions with each other. Litigation is not an effective mechanism to tackle the above-mentioned concerns making it difficult for the entity to carry out its business with the baggage of unresolved disputes.

Conciliation could effectively resolve disputes relating to infrastructure projects, labour & employment, consumer complaints, intellectual property, insolvency, insurance, investment, service including trans-border transactions, environment, antitrust, defamation, taxation, etc.

STATUTORY PROVISIONS

The United Nations Commission on International Trade Law (UNCITRAL) Rules on Conciliation, 1980 recognized the potentiality of conciliation in promoting amicable international commercial relations and suggests adoption of uniform conciliation rules by countries for development of harmonious economic relations.

The Arbitration and Conciliation Act, 1996[1]based on UNCITRAL Model Arbitration law and Conciliation Rules is the first instrument in India to provide proper legislative framework and statutory backing to conciliation as a mode of ADR. The term ‘Conciliation’ is not defined by the Act. Part III highlights that the proceedings are non-adversary, non-adjudicatory, voluntary, flexible and that the proposals are recommendatory.

The Act covers both domestic and international conciliation. International conciliation under the Act only relates to those of commercial nature and at least one of the disputant party is a foreign party (foreign national, company incorporated outside India or any foreign government). The conciliator is appointed by the parties. The role of the conciliator is to support the parties in exploring options and he can make proposals for settlement at any stage of the proceedings but cannot impose them on the parties. It is not necessary to have a conciliation clause in the agreement for parties to enter into conciliation. The parties may engage in the conciliation process even during the pendency of arbitral/court proceedings, but Section 77 disallows parties to opt for arbitral/court proceedings amidst conciliation proceedings without terminating the same. The parties are free to opt for arbitral/court proceedings in case of failure to enter into a settlement agreement. A settlement agreement which satisfies the pre-requisites of Section 73 has the effect of an arbitral award.[2] A settlement agreement drawn in secret without signature of the parties is untenable.[3]

The Civil Procedure Code, 1908[4](CPC) also allows the court to refer pending cases to conciliation. Section 89 and Rules 1A,1B and 1C of Order X of CPC enables the court to refer the case to conciliation where it appears that there exist elements of settlement with the consent of the parties, the court may formulate ‘terms of settlement’ before such referral. The dispute is summarised in the ‘terms of settlement’.[5] The provisions of Arbitration and Conciliation Act, 1996 apply to the conciliation process. If the conciliation proceedings succeed and parties enter into a settlement, the court has to first record the settlement and pass the decree in terms thereof and if necessary, execute it in accordance with law and the suit is disposed. If the parties do not want the court to record a settlement and pass a decree and feel that the settlement can be implemented even without decree, nothing prevents them from informing the court that the suit may be dismissed as the dispute has been settled between the parties outside the court.In case of failure to arrive at settlement, the matter returns to the Court for framing of issues and trial.

Conciliation Forums constituted by State: In addition to ad hoc conciliators appointed by the parties, there are specific conciliation forums established by State.

With regard to company-related disputes such as contentious interpretations of shareholder rights in newly formed joint ventures, disputes arising out of rescission/cancellation of contracts, issues arising out of enforcement of foreign judgements and awards in India etc; Section 442 of the Companies Act, 2013[6] provides for Mediation and Conciliation panel and published the Companies (Mediation and Conciliation) Rules, 2016. The Rules also lists disputes/matters that cannot be referred to mediation and conciliation: Matters in respect of inspection, investigation or inquiry under Companies Act, 2013; defaults/offences for which applications for compounding have been made by one or more parties; serious and specific allegations of fraud, fabrication of documents forgery, impersonation, coercion etc.; prosecution for criminal and non-compoundable offences; or cases involving public interest or interest of numerous persons who are not parties before the government administrator or tribunal as the case may be.[7]

Section 32 (g) of the Real Estate (Regulation and Development) Act 2016[8],provides for measures to be taken by the authority to facilitate conciliation between the promoters and the allottees through dispute settlement forums set up by the consumer or promoter associations. In furtherance, conciliation cells have been set up by Karnataka, Maharashtra, Uttar Pradesh etc.

The Industrial Disputes Act, 1947 also provides for Conciliation officers appointed by Government to settle industrial disputes.[9] The Family Court Act, 1984 provides for appointment of permanent counsellors to enforce settlement decisions in the family matters.[10] Section 9 of the Act imposes an obligation on the court to make effort for the settlement before taking evidence in the case.

