procedures of alternate dispute resolution

Alternative Dispute Resolution Project

Procedures

of

Alternative Dispute Resolution

Compiled By

Ankit Chowdhri

10/09

Contents

List of Abbreviations i

Table of Cases iii

Alternative Dispute Resolution: An Introduction 1

Malimath Committee on Arrears in Court 1

Development of Alternative Dispute Resolution 2

Arbitration 3

Features of Arbitration 5

Ad Hoc & Institutional Arbitration in Brief 8

Conciliation 9

Features of Conciliation 9

Mediation 15

Restrictions on Mediator 17

Negotiation 18

Bibliography 21

i

List of Abbreviations

& and

ADR Alternative Dispute Resolution

AIR All India Reporter

All. Indian Law Reports, Allahabad Series

Andhra Indian Law Reports, Andhra Series

Bom. Indian Law Reports, Bombay Series

CPC Code of Civil Procedure, 1908

Cut. LT Cuttack Law Times

DB Division Bench

Del. Indian Law Reports, Delhi Series

DLT Delhi Law Times

Ed. Edition

Gau. Indian Law Reports, Guwahati Series

Ibid. Ibidem

ICA Indian Council of Arbitration

ICADR International Centre for Alternative Dispute Resolution

ICC International Chamber of Commerce

ICJ International Court of Juctice

ILR International Law Reporter

Lah. Indian Law Reports, Lahore Series

ii

LJ Ch. Law Journal Reports Chancery

Ltd. Limited

Mad. Indian Law Reports, Madras Series

p. Page Number

Pat. Indian Law Reports, Patna Series

QB Queen’s Bench

Raj. Indian Law Reports, Rajasthan Series

SC Supreme Court of India

SCC Supreme Court Cases

U.S.A. The United States of America

v. versus

Vol. Volume

iii

Table of Cases

ABB ABL Ltd. v. Cement Corp. of India …………………………………………………7

Collins v. Collin …………………………………………………………………………3

Deo Narain Singh v. Siabir Singh …………………………………………………………8

Fertilizer Corporation of India Ltd. v. IDI Management …………………………………8

Fisheries Jurisdiction Case ………………………………………………………………..19

Guru Nanak Foundation v. Rattan Singh & Sons ………………………………………..17

Haresh Daya Ram Thakur v. State of Maharashtra & Others ……………………10, 12

Indurthi Venkata Srinivasa Rao v. Indurthi Narasimha Rao …………………………8

J. Kaikobad v. F. Khambatta …………………………………………………………7

Johara Bibi v. Mohammad Sadak Thambi Marakayur …………………………………8

Madan Lal v. Nabi Baksh …………………………………………………………………7

Mysore Cements Ltd. v. Svedala Barmac Ltd. ………………………………………..13

Northern Regional Health Authority v. Derek Crouch …………………………………4

Raipur Development Authority v. Chokhamal Contractors ………………………..17

Ram Singh v. G.A. Cooperative Service Society ……………………………………….18

Reshma Constructions v. State of Goa …………………………………………………8

State of Jammu & Kashmir v, Deo Dutt Pandit …………………………………………5

State of Punjab v. Dina Nath …………………………………………………………5

State of West Bengal v. Amritlal Chatterjee ………………………………………..10

iv

Tarapore and Co. v. Cochin Shipyard Ltd. …………………………………………4

Tata Iron and Steel Co. Ltd. v. Union of India and Others ………………………..13

Union of India v. M/s Jagat Ram ………………………………………………………..18

Unit Officer, NPCC Ltd. v. Madhusudan Dev Berma …………………………………7

UP Ban Nigam v. Bishan Nath Goswami ………………………………………………..11

Vice-Chairman, Bhubaneswar Development Authority v. Pyari Mohan Mohanty …5

Page | 1

Alternative Dispute Resolution

An Introduction

The Oxford Dictionary of Law defines Alternative Dispute Resolution as “any of the

variety of techniques for resolving civil disputes without the need for conventional litigation.

It may include mini-trial (a shortened and simplified form of court hearing), informal

methods of arbitration, and structured forms of conciliation using specially trained mediator

acting as a go-between.”1

Malimath Committee on Arrears in Court

Delay in administration of justice is not confined to India alone; it has rather become

a global phenomenon. As Chief Justice Warren Burger of the U.S.A. Supreme Court once

observed, “we are moving towards a time when it will be impossible for the Courts to cope

up with the dockets and if something is not done, the result will be disastrous which none of

us would want to see.” In India, the situation is all the more worse. The Indian Judicial

System has been stretched almost to a breaking point right from the Apex Court to the lowest

Subordinate Courts. The Malimath Committee which is also known as the ‘Arrears

Committee,’ undertook a comprehensive review of the working of the Court system,

particularly, all aspects of arrears and Law’s delay and made various useful

recommendations2 for reducing litigation and making justice readily accessible to the people

at the minimum cost of time and money.3

The Malimath Committee underlined the need for alternative disputes resolution

mechanism such as mediation, conciliation, arbitration, Lok Adalats etc., as a viable

alternative to the conventional Court litigation. These alternative adjudicatory techniques

would not only provide cheap and speedy justice to the needy persons but would go a long

way in restoring the confidence of the people and establishing Rule of Law as contemplated

by the Constitution of India.4

1 A Dictionary of Law, Oxford University Press, New York, 5

th Ed., 2003, p. 24.

