INDEX

S.No. Particulars Page.

No.
1.
1. Introduction
2. What is Arbitration? 2. - 3.

4. What is Conciliation? 4.

5. ARBITRATION V. 5. - 9.
CONCILIATION: VITAL
DIFFERENCES:

6. Conclusion 10. – 11.

7. Bibliography 12. – 13.

 INTRODUCTION
ADR (alternative dispute resolution) are processes used to resolve
disputes, either within or outside of the formal legal system,
without formal adjudication and decision by an officer of the state.
The term ‘appropriate’ dispute resolution is used to express the idea
that different kinds of disputes may require different kinds of
processes—there is no one legal or dispute resolution process that
serves for all kinds of human disputing. Mediation is a process in
which a third party (usually neutral and unbiased) facilitates a
negotiated consensual agreement among parties, without rendering
a formal decision. In arbitration, which resembles formal
adjudication the most, a third party or panel of arbitrators, most
often chosen by the parties themselves, renders a decision, in terms
less formal than a court, often without a written or reasoned
opinion, and without formal rules of evidence being applied. The
full panoply of processes denominated under the rubric of ADR now
includes a variety of primary and hybrid processes, with elements of
dyadic negotiation, facilitative, advisory and decisional action by a
wide variety of third party neutrals, some-times combined with
each other to create new formats of dispute processing. Human
conflict is inevitable. Most conflicts that result in legal action are
resolved outside of the courtroom and many of the conflict that is
resolved by the judges would best be resolved outside of court.
Alternative Dispute Resolution (ADR) is the name given to methods
of dispute resolution other than court-based litigation. Global trend
has progressed towards wide spread use of Arbitration and
Conciliation as the most common methods of dispute resolution.
Both are fundamentally different. However, the Union of India
incorporates these methods as valid alternate methods of dispute
resolution, by the ARBITRATION AND CONCILIATION ACT, 1996.
WHAT IS ARBITRATION?

In the terms of sub-section (1) (a), arbitration means “any

arbitration whether or not administered by permanent arbitral
institution”. Law encourages parties as far as possible, to settle
their differences privately either by mutual concessions or by the
mediation of a third person. When the parties agree to have their
disputes decided with the mediation of a third person, but with all
the formality of a judicial adjudication, that may be, speaking
broadly, called as arbitration. Arbitration, therefore, means the
submission by two or more parties of their dispute to the judgment
of a third person called the “arbitrator”, and who is to decide the
controversy in a judicial manner.
“Arbitration” is thus defined by Romilly M R in the well-known
case of Collins v Collins1: “An Arbitration is 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.” The act
does not provide definition of word Arbitration but its literally
recognized meanings - settlement of differences or disputes by
mutual understanding or agreement by the parties where the rights
and liabilities of the parties are adjudicated which are binding on
them, such settlement may be before the arbitral tribunal but not by
the court of law
However, the definition in section 2(1) (a) of the said act is merely
a clarification that the act covers institutional and ad hoc
arbitration. This definition is based on the definition mentioned in
clause (a) of article 2 of UNCITRAL model law. According to that
provision the expression arbitration is defined as under:-

1
28 LJ CH 186: (1858) 26 Beav 306
 “………Arbitration is the means by which the parties to dispute get
the matter settled through the intervention of an agreed third
person. Arbitration is a process that is carried out pursuant to an
agreement to arbitrate the disputed matter.”
According to Halsbury -
“Arbitration means the reference of dispute or difference between
not less than two parties , for determination, after hearing both
sides in a judicial manner , by a person or persons other than a
court of competent jurisdiction.”
Whatever be the type of dispute, the matter in dispute must be of a
civil nature. Matters of criminal nature cannot be referred to
arbitration. In most cases, reference to arbitration shuts out the
jurisdiction of the courts, except as provided in the Act and since
criminal courts cannot be deprived of their jurisdiction to try
criminals, no criminal matter can be referred to arbitration.
The Supreme Court has passed the following observation on why
arbitration should be preferred. “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
so that the litigant has faith in the speedy process of resolving their
disputes”.
WHAT IS CONCILIATION?

