CHAPTER – 4
CONCILIATION
1. Introduction
Conciliation is an important method of Alternative Dispute
Resolution (ADR) in which a neutral third party, known as
a conciliator, assists the disputing parties in reaching an
amicable settlement. It is a voluntary, flexible, and non-
adjudicatory process.
Unlike arbitration, where the arbitrator gives a binding
decision, in conciliation the conciliator only facilitates
communication and suggests possible solutions. The final
settlement depends entirely on the consent of the parties.
In India, conciliation is governed by Part III of the
Arbitration and Conciliation Act, 1996. The provisions
relating to conciliation are based on the UNCITRAL
Conciliation Rules.
Conciliation is widely used in commercial, industrial,
labour, and contractual disputes. It helps in preserving
relationships and promotes cooperative dispute resolution.
2. Meaning and Definition
Conciliation is a process in which a neutral third party
assists the disputing parties to arrive at a mutually
acceptable settlement.
Although the Arbitration and Conciliation Act, 1996 does
not provide a strict definition, conciliation can be
understood as:
“A process whereby a conciliator meets with the parties,
identifies the issues, and helps them to resolve their dispute
through mutual agreement.”
Key elements of conciliation include:
• Voluntary participation of parties
• Presence of a neutral conciliator
• Non-binding nature until settlement is reached
• Emphasis on cooperation and communication
3. Nature and Characteristics of Conciliation
Conciliation has the following essential features:
(A) Voluntary Process
The process is entirely based on the willingness of the
parties. Either party may initiate or withdraw from
conciliation at any stage.
(B) Non-Adjudicatory
The conciliator does not decide the dispute but only
facilitates settlement.
(C) Flexible Procedure
There are no strict procedural rules, and the process can be
tailored according to the needs of the parties.
(D) Confidentiality
All matters relating to conciliation are kept confidential.
This encourages open communication between the parties.
(E) Neutral Third Party
The conciliator must act impartially and independently.
(F) Party Autonomy
The parties have full control over the outcome of the
dispute.
4. Difference between Arbitration and
Conciliation
Basis Arbitration Conciliation
Nature Adjudicatory Non-adjudicatory
Binding award by Settlement by mutual
Decision
arbitrator consent
Role of Third
Decides dispute Facilitates settlement
Party
Formality More formal Informal
Outcome Imposed decision Agreed solution
5. Commencement of Conciliation Proceedings
Conciliation proceedings begin when one party sends a written
invitation to the other party to conciliate.
If the other party accepts the invitation, conciliation
proceedings commence.
If the invitation is rejected or not accepted within a reasonable
time, there will be no conciliation.
6. Appointment of Conciliators
The appointment of conciliators is governed by the Arbitration
and Conciliation Act, 1996.
Number of Conciliators
• There may be one conciliator, or
• Two or three conciliators
Generally, a sole conciliator is preferred.
Procedure
• Parties may agree on the appointment.
• If there are two conciliators, each party appoints one.
• If there are three conciliators, each party appoints one, and
the third acts as the presiding conciliator.
Qualifications
The conciliator must be:
• Independent
• Impartial
• Skilled in negotiation and dispute resolution
7. Role and Functions of Conciliator
The conciliator plays a crucial role in resolving disputes. His
functions include:
1. Facilitating communication between parties
2. Identifying issues in dispute
3. Suggesting possible solutions
4. Encouraging compromise
5. Maintaining fairness and neutrality
The conciliator may conduct joint meetings or separate
meetings with the parties.
He may also propose settlement terms at any stage of the
proceedings.
8. Procedure of Conciliation
The procedure is flexible and not bound by strict legal rules.
Steps involved:
1. Submission of statements by parties
2. Exchange of information
3. Meetings and discussions
4. Identification of issues
5. Proposal of settlement terms
The conciliator may consider:
• Rights and obligations of parties
• Trade practices
• Circumstances of the case
9. Confidentiality in Conciliation
Confidentiality is one of the most important aspects of
conciliation.
• All information disclosed during conciliation is
confidential
• Parties cannot use such information in future proceedings
• The conciliator must not disclose any information without
consent
This ensures trust and openness in discussions.
10. Settlement Agreement
When parties reach an agreement, it is reduced to writing and
signed by the parties.
Legal Status
As per Section 74 of the Arbitration and Conciliation Act,
1996, the settlement agreement has the same status as an
arbitral award.
It is final and binding on the parties.
11. Termination of Conciliation Proceedings
Conciliation proceedings may be terminated in the following
ways:
1. Signing of settlement agreement
2. Written declaration by conciliator
3. Written declaration by parties
4. Withdrawal by either party
12. Advantages of Conciliation
1. Cost-effective
2. Time-saving
3. Confidential process
4. Preserves relationships
5. Flexible and informal
6. Voluntary participation
7. Mutually beneficial outcome
13. Disadvantages of Conciliation
1. No guaranteed result
2. Depends on cooperation of parties
3. No binding decision without agreement
4. May be time-consuming if parties are unwilling
14. Conciliation in India: Practical Importance
Conciliation is widely used in:
• Industrial disputes
• Commercial disputes
• Family disputes
• Labour disputes
It is especially useful where parties want to maintain long-term
relationships.
15. Judicial Approach towards Conciliation
Indian courts have encouraged the use of conciliation.
In Salem Advocate Bar Association v. Union of India, the
Supreme Court emphasized the importance of ADR
mechanisms including conciliation.
Courts often refer cases to ADR to reduce pendency and
promote amicable settlement.
16. Difference between Mediation and
Conciliation
Although similar, there are slight differences:
• In conciliation, the conciliator may suggest solutions.
• In mediation, the mediator mainly facilitates
communication.
Conciliation is slightly more interventionist than mediation.
17. Conclusion
Conciliation is an effective and efficient method of dispute
resolution. It promotes harmony, cooperation, and mutual
understanding between parties.
The Arbitration and Conciliation Act, 1996 has provided a
strong legal framework for conciliation in India.
With increasing emphasis on ADR, conciliation is gaining
importance as a preferred method for resolving disputes,
especially where preservation of relationships is essential.