Part III of the Arbitration and Conciliation Act, 1996, comprising Sections 61 to 81, codifies conciliation as a structured but voluntary mode of alternative dispute resolution. Unlike arbitration, conciliation is wholly non-adjudicatory: the conciliator does not decide the dispute or impose an award but assists the parties in reaching an amicable settlement of their own making. These provisions, modelled on the UNCITRAL Conciliation Rules, 1980, govern when conciliation begins, how the conciliator must conduct it, the confidentiality that shields the process, and the decisive moment at which a signed settlement agreement acquires the status and effect of an arbitral award. The Supreme Court in Haresh Dayaram Thakur v. State of Maharashtra and Mysore Cements Ltd. v. Svedala Barmac Ltd. has sharply defined where facilitation ends and binding obligation begins. This note maps the statutory scheme and the leading authorities for judiciary and CLAT-PG aspirants.
Conciliation Distinguished: A Non-Adjudicatory Process
Conciliation is a consensual, facilitative process in which a neutral third person assists disputing parties to arrive at a mutually acceptable settlement. The defining feature, repeatedly stressed by the courts, is that the conciliator has no power to adjudicate. Arbitration culminates in a binding award imposed by the tribunal upon the parties; conciliation culminates only in an agreement that the parties themselves choose to sign. The Supreme Court in Haresh Dayaram Thakur v. State of Maharashtra, (2000) 6 SCC 179, captured this distinction by holding that the conciliator's role is purely to assist the parties in an independent and impartial manner in their attempt to reach an amicable settlement, and that a successful conciliation comes to a close only when a settlement agreement signed by the parties comes into existence.
This places conciliation firmly within the family of consent-based ADR mechanisms, distinct from the adjudicatory machinery governed by Part I of the Act. For the foundational architecture of that adjudicatory regime, see the introduction to the Arbitration and Conciliation Act and the subject hub. Because conciliation is non-adjudicatory, it does not require an antecedent agreement to conciliate in the way arbitration requires an arbitration agreement under Section 7; either party may simply invite the other to conciliate under Section 62.
Section 61: Application and Scope
Section 61 delineates the field of conciliation. It applies to conciliation of disputes arising out of a legal relationship, whether contractual or not, and to all proceedings relating thereto. The phrase mirrors the language used for arbitration agreements and confirms that conciliation is not confined to contractual disputes alone. The only express carve-out in sub-section (2) is that the Part does not apply where, by virtue of any law for the time being in force, certain disputes may not be submitted to conciliation. Thus the arbitrability filter has a conciliation analogue: matters reserved exclusively for adjudication by courts or special fora, or otherwise barred by statute, fall outside Part III. The dispute must also be capable of being settled by agreement of the parties, since the entire object is a negotiated outcome rather than an imposed one.
Section 62: Commencement of Conciliation Proceedings
Section 62 governs how conciliation begins. The party initiating conciliation sends a written invitation to conciliate to the other party, briefly identifying the subject of the dispute. Conciliation proceedings commence only when the other party accepts in writing the invitation. This consensual trigger underlines that conciliation cannot be forced upon an unwilling party.
Crucially, sub-section (3) treats silence as rejection: if the party initiating conciliation does not receive a reply within thirty days from the date on which the invitation is sent, or within such other period as specified in the invitation, the initiating party may elect to treat this as a rejection of the invitation and must inform the other party in writing accordingly. The reckoning of these communications dovetails with the deeming rules examined under receipt of written communications. The voluntary, opt-in nature of commencement is what distinguishes conciliation from court-annexed processes and from arbitration, which proceeds on a prior binding agreement.
Sections 63-64: Number and Appointment of Conciliators
Section 63 provides that there shall be one conciliator unless the parties agree that there shall be two or three conciliators. Where there is more than one, they ought, as a general rule, to act jointly. This default of a sole conciliator promotes economy and speed.
Section 64 sets out the appointment mechanism, calibrated to the number agreed. In conciliation with one conciliator, the parties may agree on the name of a sole conciliator. With two conciliators, each party appoints one. With three conciliators, each party appoints one and the parties may agree on the name of the third conciliator, who acts as the presiding conciliator. Sub-section (2) further permits parties to enlist the assistance of a suitable institution or person in connection with the appointment, including by requesting the institution to recommend names or directly appoint conciliators; in doing so the institution must have regard to considerations likely to secure an independent and impartial conciliator and, for a sole or third conciliator, to the advisability of appointing a conciliator of a nationality other than the nationalities of the parties. The emphasis on independence and impartiality echoes the disclosure norms that govern arbitrators.