2 Report of the Malimath Committee (1989-90). The Committee was headed by Hon’ble Mr. Justice V.S.

Malimath, the two other members being Hon’ble Mr. Justice P.D. Desai and Hon’ble Dr. Justice A.S. Anand. 3 Paranjape, Dr.V.N.; Arbitration and Alternative Dispute Resolution, 3

rd. Ed., Central Law Agency, Allahabad

2006, p. 264. 4 Ibid.

Page | 2

The causes of ‘our judicial system creaking under the weight of arrears’5 may be

manifold. The limitation of space does not permit their mention t this place. But the hard truth

remains that the people are disgusted with the existing justice delivery system and are at

times compelled to resort to extra judicial delivery system and are at times compelled to

resort to extra judicial remedies which lead to erosion of legal values and weakens the

foundation of democracy.6

Development of Alternative Dispute Resolution

Courts are overburdened by arrears appearing to be insoluble in the near future, and

most of the cases become infructuous. The cases are increasing in Courts in at mindboggling

speeds and the problem is further compounded when there is lack of discipline in the

litigation process and the judicial mechanism finds it difficult to cope with the enormous

caseload.7 Hence, the Alternative Dispute Resolution has received a good welcome in every

field. A resolution had been adopted by adopted by Chief Minister and the Chief Justice of

High Courts on 4th

December, 1993, declaring that the Courts were not in a position to bear

the entire burden of justice system and that a number of disputes stooped themselves to

resolution by alternative modes like arbitration, conciliation, mediation and negotiation.8 The

Alternative Dispute Resolution procedures impart procedural flexibility in order to save time

and money.

The then Prime Minister of India, Mr. Narsimha Rao, inaugurating the International

Centre for Alternative Disputes Resolution (ICADR), on 6th

October, 1995, observed:9

“While reforms in the judicial sector should be undertaken with necessary speed, it

does not appear that the courts and tribunals will be able to bear the entire burden of the

justice system. It is incumbent on Government to provide at reasonable cost as variety of

disputes that arise. Litigants should be encouraged to resort to alternative dispute resolution

so that the Court system proper would be left with a number of smaller numbers of important

disputes that demand judicial attention.”

5 Hon’ble Mr. Justice P.N. Bhagwati’s observation in his speech on Law Day, November 26, 1985.

6 See Supra 4.

7 See Paranjape, Dr.V.N.; Arbitration and Alternative Dispute Resolution, 3

rd. Ed., Central Law Agency,

Allahabad 2006, p. 263. 8 Tiwari, O.P.; Arbitration and Conciliation Act 1996 with ADR, 5

th Ed., Allahabad Law Agency, Faridabad, 2008,

p. 362. 9 Ibid.

Page | 3

As a result a number of modes were developed to ease the Courts of the burden. The

most prevalent modes of Alternative Dispute Resolution have been discussed in this

compilation.

Arbitration

As commonly understood, arbitration means settling of disputes between two or

more persons or groups by some neutral person who is acceptable to all concerned. Such

person is known as an arbitrator who upon his appointment as such is obliged to help the

parties involved in a dispute or disagreement to find grounds for agreement and to submit

or settle by arbitration. The word ‘arbitration’ has its origin in Latin word Arbitrari, which

means to give a judgement.10

Arbitration is a reference to the decision of one or more persons, either with or

without an umpire, of some natter or matters in difference between the parties.11

In the Halsbury’s Laws of England12

the term ‘arbitration’ has been defined as

under:

“The term ‘arbitration’ is used in several senses. It may refer either to a

judicial process or to a non-judicial process. A judicial process is concerned with

the ascertainment, declaration and enforcement of rights and liabilities as they exist,

in accordance with some recognised system of law. An industrial arbitration may

well have its function to ascertain and declare, but not to enforce, what in the

arbitrator’s opinion ought to be the respective rights and liabilities of the parties,

and such a function is non-judicial. Conciliation is a process of persuading parties to

reach an agreement, and is plainly not arbitration; nor is the chairman of the

conciliation board an arbitrator.”

With the ever widening expansion of international trade and commerce, complex

questions on private international law, effect of local laws on contract between parties

belonging to different nations are certain to crop up. Arbitration has been considered to be a

civilised way of resolving disputes avoiding court proceedings. This approach manifests

faith of the parties in the capacity of the tribunal of their choice to decide even a pure

10

Basu, N.D.; Law of Arbitration and Conciliation, Vol. 1, 11th

Ed., Orient Publishing Company, New Delhi, 2010, p. 1. 11

Collins v. Collins, 28 LJ Ch. 186. 12

4th

Ed., Vol. 2, paragraph 502.

Page | 4

question of law.13

Is has long been a principle of law that disputes affecting civil rights, in

which only damages are claimed, may be referred to arbitration.14

Sir John Donaldson in Northern Regional Health Authority v. Derek Crouch15

stated:

“Arbitration is usually no more and no less than litigation in private sector.

The arbitrator is called upon to find the facts, apply the law and grant relief to one or

other or both of the parties.”

Arbitration is entered into usually by contract, but renders a binding result.