Further, the Legal Services Authorities Act, 1987[11] encourages settlement by way of conciliation, provides that a settlement before a Lok Adalat is enforceable as a court decree. The Commercial Courts Act, 2015[12] and the Consumer protection Act, 2019[13]promotes mediation as a settlement mechanism.

Conciliation in Criminal Cases: Conciliation can be used in resolving compoundable criminal offences committed by a business entity. Delhi High Court has laid down guidelines to allow conciliation in cases which is either compoundable or one respecting which there would be no inhibition felt by the High Court in exercise of its inherent power under Section 482 of Criminal Procedure Code, 1973. Thus, criminal cases which are compoundable can be conciliated provided that the respective High court has not barred the same.

CONCLUSION

With regard to Government-related disputes, it is preferable to suggest conciliation/have a conciliation clause in the contract. Moreover, the regulatory boards such as Securities and Exchange Board, Telecom Regulatory Authority, Electricity regulatory commissions etc. can also adopt conciliation mechanisms for dispute resolution. The tribunal setup to adjudicate issues relating to these regulators can also direct the parties to conciliation. High Courts making rules regarding conciliation will also be a way forward to promote conciliation and free the judiciary from the overburdening of suits/complaints.

Majority of the commercial contracts contain clause relating to invocation of arbitration mechanism or approaching the court to settle disputes. As of now, conciliation is not is mechanism preferred by business entities. Contracts containing adoption of conciliation/mediation mechanism as a precursor to arbitration/litigation ie. a Multi-tier dispute resolution mechanism involving expert determination and early neutral evaluation will prove effective.

REFERENCES

Books

  1. Dr. N. V. Paranjape, Law relating to Arbitration and Conciliation in India [7th ed. 2016].
  2. Dr. Avtar Singh, Arbitration and Conciliation law [9th ed. 2009].

Statutes

  1. The Arbitration and Conciliation Act, No. 26 of 1996, India Code§61-§81.
  2. The Companies Act, No. 18 of 2013, India Code§442.
  3. Civil Procedure Code (Amendment) Act, No. 46 of 1999, India Code§89.
  4. Real Estate (Regulation and Development) Act, No. 16 of 2016, India Code§32(g).
  5. The Industrial Disputes Act, No. 14 of 1947, India Code§4, §12, §12A.
  6. The Family Court Act, No. 66 of 1984, India Code§4, §5, §6.
  7. The Legal Services Authorities (Amendment) Act, No. 59 of 1994, India Code. 22D
  8. The Commercial Courts Act, No. 4 of 2016, India Code§12A.
  9. The Consumer protection Act, No.35 of 2019, India Code.

Cases

  1. Afcons Infrastructure Ltd. v Cherian varkey Construction Co. Pvt. Ltd., 2010 8 SCC 24 (India).
  2. United India Insurance Co. Ltd v. Ajay Sinha, AIR 2008 SC 2398 (India).

Haresh Dayaram Thakur v. State of Maharashtra and Ors, AIR 2000 SC 2281 (India)


[1]The Arbitration and Conciliation Act, No. 26 of 1996, India Code§61-§81.

[2]United India Insurance Co. Ltd v. Ajay Sinha, AIR 2008 SC 2398 (India).

[3]Haresh Dayaram Thakur v. State of Maharashtra and Ors, AIR 2000 SC 2281 (India).

[4]Civil Procedure Code (Amendment) Act, No. 46 of 1999, India Code§89.

[5]Salem Advocate Bar Association, Tamil Nadu v Union of India, 2005 6 SCC 344 (India).

[6]The Companies Act, No. 18 of 2013, India Code§442.

[7]The Companies (Mediation and Conciliation) Rules, 2016, Rule 30, Companies Act, No. 18 of 2013, India Code§442.

[8] Real Estate (Regulation and Development) Act, No. 16 of 2016, India Code§32(g).

[9] The Industrial Disputes Act, No. 14 of 1947, India Code§4, §12, §12A.

[10] The Family Court Act, No. 66 of 1984, India Code§4, §5, §6.

[11] The Legal Services Authorities (Amendment) Act, No. 59 of 1994, India Code§4f, §22C, §22D.

[12]The Commercial Courts Act, No. 4 of 2016, India Code§12A.

[13]The Consumer protection Act, No.35 of 2019, India Code§2(25), §37, §38, §41, §74-81, §101(2)(r).

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