All About Conciliation

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Conciliation is a mode of Alternate Dispute Resolution. It has been made available to the citizens of India through The Arbitration and Conciliation Act, 1996. Conciliation is conducted where the matter arises out of a legal relationship between the 2 parties. Such a relation can be contractual or non-contractual based on the issue.

Conciliation is a mode of Alternate Dispute Resolution. It has been made available to the citizens of India through The Arbitration and Conciliation Act, 1996. Conciliation is conducted where the matter arises out of a legal relationship between the 2 parties. Such a relation can be contractual or non-contractual based on the issue. While settling matters through conciliation the parties try to come to a settlement in front of a third party i.e. a conciliator. Conciliation is a process where a third party, conciliator, assists the parties to reach a mutually agreed settlement. The process of conciliation is voluntary and confidential.

Conciliation proceedings

Conciliation and it proceedings are mentioned in Part III of the Arbitration and conciliation Act, 1996. 

  1. Commencement of Conciliation 

One party shall invite the other party to conciliate the determined dispute. Conciliation is said to be underway only when the other party accepts the invitation. If the other party does not reply to the invitation to conciliate within 30 days from the date of the invitation, the sender can choose to treat it as a rejection to the invitation. Where the sender chooses rejection, he/she shall inform the other party of the same. 

  1. Appointment of Conciliator 

Usually, there is only one conciliator to preside over the conciliation. There can be 2 or 3 conciliators if both the parties agree. Even a number of conciliators is acceptable if arred upon by both the parties. 

While appointing a sole conciliator, both parties shall come to an agreement and decide upon the sole conciliator. In the case of 2 conciliators, each party shall appoint one conciliator each. While appointing 3 conciliators, each party shall appoint one conciliator and the 3rd conciliator shall be agreed upon by both parties. The 3rd conciliator will take up the position of presiding conciliator. 

The parties can approach a suitable institution or person for the appointment of a conciliator. The parties can decide on whether to take the recommendation of conciliators from the institution or to grant the institution the power to directly appoint an impartial 3rd party conciliator. 

  1. Role of conciliator 

The conciliator shall conduct the conciliation proceedings in such a manner as he considers appropriate. While doing so he shall take into consideration the facts of the case, expectations of both parties and try settling the issue as soon as possible. The conciliator shall be impartial and just in his conduct. 

The conciliator can make proposals for settlement at any stage of conciliation. Such a proposal does not need to be written and does not require a statement of the reason for the said proposal. 

  1. Settlement Agreement 

The conciliator can call for suggestions from both parties for the settlement of the dispute. When a conciliator sees signs of a possible settlement between the parties, the conciliator will make terms of settlement to be reviewed by the parties. The conciliator shall make terms of possible settlement based on such review. 

Once parties reach a settlement, a settlement agreement is written by the parties. The parties can also request the conciliator to formulate a settlement. A settlement agreement is considered to have the same status and effect as that of an arbitral award for the term agreed upon. The settlement agreement becomes binding once both parties sign it. The conciliator authenticates the settlement agreement and gives a copy to both parties. 

  1. Termination of Conciliation 

In an ideal situation, a conciliation is terminated when both parties sign the settlement agreement. 

Conciliation is a voluntary mode of Alternate Dispute Resolution. As a result, both parties can terminate the proceedings at any stage of the proceeding. The conciliator has the capacity to terminate proceedings after consultation with the parties. The termination is valid only when a written declaration is made by the entity terminating the proceedings. 

  1. Costs

The conciliator shall draw up a written notice for the charges to be incurred by both parties. The cost of conciliation proceedings shall be borne by both parties equally unless a specific ratio is mentioned in the settlement agreement. These charges include:

  1. Fees and expenses of conciliator
  2. Expenses of witness
  3. Fees of expert advice requested by the conciliator
  4. Charges of institute/person helping with appointment of conciliator. 
  5. Charges of institute/person providing administrative assistance for the duration of the conciliation. 

The conciliator can direct the parties to make equal deposits before and during the proceedings of conciliation. These deposits are made towards the charges incurred during the conciliation proceedings. If any of the parties delays paying the deposit for more than 30 days, the conciliator can terminate the proceedings through a written declaration. The money not spent is returned to the parties at the termination of conciliation. 

Principles of Conciliation 

  1. Principles of Natural Justice 

A conciliation proceeding is not governed by proceedings of the Civil Procedure Code, 1908. It is the duty of the conciliator to maintain the principles of natural justice.

  1. Confidentiality 

The parties and conciliators must maintain at most confidentiality with regards to the conciliation proceedings and the settlement agreement. The conciliator is bound to maintain confidentiality regarding any information given on the condition of non-disclosure to the other party. 

  1. Disclosure of information 

The conciliator has the duty to inform a party regarding any information received from the other party. This is done so that the other party has an opportunity to give an explanation.  

  1. Cooperation 

The parties must co-operate with the conciliator by providing all the necessary information as and when required. 

  1. Communication between parties and conciliators

The conciliator can invite parties to meet him, such invitation can be written or oral. They can be called together or separately.  

  1. Location 

The location for conciliation is determined by the provisions mentioned in the agreement. If such a provision does not exist, the conciliator shall decide a location after consulting with both parties. 

Arbitration v. Conciliation 

Arbitration is a very rigid method of alternate dispute resolution where arbitration is resolved through a judgment made by the arbitrator. Conciliation on the other hand is an extremely flexible method where there is an amicable settlement where parties themselves have reached the settlement & which is binding as per their decision. The conciliator just provides support to find the mutual ground of settlement. For effective conciliation, it is necessary that the parties to a dispute should be brought together face to face at a common place where they can interact with each other & with the conciliator to arrive at a settlement of the dispute.

Arbitration is considered a formal and private proceeding as compared to court proceedings. Conciliation is considered much more private and confidential than an arbitral proceeding.  The main requirement for a dispute to go into arbitration is that the arbitration agreement is in writing. Whereas a conciliation can be started through the offer and acceptance of a written invitation. 

An arbitration is decided when the arbitrator passes an award. An arbitration award is binding on both parties. It is a form of judgment passed by an arbitrator. In conciliation, the matter is decided through a settlement agreement. This settlement agreement is achieved by mutual understanding and discussion between the parties. The conciliator does not pass a judgment by provides recommendations on ways to settle the dispute. Unlike an arbitral award, a settlement agreement is valid only after both parties sign the said agreement. 

Section 30 of the Arbitration and Conciliation Act states that the parties can go in for conciliation and mediation during the pendency of the arbitral proceedings. The arbitral tribunal can recommend the parties to settle the dispute through conciliation. But Section 77 of the Act states that during the pendency of conciliation either of the parties cannot initiate any arbitral or court proceedings on the dispute being resolved in such conciliation. 


Conciliation is an easy and cost-effective method of alternate dispute resolution. It focuses on resolving the dispute by mutual understanding and settlement. It makes an atmosphere where both parties are able to freely discuss and reach an amicable resolution. Conciliation does not disrupt the relationship between the parties involved. Thus, creating an opportunity for the parties to remain in business and on good terms.



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