Arbitrators are selected by parties who bear the expenses of arbitral proceedings as also the

fees payable to arbitrators. Arbitration though less formal than litigation, is the most formal

of the other ADR processes and results in an ‘award’ which is similar to a final decree of a

Court.16

The arbitral proceedings are deemed to have commenced with the sending of a

notice of arbitration by the claimant to the respondent and such notice is received by the

respondent. The notice is deemed to have been received on the day it was delivered in

accordance with the provisions of Section 3 (2) of the Arbitration and Conciliation Act,

1996.17

An arbitration clause in the contract between the parties excludes intervention of

the law Courts to decide the case on merits. The decision of the arbitral tribunal is final and

binding on the parties.18

Even a challenge to the validity of an award made by the arbitral

tribunal or its jurisdiction has to be referred to the tribunal itself and not the law Court.19

Arbitration as an alternative dispute resolution technique has received statutory

recognition by the Arbitration and Conciliation Act, 1996 which has repealed the earlier

Arbitration Act, 1940. The provisions relating to domestic arbitration are contained in Part I

of the Act 1 while Part II deals with the finality and enforceabilities of the foreign I

award.20

13

Tarapore and Co. v. Cochin Shipyard Ltd., AIR 1984 SC 1072; 1985 Arb. LR ; (1984)2 SCC 680. 14

Russell on Arbitration, 20th

Ed., p. 22. Cited in Markanda, P.C.; Law Relating to Arbitration & Conciliation, 6th

Ed., Wadhwa & Company Nagpur, 2006, p. 27. 15

(1984) QB 644 (CA). 16

Dr. A.M. Singhvi, Justice Delayed is Justice Denied. Blue Print for Reform, All India Seminar Papers on Judicial Reforms (1998) p. 41. Cited in Paranjape, Dr. N.V., Arbitration and Alternative Dispute Resolution, Central Law Agency, Allahabad, 3

rd Ed., 2006, p. 269.

17 See Section 3 (2) of the Arbitration & Conciliation Act, 1996.

18 See Section 35 of the Arbitration and Conciliation Act, 1996.

19 See Section 33 of the Arbitration and Conciliation Act, 1996.

20 Paranjape, Dr.V.N.; Arbitration and Alternative Dispute Resolution, 3

rd. Ed., Central Law Agency, Allahabad

2006, p. 269.

Page | 5

Features of Arbitration

Arbitration has been explained hereunder under points highlighting various essentials

of the procedure while also highlighting the corresponding statutory provision.

1. Alternate dispute redressal by arbitration

Arbitration is considered to be an important alternative dispute redressal process

which is to be encouraged because of high pendency of cases in the Courts and cost of

litigation. Arbitration has to be looked up to with all earnestness as that the litigant has faith

in the speedy process of resolving thereto dispute.21

But the parties are not allowed to initiate during the reconciliation proceedings, any

arbitral or judicial proceedings in respect of a dispute which is the subject-matter of

conciliation proceedings except that a party may initiate arbitral or judicial proceedings

where in his opinion such proceedings are necessary for preserving his rights.22

2. Agreement of parties to submit to arbitration

Parties may agree to submit to arbitration all or certain disputes which have arisen or

which may arise between them in respect of a defined legal relationship, whether contractual

or not.23

An arbitrative agreement may be in the form of an arbitration clause in a contract or

in the form of a separate agreement.24

The essentials of arbitration agreement include:25

(a) There should be an agreement;

(b) Agreement should be in writing;26

(c) Agreement should be to refer either a present or future dispute for arbitration.

An arbitration agreement should be in writing which may be contained in— (a) a

document signed by the parties; (b) an exchange of letters, telex, telegrams or other mentis of

telecommunication which provide a record of the agreement; or (c) an exchange of statement

21

State of Jammu & Kashmir v, Deo Dutt Pandit, AIR 1999 SC 3196; 1999 (7) SCC 339. 22

See Section 77 of the Arbitration & Conciliation Act, 1996. 23

See Section 7(1) of the Arbitration & Conciliation Act, 1996. 24


Vice-Chairman, Bhubaneswar Development Authority v. Pyari Mohan Mohanty, (1987) 63 Cut. LT 402. 26

State of Punjab v. Dina Nath, AIR 2007 SC 2157, 2159.

Page | 6

of claim and defence in which the existence of the agreement is alleged by one party and not

denied by the other.27

3. Obligation of judicial authority & commencement of arbitration.28

A judicial authority before which an action is brought in a matter which is subject to

an arbitration agreement shall, if a party so applies not later than when submitting his first

statement on the substance of the dispute, refer the parties to arbitration.29

Such application

should be accompanied by the original arbitration agreement or a duly certified copy of it.30

Notwithstanding that such an application has been made and that the issue is pending before

the judicial authority, arbitration may be commenced or contemned and an arbitral award

may be made.31

4. Equal treatment of parties

The arbitration proceedings also the parties are to be treated with equality and each

party has to be given full opportunity to present his case.32

The minimum requirement of

proper hearing should include:33

(a) Each party must have notice that the hearing is to take place and of the date, time

and place of holding such hearing;

(b) Each party must have a reasonable opportunity to be present throughout the

hearing;

(c) Each party must have a reasonable opportunity to present statements, documents,

evidence and arguments in support of his own case;

(d) Each party must be supplied with the statements, documents and evidence

adducted by the other side;

(e) Each party must have a reasonable opportunity to cross-examine his opponent’s

witness and reply to the arguments advanced in support of the opponent’s case.34

27

See Tiwari, O.P.; Arbitration and Conciliation Act 1996 with ADR, 5th

Ed., Allahabad Law Agency, Faridabad, 2008, p. 372. 28

See Section 7(3) & (4) of the Arbitration & Conciliation Act, 1996. 29





Markanda, P.C.; Law Relating to Arbitration & Conciliation, 6th


See similar suggestions by Mustill & Boyd, Law and Practice of Commercial Arbitration in England, 1982 Ed., p. 261.

