A distinctive study between the ADR Mechanism: Arbitration vs Conciliation

INTRODUCTION

Alternative Dispute Resolution[1] mechanism is becoming prevalent across the globe since its inception. Undeniably, people have started to find it more convenient to resolve their disputes through these methods rather than complexing their ways into conventional court proceedings. When compared to the regular judicial proceedings, ADR mechanism is more flexible, party centric and pocket friendly which consequently captivates the parties towards opting for it. The mechanism includes diverse methods of dispute resolution in the form of mediation, negotiation, arbitration, conciliation, Lok-Adalat etc., out of which the party could apt the method suitable to its state of affairs. ADR is though a modern but a rapidly growing concept which purports towards settlement of disputes in an amicable and swift manner particularly concerning rights in personam. One of the prominent rationales behind its evolution is the mounting arrears of pending cases in the Indian Courts due to inordinate delay in the delivery of justice, the other being, the expenses of litigation.

Arbitration and Conciliation are two of the most prominent ADR methods which the parties, in most cases, prefer to resolve their disputes. These two ADR methods have been given statutory recognition under the ARBITRATION & CONCILIATION ACT, 1996[2] under the Indian legal context. The analysis is thoroughly based on comparing both these methods distinctively in a comprehensive manner.

ARBITRATION

The Act of 1996 provides that “any arbitration whether it is administered by any permanent arbitral institution or not”[3] will fall within the meaning of arbitration, thus, the definition is a mere classification that the act covers institutional and ad hoc arbitration, however it is silent upon the meaning of arbitration. Thus this definition to some extent could be relied on the definition provided by the UNCITRAL Model Law[4]. The literal meaning of arbitration is a process of settlement of all or certain disputes or differences between two or more parties wherein an arbitrator determines the rights and liabilities of the parties after adjudicating the matter and such adjudication is binding upon the parties. Arbitration as defined by Romilly M R

as means “a reference to the decision of one or more persons, either with or, without an umpire of a particular matter in difference between the parties.”[5]

It is pertinent to understand that Arbitration finds its origin from an arbitration agreement[6]. An arbitration agreement gives right to the parties to initiate arbitral proceedings when the rights of the parties are violated or obligation of the parties are not being discharged.

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CONCILIATION

Conciliation is a less formal way of Alternative dispute resolution method. It is inclined towards building a healthy relationship between the parties. In the process of Conciliation the third neutral party i.e. the conciliator plays an active role in the actual settlement of disputes and even suggests the parties the proposals of settlement to amicably resolve the dispute. The conciliator, usually the authoritative figure, is responsible for working towards the best interest of the disputing parties by giving the best solutions.  Conciliation has been given statutory recognition under Part III of the Act of 1996.[7] The scope of conciliation extends to the disputes, whether contracted or not but it is essential that such dispute must arise out of the legal relationship.[8] It means that the dispute must be of such a nature that is must give rise to the right and liability of the parties to sue and be sued.

ARBITRATION v. CONCILIATION

Though both, arbitration and conciliation are methods of ADR mechanism they differ in many vital aspects. The major similarity between these two methods is the appointment of the third neutral party to resolve the dispute. The essential points of distinction between the two are stated as following:

  1. NATURE OF PROCEEDINGS:

The conciliation proceeding as compared to arbitration is less formal in nature. It means the process of adjudicating the rights and liabilities of the parties is absent rather under this process, to resolve the dispute, several communication sessions are initiated and held by the conciliator, individually or collectively, in which the conciliator becomes aware of the root cause of dispute and subsequently reach to an inference which is in the best interest of both the parties.[9]

  1. APPLICABILITY:

Unlike the Conciliation which is applicable only to existing disputes, Arbitration can be made applicable to both, existing and future disputes. The only requirement is that while constituting an agreement there must be an arbitration clause which gives sanction to the arbitral proceeding. The bindingness of the clause is such that even if the principal contract is repudiated, the arbitration clause will survive due to its independence.[10]

  1. INITIATION Of PROCEEDINGS

The proceeding of conciliation is initiated by the party willing to conciliate by means of sending a written invitation to the other party which also includes the subject-matter of the dispute subsequently the other party may give his written acceptance to it. However if he rejects the invitation, it will have no binding effect and consequently the conciliation proceedings shall not commence whereas the constitution of prior arbitration agreement has binding effect on the parties and even if one of the parties approach the court to commence regular court proceeding, the court, on request of the other party, is bound to compel the parties to resort to arbitral proceedings.[11]

  1. APPOINTMENT OF THIRD NEUTRAL PARTY

Under the arbitration process the parties if, fail to determine the number of arbitrators, which should always be even, the act provides for the appointment of sole arbitrator.[12] Whereas in case of conciliation, by default, a sole conciliator is sufficient however the parties can appoint one conciliator each.