Sections 65-67: The Role and Conduct of the Conciliator
These provisions form the operative heart of Part III. Under Section 65, the conciliator may request each party to submit a written statement describing the general nature of the dispute and the points at issue, and to supply further information as needed. Section 66 liberates the conciliator from the strictures of procedural law, providing that the conciliator is not bound by the Code of Civil Procedure, 1908, or the Indian Evidence Act, 1872. This procedural flexibility was emphasised by the Supreme Court in Haresh Dayaram Thakur v. State of Maharashtra, (2000) 6 SCC 179, where the Court noted that the conciliator is vested with wide powers to decide the procedure to be followed, untrammelled by the technical rules that govern courts.
Section 67 prescribes the conciliator's mandate and bearing. Sub-section (1) requires the conciliator to assist the parties in an independent and impartial manner in their attempt to reach an amicable settlement. Sub-section (2) directs the conciliator to be guided by principles of objectivity, fairness and justice, giving consideration to the rights and obligations of the parties, the usages of the trade concerned, and the circumstances surrounding the dispute, including any previous business practices between the parties. Sub-section (3) permits the conciliator to conduct proceedings in such manner as he considers appropriate, taking account of the circumstances, the wishes of the parties and any request for an oral statement. Significantly, sub-section (4) empowers the conciliator at any stage to make proposals for a settlement, which need not be in writing and need not be accompanied by reasons. This proactive power to suggest settlement terms is what distinguishes a conciliator from a passive mediator under the older conception.
Sections 68-70: Administrative Assistance, Communication and Disclosure
Section 69 enables the conciliator to communicate with the parties orally or in writing, and to meet or communicate with them together or with each of them separately; it also leaves the place of meetings to the parties' agreement or, failing that, to the conciliator. The capacity to hold separate caucuses with each party is a powerful conciliation tool absent from adjudicatory arbitration.
This separate-communication power is balanced by Section 70, which mandates disclosure of information: when the conciliator receives factual information concerning the dispute from a party, he shall disclose the substance of that information to the other party so that the latter may present any explanation it considers appropriate. The proviso, however, carves out genuinely confidential material: if a party gives information to the conciliator subject to a specific condition that it be kept confidential, the conciliator shall not disclose that information to the other party. This calibrated regime preserves both fairness and the candour necessary for settlement. Section 68 supplements the framework by permitting the parties or the conciliator to arrange administrative assistance from a suitable institution or person, with the parties' consent.
Sections 71-72: Cooperation and Suggestions by Parties
Section 71 imposes a duty of cooperation on the parties in good faith with the conciliator, and in particular requires them to comply with requests by the conciliator to submit written materials, provide evidence and attend meetings. Although couched as a duty, the consensual character of conciliation means non-cooperation cannot be coerced; its practical consequence is that an uncooperative party risks termination of the proceedings under Section 76.
Section 72 entitles each party, on its own initiative or at the conciliator's invitation, to submit suggestions for the settlement of the dispute. This reinforces the party-driven nature of conciliation: the settlement is built from the parties' own proposals rather than imposed from above, in keeping with the autonomy principle that pervades the Act and is reflected even in the parties' freedom to shape the arbitration agreement under Section 7 on the form and validity of arbitration agreements.
Section 73: The Settlement Agreement
Section 73 is the fulcrum of Part III. Under sub-section (1), when it appears to the conciliator that there exist elements of a settlement which may be acceptable to the parties, he shall formulate the terms of a possible settlement and submit them to the parties for their observations; after receiving the observations, the conciliator may reformulate the terms in the light of those observations. Sub-section (2) provides that if the parties reach agreement on a settlement of the dispute, they may draw up and sign a written settlement agreement; if requested by the parties, the conciliator may draw up, or assist the parties in drawing up, the settlement agreement. Sub-section (3) declares that when the parties sign the settlement agreement, it shall be final and binding on the parties and persons claiming under them. Sub-section (4) requires the conciliator to authenticate the settlement agreement and furnish a copy to each party.
The Supreme Court in Haresh Dayaram Thakur v. State of Maharashtra, (2000) 6 SCC 179, held that the legislature has carefully spelt out the procedure to be followed by the conciliator: the successful termination of conciliation proceedings is when the dispute is settled by the agreement of the parties, and such a settlement agreement is to be drawn up and signed by the parties. The Court applied the maxim that where a statute prescribes a procedure for doing a thing, that thing must be done in that manner alone. On the facts, a conciliator had forwarded a report directly to the High Court without a settlement agreement signed by the parties; the Court held that such a unilateral report could not be treated as a settlement agreement and lacked any binding force, because the indispensable requirements of mutual consent and the parties' signatures were absent. Signature by the parties is therefore the constitutive act, not a formality. The ruling establishes that the conciliator's function is confined to formulating and reformulating proposals and assisting in drafting; the conciliator can neither declare a settlement to exist nor confer binding force on a draft that the parties have not actually executed. Until the parties sign, there is at most an unconcluded negotiation, and a conciliator who purports to record a settlement absent the parties' signatures acts beyond the statutory mandate.