Page | 7

5. Civil Procedure and Limitation rules not binding

The Arbitral Tribunal also is not bound by the Code of Civil Procedure, 190835

the

Indian Evidence Act, 1872.36

The parties are free subject to the provisions as to conduct of

arbitral proceedings, to agree on the procedure to be followed by the arbitral tribunal in

conducting its proceedings.37

There is no rule of law that an arbitrator must decide all the

issues framed in the suit expressly as long as the whole suit is decided by him. He is not

bound by any rules of procedure or those of evidence, and it is not open to the parties to pick

holes in the decision by the tribunal of their own choice.38

6. Commencement of arbitral proceedings

Unless otherwise agreed by the parties, the arbitral proceedings in respect of a

particular dispute commence on the date on which a request for that dispute to be referred to

arbitration is received by the respondent.39

A perusal of this provision would make it

abundantly clear that it is not necessary that the request should be made expressly in writing.

Request could be made by conduct of the parties and it has to be understood in that manner.

Had it been essential that request should be made in writing to the petitioner, then the word

“written” should have found place in this section before the word “request”.40

7. Decision making by panel of arbitrators

Unless otherwise agreed by the parties, in arbitral proceedings with more than one

arbitrator, any decision of the arbitral tribunal shall be made by a member or all its members.

If authorized by the parties or all the members of the arbitral tribunal, questions of procedure

may be decided by the presiding arbitrator.41

The provision says that the opinion of majority

shall prevail. The majority is a term signifying greater number. This sub section42

is based on

the theory of numbers. It requires counting of heads. If there are three arbitrators, two will

35

Unit Officer, NPCC Ltd. v. Madhusudan Dev Berma, AIR 1979 Gau. 64 (DB). 36

See Section 19(1) of the Arbitration & Conciliation Act, 1996. Also See J. Kaikobad v. F. Khambatta, AIR 1930 Lah. 280 (DB). 37


Madan Lal v. Nabi Baksh, AIR 1947 Lah. 177. 39


ABB ABL Ltd. v. Cement Corp. of India, 1999 (3) Raj. 243. 41


Ibid.

Page | 8

have the deciding voice because they constitute the majority. The award with which the law

is concerned is the award of the majority.43

8. Settlement

An arbitral tribunal has to encourage settlement of the dispute and, with the agreement

of the parties, the arbitral tribunal may use mediation, conciliation or other procedure at any

time during the arbitral proceedings to encourage settlement.44

If during arbitral proceedings,

the parties settle the dispute, the arbitral tribunal shall terminate the proceedings and, if

requested by the parties and not objected to by the arbitral tribunal record the settlement in

the form of an arbitral award on agreed terms.45

An arbitral award shall be made in writing and shall be signed by the members of the arbitral

tribunal.46

The arbitral award shall state the reasons upon which it is based unless—

the parties have agreed that no reasons are to be given; or

the award is an arbitral award on agreed terms of the parties.47

The arbitral award shall state its date and the place of arbitration as determined in accordance

with Section 20 (place of arbitration) and the award shall be deemed to have been made at

that place;48

arbitral award is made, a signed copy of it shall be delivered to each party.49

In

other words, receipt of signed copy50

of the arbitral award is an important event in the

arbitration proceeding.51

Ad Hoc & Institutional Arbitration: In Brief

Arbitration may either be ‘Ad hoc’ or it may be ‘institutional’. In Ad hoc arbitration,

the parties jointly select the arbitrator(s) and work out details of the procedure together with

the arbitral tribunal when the dispute arises. The Arbitral Tribunal may also devise its own

43

Fertilizer Corporation of India Ltd. v. IDI Management, AIR 1984 Del. 333; (1984) 26 DLT 149 (DB). 44






Ibid. 50

The award must be signed by the arbitrators. Johara Bibi v. Mohammad Sadak Thambi Marakayur, AIR 1951 Mad. 997 (DB); Deo Narain Singh v. Siabir Singh, AIR 1952 Pat. 461. 51

Reshma Constructions v. State of Goa, 2000 (1) RAJ 552 (Bom). Indurthi Venkata Srinivasa Rao v. Indurthi Narasimha Rao, AIR 1963 AP 193.

Page | 9

procedure. But when parties agree to employ the services of an arbitration institution, it is

termed as institutional arbitration.52

These institutions have framed their own Rules of

arbitration.

It has been generally accepted that institutional arbitration has many advantages as

against the Ad hoc arbitration. Since institutional arbitration is conducted according to its

own set rules and procedure, and supervised by professionally trained staff, it reduces the

risks of procedural breakdowns, particularly of the commencing of the arbitral powers, and

of the possibility of technical defects in the arbitral award. Though Ad hoc is more flexible,

less expensive and more confidential than the institutional arbitration; the trend is to prefer

institutional arbitration because of its certainty, efficacy and international recognition.