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Under Arbitration, if the parties opt to appoint a panel of three arbitrators, each party may appoint an arbitrator and the appointed arbitrators will appoint the third arbitrator. However in case of conciliation, each party may appoint one conciliator and agree upon the name of the third conciliator.[13]

  1. ROLE OF THIRD PARTY

Unlike arbitration where the arbitrator not only actively arbitrates but also resolves the dispute by passing an arbitral award, in conciliation the role of conciliator is to assist and suggest the parties to reach an amicable settlement of their dispute.[14]

  1. DISCLOSURE OF INFORMATION:

In conciliation, on request of the other party, the conciliator may withhold information.[15]

But it is not so in arbitration as the information given by a party is subjected to scrutiny by the other party. Thus there is no question of confidentiality in case of arbitration awards. There is no confidentiality inter se the parties, however, all ADR systems are confidential procedures, they are not available to the public as precedents as referable records of case laws.

  1. TERMINATION OF PROCEEDINGS:

The conciliation proceedings may be unilaterally terminated by a written declaration of a party to the other party and the conciliator, but arbitration proceedings cannot be so terminated.[16]

  1. DISABILITIES:

A conciliator once appointed is imposed upon with certain disabilities like he cannot act in the capacity of an arbitrator or a council or a witness in any proceeding whether arbitral or judicial[17] whereas there is no such bar upon the arbitrator or the parties to an arbitral proceedings.

  1. ENFORCEABILITY

An Arbitral award is enforceable as a decree of a civil court[18] however the decision of conciliator is non-enforceable but if the decision is the result of mutual settlement between the parties, it will have the same status as that of an arbitral award and it may be enforced as a valid contract.

  1. EVIDENTIARY VALUE

Unlike the arbitration proceedings which have evidential value in the eyes of law, conciliation proceedings cannot be used as evidence in any proceedings.[19]

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CAN A CONCILIATOR ARBITRATE?

The UNCITRAL Conciliation Rule, 1980[20] and the Act of 1996[21] both expressly provide that a conciliator shall not be an arbitrator for the same dispute which he/she has conciliated. However Justice Kannan

[22] held that if there is an arbitration clause, agreement or contract between the parties, the council who had conciliated in the dispute, on termination of such proceedings, can be appointed as an arbitrator.

CONCLUSION

Both these ADR methods are objected towards alleviating the burden from the judiciary thus it can be seen as a sustainable methods of Alternative dispute resolution in coming decades, however these methods should not be seen as a substitute to the traditional judicial proceedings rather it must been seen as an enhancement in working of our judicial system more effectively and conveniently.

[1] Hereinafter to be read as ADR mechanism.

[2] Hereinafter to be read as the ACT OF 1996.

[3] Section 2(1)(a) of the Arbitration & Conciliation Act, 1996.

[4] Article 2(a) of the United Nations Commission on International Trade Law.

[5] Collins v. Collins 28 LJ CH 186: (1858) 26 Beav 306.

[6] Section 2(1)(b)  of the Arbitration & Conciliation Act, 1996.

[7] Sections 61 to 81 of the Arbitration & Conciliation Act, 1996.

[8] Section 61 of the Act of 1996.

[9] Section 69 of the Act of 1996.

[10] Doctrine of Separability, governed by Section 16(1)(a) & (b) of the Act of 1996.

[11] Section 8 of the Act of 1996.

[12] Sub-section (1) & (2) of section 10 of the Act of 1996.

[13] Sub-section (3) of section 11 & clause (c) of sub-sec (1) of section 64 of the Act of 1996.

[14] Section 72 of the Act of 1996.

[15] Section 70 of the Act of 1996.

[16] Section 32 & Section 76 of the Act of 1996.

[17] Section 80 of the Act of 1996.

[18] M/S Umesh Goel v. Himachal Pradesh Cooperative Grouping House Society Ltd., 2016 SCC OnLine SC 624

[19] Section 81 of the Act of 1996.

[20] The Constitution of India, 1949, Article 19.

[21] Supra note 18.

[22] Welspun Corp. Ltd v. Micro and Small, Medium Enterprises Facilitation council, Punjab and Ors. 2012 166 PLR 195.

Author: Aman Pandey,
Faculty of Law, University of Lucknow 4th Year

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