Conciliation- An effective ADR mechanism

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“When you are at the edge of a cliff, sometimes progress is a step backwards” – Anonymous

COVID-19 pandemic has brought about an unprecedented hardship globally affecting not only human life but also businesses and world economies as nation after nation have come under its grasp in quick succession. The Government of India while closely monitoring the wrath of Covid-19 worldwide, took a conscious decision to declare a complete national lock down from the latter part of March 2020 which was extended from time to time and continues to extend till date although with certain relaxations to ease economic pressure and help businesses survive. The lockdown has been an eye-opener for all of us with the realization that we not only need to be self sufficient but have to adapt to the changing technology and its benefits which has undoubtedly become a necessity rather than a luxury.

While the objective of the lockdown was to protect those in India from getting infected from the virus, it also brought with it the economic slowdown with businesses reeling under financial strain, closure of companies, defaults and delays in performance of contracts, etc. leading to an emergence of various issues between contracting parties. This unavoidable and uncertain environment has led to an increasing tendency of parties to invoke judicial remedies available to them under the contracts which are mostly in the form of either Arbitration or Litigation. The judiciary is treading carefully in these extraordinary times by protecting its own and the litigants from a community spread by closure of courts and only matters of urgency and importance are being taken up through video conferencing using various platforms available in the market. While the Courts are adapting to latest technology to enable a smooth justice delivery system for all, there is an imminent threat of  a rise in the litigations and arbitrations being initiated on account of increasing defaults by contracting parties. In such a scenario for businesses to remain relevant and competitive –there is a dire need to overcome operational challenges and strengthening of existing commercial relationships.

Often, majority of the commercial agreements contain dispute resolution clauses which mandates the parties to either invoke the arbitral mechanism or approach courts for redressal of its grievances. Hardly does one see a well drafted dispute resolution clause emphasizing on the adoption of other forms of alternate dispute resolution process, i.e., Conciliation/Mediation as a precursor to litigation or arbitration. Call it a lack of understanding, lack of confidence or lack of will of the parties in adopting these alternate dispute resolution mechanisms; given the realistic risks of established commercial relationships going sour, parties may find it more prudent (cost effective as well as expeditious) to attempt to settle their disputes through the aegis of a conciliator/mediator prior to invoking  arbitration or resorting to litigation.  

It is interesting to note that while the terms “mediation” and “conciliation” are often used interchangeably globally, India  recognizes “conciliation” as a separate form of ADR process. Equally interesting is the fact that while mediation is gaining immense popularity in India (sans legislation ), conciliation has not received its due credit despite the existence of a statute governing it i.e. The Indian Arbitration and Conciliation Act 1996. 

Merriam Webster dictionary defines conciliation as “the settlement of a dispute by mutual and friendly agreement with a view to avoiding litigation”. In simple terms, Conciliation is a form of Alternate Dispute Resolution (ADR) process of settling disputes arising out of a legal relationship between parties without the interference of the Court, through conciliator(s) appointed by the parties. The conciliator attempts to bring about an amicable resolution of the dispute between the parties by persuading them to reach a settlement. The conciliator plays an active role in the process by proposing solutions to resolve the conflict which is distinct from a mediator who facilitates the parties to reach a conclusive and mutually satisfactory agreement. In commercial  disputes, it is always advantageous to settle without having to traverse the path of consuming and costly adjudication proceedings, wherein the outcome is uncertain and dependent upon a host of factors. While it is true that conciliation proceedings may also fail, however comfort can be derived from the assumption that only those parties who are actually desirous of settling disputes amongst them by way of an amicable settlement would initiate this process, same being non-adversarial and friendly in character unlike litigation and arbitration where parties hotly contest.

Part III of the Arbitration and Conciliation Act, 1996 (the “Act”) puts in place the legislative framework for conciliation and its regulation. The Act provides for the Conciliator to be not bound by the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872 (Section 66), Section 67 of the Act provides for the Role of the Conciliator which is to assist the parties in an independent and impartial manner in their attempt to reach an amicable settlement of dispute. Principles of objectivity, fairness and justice, consideration to rights and obligations of the parties, usages of trade and surrounding circumstances to the dispute among other  things are to be kept in mind by the conciliator who is empowered to make proposals for a settlement at any stage of the conciliation proceedings. Once a settlement agreement is signed between the parties it is final and binding having the same status and effect as that of an arbitral award (Sections 73 and 74). Upon having initiated conciliation proceedings, parties are precluded from initiating during such proceedings, any arbitral or judicial proceedings in respect of a dispute that is the subject matter of conciliation (Section 77). However, arbitral or judicial proceedings are allowed in situations where it is necessary for a party to preserve its rights (Section 77). Interestingly Section 30 of the Act talks about “Settlement” even in cases of Arbitral proceedings. The said section empowers an arbitral tribunal to encourage settlement of the dispute between the parties by using “mediation, conciliation or other procedures”. Section 89 of the Code of Civil Procedure, 1908 (“CPC”) (brought in force in its present form by the CPC (Amendment) Act, 1999 with effect from 1/7/2002) provides for ADR process of settlement of disputes between parties by four procedures: (a) arbitration; (b) conciliation; (c) judicial settlement including settlement through Lok Adalat; (d) mediation. Interestingly sub-section (2) of section 89 of the CPC provides for the applicable laws/ methods in case of the above four procedures. In the case of arbitration or conciliation, the provisions of the Arbitration and Conciliation Act, 1996 shall be applicable as if the proceedings for arbitration or conciliation were referred for settlement under the provisions of the said Act; in case of Lok Adalat, the Court shall refer the dispute to Lok Adalat in accordance with the provisions of the Legal Services Authority Act, 1987; in case of judicial settlement, the Court shall refer the dispute to a suitable institution or person which shall be deemed to be a Lok Adalat and with the provisions of the Legal Services Authority Act, 1987 being applicable; for mediation, the Court shall effect a compromise between the parties and follow procedure as may be prescribed.

Recently the Karnataka Real Estate Regulatory Authority (RERA) has set up a conciliation cell for quick resolution of disputes between the builders and buyers. The detailed circular titled ‘Procedure for K-RERA Conciliation and Dispute Resolution Cell’ has been uploaded by the Karnataka RERA on its website.Similar conciliation forums have been adopted by some other States RERA like Uttar Pradesh RERA, Maharashtra RERA, etc.

It is evident that unlike other nations, India has given separate recognition to Mediation and Conciliation as separate modes of ADR process. However, while mediation has received widespread acceptability in India, conciliation process has not. The current disruption of the regular functioning of courts, mediation centers and arbitral tribunals in India, has compounded the problem of an already existing delayed justice delivery system. Further, the uncertainties which are inherent around court decisions given that disputes often traverse through several rounds of challenges before it attains finality, it would be prudent for parties to now seriously consider in the Covid -19 as well as post Covid-19 era, conciliation as an effective mode of settlement of disputes which is more likely to resolve disputes amicably,expeditiously and in a cost efficient manner while ensuring that good relations are maintained between the parties and judicial animosity kept at bay. Conciliation will assume greater significance in commercial disputes relating to trans-border performance of contracts with the applicability of foreign law or that of multiple jurisdictions. It would be worthwhile to actively promote this ADR process in order to improve the ease of doing business in India following the examples of  most advanced nations where litigation is often the last resort unlike in India where it is normally considered the first and often only resort for adjudication of disputes. Promotion of conciliation will also greatly help in reducing the burden on the judiciary which is already reeling under enormous pressure of millions of pending cases in various courts across India.

The author is Managing Partner, Jurisperitus Law Offices

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