Conciliation

In the Halsbury’s Laws of England,53

the term Conciliation has been defined as “a

process of persuading parties to reach agreement.”54

According to the Chambers 21st Century Dictionary, the word ‘conciliate’ means to

win over someone; to overcome the hostility of someone; to reconcile (people in dispute),

etc.55

The provisions of Part III of the Act shall apply to conciliation if disputes which had

been pending before the arbitral tribunal and such disputes must be those which had arisen

between the parties out of legal relationship, whether contractual or not, and to all

proceedings relating thereto. However, the provisions of Part III of the Act shall have no

application if there is any specific prohibition in any other law for the time being in force or

the parties have otherwise agreed to expressly exclude conciliation.56

Features of Conciliation

1. Application and scope of conciliation.

52

The Service if the Indian Council of Arbitration (ICA); the International Chamber of Commerce (ICC) are generally utilized for Institutional Arbitration. 53

4th

Ed., Vol. 2, Paragraph 502. 54

See Supra 12. 55

Sethi, Justice R.P.; Commentary on Law of Arbitration & Conciliation, Vol. 2, Ashoka Law House, New Delhi, 2007, p. 964. 56


Ed., Wadhwa & Company Nagpur, 2006, p. 848.

Page | 10

By way of conciliation a dispute may be settled without litigation out of Court. The

decision is arrived at by the parties themselves through the assistance of a sole-conciliator or

conciliator appointed by the parties separately along with a third conciliator to be appointed

by the consent of both the parties.57

Under Section 62 of the Act, the party initiating conciliation has to send to the other

party a written invitation to conciliate, briefly, identifying the subject of the dispute.58

On

receipt of invitation for conciliation, the other party has a choice either to accept or to reject

the offer. If it is the former, then the conciliation proceedings shall be deemed to have

commenced with the other party confirms in writing its willingness to agree to the said

proposal.59

It is submitted that any oral acceptance of an offer of conciliation shall not be

considered sufficient under the provisions of this section.60

If the other party rejects the

invitation, there will be no conciliation proceedings.61

If the party initiating conciliation does

not receive a reply within thirty days from the date on which he sends the invitation, or within

such other period of time as specified in the invitation, he may elect to treat this as a rejection

of the invitation to conciliate and if he so elects, he shall inform in writing the other party

accordingly.62

2. Procedure to alternate conciliation and dispute settlement.

In Section 64, provision is made that the appointment of conciliators shall be by

agreement of parties or if the parties agree they may request a suitable institution or a person

to appoint a conciliator on their behalf.63

The parties may enlist the assistance of a suitable

institution or person in connection with the appointment of conciliators, and particularly,—

(a) a party may request such an institution or person to recommend the names of suitable

individuals to act as conciliator, or (b) the parties may agree that the appointment of one or

more conciliators be made directly by such institution or person.64

But in recommending or

appointing individuals to act as conciliator, the institution or person shall have regard to such

considerations as are likely to secure the appointment of an independent and impartial

57

Also See Harish Daya Ran Thakur v. State of Maharashtra & Others, 2000 (6) SCC 179; AIR 2000 SC 2281. 58


See Section 62(2) of the Arbitration & Conciliation Act, 1996. Also see State of West Bengal v. Amritlal Chatterjee, 2003 (10) SCC 527; AIR 2000 SC 1295. 60





Harish Daya Ram Thakur v. State of Maharashtra & Others, 2000 (6) SCC 179; AIR 2000 SC 2281. 64

See Section 64(2) of the Arbitration & Conciliation Act, 1996.

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conciliator and, with respect to a sole or third conciliator, shall take into account the

advisability of appointing a conciliator of a nationality other than the nationalities of the

parties.65

When a conciliator is appointed, each party has to submit to the conciliator a brief

within statement describing the general nature of the dispute and the points at issue, and copy

of such statement has to be served on the other party.66

The conciliator may ask each party to

submit a further written statement to him, supplemented by any document and other evidence

and grounds in support thereof. He may ask for further additional information as he deems

fit.67

The provisions of C.P.C. or Evidence Act do not bind the conciliator.68

He may for facilitating the conduct of the conciliation proceedings, arrange

administrative assistance by a suitable institution or person. But for such act, he has to obtain

consent of the parties.69

He may invite the parties to meet him or may communicate with them orally or in

writing. He may meet or communicate with the parties together or with each of them

separately.70

Unless the parties have agreed upon the place where meetings with the

conciliator are to be held, such place shall be determined by the conciliator, after consultation

with the parties having regard to the circumstances of the conciliation proceedings.71

Where

there is no condition in the agreement empowering the arbitrator (or conciliator) to fix the

venue of the arbitration (conciliation) hearing as he thought fir, the arbitrator (or conciliator)

in fixing the venue of the meeting must take into account the material circumstances,

including the residence of the parties and their witnesses, the subject matter of the reference

and the balance of convenience.72

When the conciliator receives factual information concerning the dispute from a party,

he shall disclose the substance of that information to the other party in order that the other

party may have the opportunity to present any explanation which he considers appropriate.73

65

See Proviso to Section 64(2) of the Arbitration & Conciliation Act, 1996. See also Sethi, Justice R.P.; Commentary on Law of Arbitration & Conciliation, Vol. 2, Ashoka Law House, New Delhi, 2007, p. 972. 66






Ibid. 72

UP Ban Nigam v. Bishan Nath Goswami, AIR 1985 All. 351. 73


Page | 12

But when a party gives any 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.74

The Apex Court observed75

that “In Section 70 provision is made regarding disclosure of

information therein it is provided, inter-alia, that when the conciliator receives factual

information concerning the dispute form a party, he shall disclose the substance of that

information to the other party in order party have the opportunity to present any explanation

which he considers appropriate. In the proviso to the Section it is stated that when a party

gives any 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.”