Section 74: Status and Effect of the Settlement Agreement
Section 74 confers decisive legal force on the settlement. It provides that the settlement agreement shall have the same status and effect as if it were an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal under Section 30. The practical consequence is profound: a Section 73 settlement is enforceable as a deemed arbitral award under Section 36, without the need to file a fresh suit, and it is shielded from challenge save on the narrow Section 34 grounds.
The Supreme Court delimited the precondition for this elevated status in Mysore Cements Ltd. v. Svedala Barmac Ltd., (2003) 10 SCC 375. There, a "Memorandum of Conciliation" and a contemporaneous Letter of Comfort, signed by the parties and authenticated by the conciliators, were pressed as enforceable under Section 74 read with Sections 30 and 36. The Court held that for a settlement agreement to acquire the status and effect of an arbitral award under Section 74, the mandatory requirements of Section 73 must be strictly satisfied: there must be a settlement agreement, in writing, signed by the parties, drawn up in conformity with the prescribed procedure. Since the documents in question did not meet these requirements and could not be assigned the character of a Section 73 settlement agreement, they could not be enforced as an arbitral award. Mysore Cements thus operates as a strict-compliance gatekeeper: Section 74's powerful enforcement consequence is available only where the Section 73 form has been scrupulously observed.
Section 75: Confidentiality
Section 75 enshrines confidentiality as a cardinal feature of conciliation. Notwithstanding anything contained in any other law, the conciliator and the parties shall keep confidential all matters relating to the conciliation proceedings. The obligation expressly extends even to the settlement agreement, except where its disclosure is necessary for the purposes of its implementation and enforcement. This confidentiality is what allows parties to negotiate frankly, to make concessions and to float settlement proposals without fear that admissions made for the sake of compromise will later be used against them. Until the 2019 amendment introduced Section 42A for arbitration, Section 75 was the only express statutory confidentiality provision in the Act, and it remains the more robust of the two. Its protection is reinforced downstream by the evidentiary bar in Section 81.
Section 76: Termination of Conciliation Proceedings
Section 76 enumerates the four exhaustive modes by which conciliation proceedings terminate, and the date of termination in each case. They are: (a) by the signing of the settlement agreement by the parties, on the date of the agreement; (b) by a written declaration of the conciliator, after consultation with the parties, to the effect that further efforts at conciliation are no longer justified, on the date of the declaration; (c) by a written declaration of the parties addressed to the conciliator that the conciliation proceedings are terminated, on the date of the declaration; or (d) by a written declaration of a party to the other party and the conciliator that the conciliation proceedings are terminated, on the date of the declaration. The inclusion of clause (d) confirms the voluntary character of the process throughout: a single party may unilaterally walk away at any time. In Haresh Dayaram Thakur, the Court read Sections 73 and 76 together to underscore that successful termination occurs only under clause (a), through a signed agreement, and any other conclusion of the process falls under clauses (b) to (d) without producing a binding settlement.
Sections 77-80: Resort to Litigation, Costs, Deposits and the Conciliator's Disqualification
Section 77 imposes a stand-still: the parties shall not initiate any arbitral or judicial proceedings in respect of a dispute that is the subject-matter of the conciliation proceedings during their pendency, except that a party may initiate such proceedings where, in its opinion, they are necessary for preserving its rights (for instance, to forestall the bar of limitation). This protects the integrity of the conciliation while preserving urgent remedies.
Section 78 deals with costs: upon termination, the conciliator fixes the costs and gives written notice to the parties, who in the absence of agreement bear them in equal shares; costs include the conciliator's fees, witness expenses, expert assistance and administrative charges. Section 79 permits the conciliator to require advance deposits towards anticipated costs, with the proviso that if the required deposits are not paid in full within thirty days, the conciliator may suspend or terminate the proceedings. Section 80 safeguards the neutrality of the process by providing that, unless otherwise agreed, the conciliator shall not act as an arbitrator or as a representative or counsel of any party in any arbitral or judicial proceeding in respect of the same dispute, nor be presented by the parties as a witness in any such proceeding. The right to object to a breach of such norms must be exercised promptly, consistent with the principle of waiver of the right to object. Read together, Sections 77 to 80 protect the conciliation while it is alive, fairly allocate its expenses, and insulate any later adjudication from contamination by the neutral who facilitated the failed settlement, thereby preserving both the candour of the process and the impartiality of any subsequent forum.