The parties shall in good faith co-operate with the conciliator and in particular, they

shall endeavour to comply with the requests made by the conciliator to submit written

materials, they shall provide evidence and attend the meetings before the conciliator.76

Each party may on his own initiative or at the invitation of the conciliator, submit to

him the suggestions for settlement of the dispute.77

3. Status and effect of settlement agreement.

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 observation of the parties, the

conciliator may reformulate the terms of a possible settlement in the light of such

observations.78

If the parties reach an agreement or 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 the settlement agreement.79

When the parties sign the settlement agreement, it shall

be final and binding on the parties and persons claiming under them respectively.80

The

conciliator shall authenticate the settlement agreement and furnish a copy thereof to each of

the parties.81

74

See Proviso to Section 70 of the Arbitration & Conciliation Act, 1996. 75

Harish Daya Ram Thakur v. State of Maharashtra and Others, 2000 (6) SCC 179; AIR 200 SC 2281. 76





See Section 73(3) of the Arbitration & Conciliation Act, 1996. Also see Haresh Daya Ram Thakur v. State of Maharashtra and Others, AIR 2000 SC 2281. 81


Page | 13

The settlement agreement shall have the same status and effect as if it is an arbitral

award on agreed terms on the substance of the dispute rendered by an arbitral tribunal under

Section 30 of the Arbitration & Conciliation Act, 1996.82

It is only that agreement which has been arrived at in conformity with the manner

stipulated and form envisaged and got duly authenticated in accordance with this section,

alone can be assigned the status of a settlement agreement within the meaning if and for

effective purpose of the Act and not otherwise.83

4. Principle of fairness and justice to be followed.84

Doctrine of ‘fairness’ and the duty to act fairly is a doctrine developed in the

administrative law field to ensure the rule of law and to prevent failure of justice. It is a

principle of good conscience and equity since the law courts are to act fairly and reasonably

in accordance with the law.85

The conciliator is obliged to be guided by the principle of

fairness and justice objectively. He has to keep in consideration the rights and obligations of

the parties besides other things. He has to take into consideration the usages of the concerned

trade and surrounding circumstances of the case-dispute and the .previous business practices

in use between the parties. The conciliator has to assist the parties in an independent and

impartial manner to reach at an amicable settlement.86

He is to be guided by principles of

objectivity, fairness and justice. He has to consider the rights and obligations of the parties.

He has to keep in mind the usages of the trade concerned and the circumstances surrounding

the dispute, including any previous business practices between the parties.87

He may conduct

the proceedings in such a way as he thinks appropriate. He has to take into account the

circumstances of the case, the wishes of the parties. At the request of a party, he may hear

oral statements due to need of speedy settlement of the dispute.88

He may make his proposals

for settlement of a dispute at any stage of the proceedings. Such proposals need not be in

writing or to accompany reasons for the settlement.89

82


Mysore Cements Ltd. v. Svedala Barmac Ltd., AIR 2003 SC 2494; (2003) 10 SCC 375. 84


Tata Iron and Steel Co. Ltd. v. Union of India and Others, 2001 (2) SCC 41; AIR 2000 (SC) 3706. 86





Page | 14

5. Confidentiality of the information, etc. to be kept in conciliation procedure.90

Without any consideration to anything contained in any other law otherwise, the

conciliator and the parties are obliged to keep confidential all matters relating to the

conciliation proceedings. This confidentiality provision shall be applicable also to the

settlement, agreement, except where the disclosure is necessary for the purposes of the

implementation and enforcement of the settlement agreement arrived at and authenticated by

the conciliation.

6. Termination of conciliation proceedings.91

The conciliation proceedings shall be terminated—

o by the signing of the settlement agreement by the parties on the date of

the agreement; or

o 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; or

o by a written declaration of the parties addressed to the conciliator to

the effect that the conciliation proceedings are terminated, on the date

of the declaration; or

o by a written declaration of a party to the other party and the conciliator,

if appointed, to the effect that the conciliation proceedings are

terminated, on the date of the declaration.

7. Costs of conciliation proceedings.92

Upon termination of the conciliation proceedings, the conciliator shall fix the costs of

the conciliation and give written notice thereof to the parties.93

For the purpose, “costs” means reasonable costs relating to—

the fee and expenses of the conciliator and witnesses requested by the conciliator with

the consent of the parties;

90





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any expert advice requested by the conciliator with the consent of the parties;

any assistance provided pursuants Section 64(2)(b) and Section 66, that is to say,

where—

o to appoint a Conciliator in conciliation proceedings with two conciliator, each

party may appoint one Conciliator;

o in order to facilitate the conduct of the conciliation proceedings, the parties or

the conciliator with the consent of the parties arranges for administrative

assistance by a suitable institution or person.

any other expenses incurred in connection with the conciliation proceedings and the

settlement agreement.

The costs shall be borne equally by the parties, unless the settlement agreement

provides for a different apportionment. All other expenses incurred by a party shall be borne

by that party.94

The conciliator may direct each party to deposit an equal amount as an advance for

the costs aforesaid, which he expects to be incurred.95

During the course of the conciliation

proceeding, the conciliator may direct supplementary deposits in an equal amount from each

party.96

If such aforesaid required deposits are not paid in full by both parties within thirty

days, the conciliator may suspend the proceedings or may make a written declaration of

termination of the proceedings to the parties, to be effective on the date of such declaration.97

Upon such termination of the conciliation proceedings, the conciliator shall furnish accounts

of the proceedings and of the deposits received and return any unexpected balance to the

parties.98

Mediation

According to the Encyclopaedia of the Laws of England, mediation is the technical

term in international law which signifies the interposition by a neutral and friendly state

between two states at war or on the eve of war with each other, of its good offices to restore

94






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or preserve peace. The term is sometimes used as a synonym of intervention, but mediation

differs from it is being purely a friendly act. The phrase armed mediator is a misnomer.99

As per Black’s Law Dictionary100

mediation is the method of non-binding dispute

resolution involving a neutral third party who tries to help the disputing parties reach a

mutually reachable solution.

The employment of the procedures of good offices and mediation involves the use of

a third party, whether an individual or individuals, a state or group of states or an

international organisation, to encourage the contending parties to come to a settlement.

Unlike the techniques of arbitration, the process aims at persuading the parties to a dispute to

reach satisfactory terms for its termination by themselves. Provisions for settling the dispute

are not prescribed.101

As a form of alternative dispute resolution, mediation involves the act of a neutral

third party (usually a retired Judge or an experienced lawyer) to facilitate the settlement of

dispute between the two contending parties. It differs from arbitration in the sense that

arbitration is governed by the arbitration agreement wherein the arbitrator is nominated by

the disputant parties. The mediator often asks the parties to put forth their views and claims in

a joint session before melting them separately to explore the possibilities of settlement of the

dispute. However, unlike an arbitration award, the settlement arrived at the end of the

mediation does not have the binding effect on the parties. So also, the settlement made

through the process of mediation is not enforceable as a decree of the Court as in the case of

an arbitral award which has the status and recognition as a decree passes by a Civil Court.102

Though the mediator is not required to follow the procedural law in arriving at a

settlement between the contending parties, he must not act contrary to the principles of

natural justice and fair play. He should be impartial and neutral in his conduct of negotiation

with the parties.

Mediation as an alternative dispute resolution method is being increasingly used in the

commercial sector at national and international level because it is relatively cheap, less time

99



Seventh Ed., p. 996. 101

Shaw, Malcom N., International Law, 6th

Ed., Cambridge University Press, New York, 2008. p. 1018. 102

Paranjape, Dr.V.N.; Arbitration and Alternative Dispute Resolution, 3rd

. Ed., Central Law Agency, Allahabad 2006, p. 266.

Page | 17

consuming and settles disputes in a consensual manner. This mode of settlement being out of

the purview of formal legislative enactment helps the parties to avoid rigid legal procedures

and technicalities of law and reach a solution with their mutual consent.103

Emphasizing the need for utilization of ADRs including conciliation, mediation, etc.

as means of settlement of disputes, the Apex Court in Guru Nanak Foundation v. Rattan

Singh & Sons104

observed:

"Interminable, time consuming, complex and expensive Court procedure impelled

jurists to search for an alternative forum, less formal, more effective and speedy for

resolution of disputes avoiding procedural claptrap and this led them to the Arbitration Act,

1940. However, the way in which the proceedings under the Act are conducted and without

exception challenged in Court, has made lawyers laugh and legal philosophers weep.

Experience shows and law reports bear ample testimony that the proceedings under the Act

have become highly technical, accompanied by unending prolixity, at every stage providing a

legal trap to the unwary. Informal forum chosen by the parties for expeditious disposal of

their disputes has by the decision of the Courts, been clothed with 'legalese' of unforceable

complexity.”

In yet another case, the Supreme Court in Raipur Development Authority v.

Chokhamal Contractors,105

inter-alia, observed:

“The system of dispute resolution has of late, acquired a certain degree of notoriety

by the manner in which in many cases, the financial interests of Government have come to

suffer by awards which have raised eyebrows by doubts as to their rectitude and propriety.”

Restrictions on Mediator106

Mediation not being a statutory process, the powers of mediator is not defined under

any statute. His main function is to appraise the parties about the pros and cons relating to

the subject – matter of the dispute and help them in reaching a settlement by mutual

consent. There are, however, certain restrictions on the powers of a mediator which may

briefly be stated thus:

103

Ibid. 104

AIR 1981 SC 2071, 2076. 105

AIR 1990 SC 1426. 106

See Paranjape, Dr.V.N.; Arbitration and Alternative Dispute Resolution, 3rd

. Ed., Central Law Agency, Allahabad 2006, p. 268.

Page | 18

He cannot compel attendance of any person or production of any document.

Mediation being a consensual process, there is no question of mediator

making an ex parte settlement.

The settlement arrived at by mediator lacks enforceability because of the

non-statutory nature of his functions.

He can only persuade the parties to reach a settlement and has no power to

compel them to accept his settlement decision.

He functions as a mediator only till the parties so desire and seizes to act as

such if any party withdraws his consent.

The mediator cannot modify or alter the subject-matter of the dispute; and

He has no power, to penalise a recalcitrant party.