Section 81: Admissibility of Evidence in Other Proceedings
Section 81 completes the confidentiality architecture by erecting an evidentiary shield. It provides that the parties shall not rely on or introduce as evidence in arbitral or judicial proceedings, whether or not such proceedings relate to the dispute that was the subject of the conciliation, certain categories of statements made during conciliation. These protected categories are: (a) views expressed or suggestions made by the other party in respect of a possible settlement of the dispute; (b) admissions made by the other party in the course of the conciliation proceedings; (c) proposals made by the conciliator; and (d) the fact that the other party had indicated its willingness to accept a proposal for settlement made by the conciliator. The provision ensures that the candour of settlement negotiations cannot be weaponised in subsequent litigation, complementing the confidentiality duty in Section 75. Together, Sections 75 and 81 make conciliation a genuinely "without prejudice" forum.
Conciliation as a Pre-Arbitration Step: Mandatory or Directory?
Commercial contracts frequently embed conciliation or amicable-settlement clauses as a precondition to invoking arbitration, raising the question whether such a step is mandatory before the arbitral machinery, including a reference under Section 11 or a stay under Section 8 on the court's power to refer parties to arbitration, may be set in motion. In Visa International Ltd. v. Continental Resources (USA) Ltd., (2009) 2 SCC 55, the Supreme Court, hearing a Section 11 application, considered a clause requiring the parties to attempt amicable settlement before arbitration. The Court held that the arbitration request was not premature, reasoning that where the parties had taken rigid and irreconcilable stands and the correspondence showed that amicable settlement had no realistic prospect of success, insistence on a futile pre-arbitral step would serve no purpose. The pragmatic principle distilled from this and later authorities is that a pre-arbitration conciliation requirement is generally treated as directory rather than mandatory where compliance would be an empty formality, although well-drafted multi-tier clauses with clear, time-bound conciliation steps may be enforced more strictly. The lesson for litigants is to document genuine attempts at amicable resolution before pivoting to arbitration.
Frequently asked questions
How does conciliation differ from arbitration under the 1996 Act?
Arbitration is adjudicatory: the tribunal hears the dispute and imposes a binding award on the parties. Conciliation is non-adjudicatory and facilitative: the conciliator under Sections 61-81 only assists the parties to reach a settlement of their own making and cannot impose any outcome. As the Supreme Court explained in Haresh Dayaram Thakur v. State of Maharashtra, (2000) 6 SCC 179, a successful conciliation concludes only when the parties themselves sign a settlement agreement.
When do conciliation proceedings commence under Section 62?
Conciliation commences when one party sends a written invitation to conciliate identifying the subject of the dispute and the other party accepts that invitation in writing. If no reply is received within thirty days of sending the invitation, or within any other period stated in it, the initiating party may treat the silence as a rejection and must inform the other party in writing accordingly. The process is therefore strictly opt-in.
What is the legal status of a conciliation settlement agreement?
Under Section 74, a settlement agreement drawn up and signed under Section 73 has the same status and effect as an arbitral award on agreed terms under Section 30. It is therefore enforceable as a deemed award under Section 36, without a fresh suit. But this elevated status is available only where the strict procedure of Section 73 is followed, as held in Mysore Cements Ltd. v. Svedala Barmac Ltd., (2003) 10 SCC 375.
Why was the document in Mysore Cements held unenforceable?
In Mysore Cements Ltd. v. Svedala Barmac Ltd., (2003) 10 SCC 375, the parties relied on a Memorandum of Conciliation and a Letter of Comfort as enforceable under Section 74. The Supreme Court held that these documents did not satisfy the mandatory requirements of Section 73, in particular a written settlement agreement signed by the parties in the prescribed manner, and so could not be assigned the status of an arbitral award. Strict compliance with Section 73 is the gateway to Section 74.
How does the Act protect confidentiality during conciliation?
Two provisions work together. Section 75 obliges the conciliator and the parties to keep confidential all matters relating to the conciliation, including the settlement agreement except where disclosure is needed for its implementation. Section 81 bars the parties from later introducing as evidence, in any arbitral or judicial proceeding, the views, suggestions, admissions or settlement proposals made during conciliation. Together they make conciliation a genuinely without-prejudice forum.
Can a conciliator later act as arbitrator in the same dispute?
No, unless the parties otherwise agree. Section 80 provides that the conciliator shall not act as an arbitrator or as a representative or counsel of any party in any arbitral or judicial proceeding concerning the same dispute, nor be presented by the parties as a witness in such proceedings. This safeguards the neutrality and candour of the conciliation, since the conciliator typically holds separate caucuses and receives confidential information from each side.