As stated earlier, the settlement made by, the mediator is not legally enforceable

because it lacks statutory recognition. Therefore, the enforcement of settlement made by

mediator depends upon the willingness of the parties. However, if the settlement is

converted into a written agreement between the parties, it becomes enforceable like any

other contract under the law of contracts. Section 74 of the Arbitration and Conciliation

Act, 1996 also supports this contention.

The Delhi High Court in Union of India v. M/s Jagat Ram107

has held that if the

settlement made by the Mediator/conciliator is beyond the scope of the subject-matter of the

dispute itself, the Court may refuse execution thereof although the parties have not

challenged the same and are agreed for its execution.

Negotiation

Negotiation falls in the category of Alternative Dispute Resolution, which is

preventive in nature. It signifies resolving disputes by dialogue. It is perhaps the most ancient

tradition of resolving dispute which mankind has known. In face one negotiates everyday

willingly or unwillingly – even when there is no dispute.

Of all the procedures used to resolve differences, the simplest and most utilised form

is understandably negotiation. It consists basically of discussions between the interested

parties with a view to reconciling divergent opinions, or at least understanding the different

107

AIR 1996 Del. 191. See also Ram Singh v. G.A. Cooperative Service Society, AIR 1976 P&H 94.

Page | 19

positions maintained. It does not involve any third party, at least at that stage, and so differs

from the other forms of dispute management. In addition to being an extremely active method

of settlement itself, negotiation is normally the precursor to other settlement procedures as the

parties decide amongst themselves how best to resolve their differences.108

It is eminently

suited to the clarification, if not always resolution, of complicated disagreements. It is by

mutual discussions that the essence of the differences will be revealed and the opposing

contentions elucidated. Negotiations are the most satisfactory means to resolve disputes since

the parties are so directly engaged.109

In some countries scientific techniques of negotiation have been developed. There are

courses on negotiation. Many institutions impart training. A real negotiation applies win-win

situation in which all parties are satisfied. There are certain techniques, viz., analysing the

interest of the parties and planning negation and determining the parameters. There are

various parameters which are stated. What are the expectations from the negotiations? What

is the minimum that an agreement can reach or what is the negotiation strategy? What are the

most important interests of the parties? How does one interact with or manage people? The

next stage is to select the appropriate negotiation techniques which include adapting the

changing situation without losing sight of the objective; avoiding confrontation and trying to

understand the interest of the other party. Some aspects which can interfere with negotiation

are personal position and interest, psychological and emotional aspects of the persons,

difficulty in communication, etc.110

Negotiations are generally characterized by two types of strategies: one is called

adversarial strategy and the other is called problem-solving strategy. An adversarial strategy

seeks to maximize the gain without regard to how the other participants fare – to win as much

as can be won by agreement. It assumes:

(a) Limited resources which are to be distributed – what is gained by one negotiator is

lost by the other.

(b) All participants are in conflict over-limited, resources offers, counteroffers, and

bargaining power – resulting in agreement of failure.

108

See Judge Nrevo, Fisheries Jurisdiction Case, ICJ Reports, 1973, p. 3, p. 45; 55 ILR p. 183, 225. 109

Shaw, Malcom N., International Law, Cambridge University Press, New York, 6th

Ed., 2008. p. 1014. 110

Mohta, V.A. & Mohta, Anoop V.; Arbitration, Conciliation & Mediation, Manupatra, 2nd

Ed., 2008, p. 541.

Page | 20

Labour management negotiations fall in this category. The outcome depends on the

bargaining power. On the other hand, a problem-solving strategy resolves around ‘interest’,

instead of ‘positions’, i.e. the position in which two persons are placed. It seeks fair deal or

solution. It seeks to promote mutual gain, that is ‘win-win’ situation for both the parties, and

here interaction or the correlation between negotiation and other form of Alternative Dispute

Resolution comes into being. Let us again take an example of industrial disputes. In the

process of bargaining, one party, usually labour, is weak. However, a labour union, thinking

that it is not able to negotiate properly, may go to a conciliator, i.e. it invokes conciliation

machinery provided under the Industrial Disputes Act. The conciliation officer, here, acts as a

facilitator. He may be a negotiator for both the parties. In fact, the third person is a facilitator

who facilitates the negotiations and there is his role to see that there should be a proper and

fair solution, agreement, or settlement where both the parties are in ‘win-win’. So, even in

negotiations it may not be necessary that two parties are negotiating between themselves.

Even negotiating skills are required, and mediators and conciliators as well, where they have

to ensure proper settlement and if they know these techniques, they will be able to get the

matter settled between the parties or would be able to facilitate such a settlement.111

What makes mediation different from negotiation is the involvement of a mediator.

Role of a neutral is to facilitate or help the parties to resolve their differences. The power of

having a third person in a room whose only agenda is to help the negotiating process do

better and if possible to reach a settlement can help transform a dispute. For this reason

mediation has also been defined as ‘assisted negotiation’.112

111

Negotiation – Alternative Mode of Dispute Resolution’ by Justice A.K. Sikri, Judge, Delhi High Court Cited by Mohta, V.A. & Mohta, Anoop V., Arbitration, Conciliation & Mediation, Manupatra, 2

nd Ed., 2008, p. 542.

112 See Supra 110.

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procedures of alternate dispute resolution

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