Part 3 of the Arbitration & Conciliation Act deals with Conciliation.

Conciliation means settling of disputes without litigation.
Conciliation is the process by which discussion between parties is
kept going through the participation of the conciliator. S.61 points
out that the process of conciliation extends to disputes, whether
contracted or not. But the disputes must arise out of the legal
relationship. It means that the dispute must be such as to give one
party the right to sue and the other party the liability to be sued.
The Act of 1940 used the word difference but in the new Act in place
of difference the word dispute has been used. However, the word
‘Dispute’ has not been defined in the new Act of 1996. The word
dispute under ordinary parameters implies an assertion of right by
one party and repudiation by another party. The word ‘difference’
has a wider meaning but the word ‘dispute’ is more positive and the
difference between the parties when assumed a definite and
concrete form they became dispute.
Conciliation involves building a positive relationship between the
parties. The conciliator plays a relatively direct role in the actual
resolution of a dispute and even advises the parties on certain
solutions by making proposals for settlement. In conciliation, the
neutral is usually seen as an authority figure that is responsible for
figuring out the best solution for the parties. The conciliator, not the
parties, often develops and proposes the terms of settlement. The
parties come to the conciliator seeking guidance and the parties
make decisions about proposals made by conciliators.
ARBITRATION V. CONCILIATION:
VITAL DIFFERENCES:

Though like arbitration, conciliation is also another means of

settling disputes, they two differ in many vital aspects. The only
similarity that appears between the two is that a third person is
chosen or nominated by the parties to resolve their disputes.

The main points of difference between arbitration and conciliation

may be stated as follows:-

The method of conciliation is generally applicable to existing

disputes, while the mode of arbitration is available for existing as
well as for the future disputes. While making a contract, they can
input a clause wherein any dispute arising out of their contractual
relationship in future can be referred to arbitration. Such a clause is
binding on the parties. An arbitration agreement is governed by the
doctrine of seperatibility i.e., it is a binding contract in itself which
accords compulsory execution as and when a dispute arises. {S. 7(2)
of Arbitration and Conciliation Act, 1996} The conciliation
proceedings start by sending a written invitation and a written
acceptance thereof in between the parties. The invitation may be
accepted. {S. (62), Arbitration and Conciliation Act, 1996} or
rejected by the other party as it has no binding effect, being an
invitation only. The prior written agreement in arbitration
commands a binding effect upon the parties and its breach by
resorting to court, compels court to refer the matter to the
arbitration and parties are bound by the arbitral agreement. In
arbitration, the arbitration agreement itself suggests for redressal
of disputes through arbitration and if any party approaches court,
the other party may request the court to refer the matter to
arbitration and court is bound to refer such matter to the arbitral
Tribunal.
➢ While conciliation proceedings are in progress, there is a bar on
parties from initiating arbitral or judicial proceedings as per section
77 of the new act 1996.
➢ Where parties fail to determine the number of arbitrators which
should always be even, the act provides on such failure for a sole
arbitrator. However, in case of conciliation, by default, only one
arbitrator is enough. The parties however can appoint one
conciliator each, these two need not appoint the third one. Parties
may agree for two or three conciliators and maximum number of
conciliators cannot exceed three. Where the number of conciliators
is more than one, they as a matter of general rule should act jointly.
In case of arbitrators there is no bar on their maximum number but
the total should not be even number. When parties agree for three
arbitrators, each party shall appoint one and these two shall appoint
the third arbitrator who shall be presiding arbitrator. {S.10 and
S.63, Arbitration and Conciliation Act, 1996.} In Ethiopian Airlines
v. Stic Travels (P.) Ltd2., the Apex Court explained the scope of this
provision,
“……Two arbitrators shall appoint the third arbitrator who acts as
chairman. He cannot be deemed to be an umpire even if one of the
nominated arbitrators of party dies, no fresh right accrues to
appoint fresh chairman.” In Narayan Prasad Lohia v. Nikunj Kumar
Lohia3, the court again explained that the section 11 will apply
mutatis mutandis if the parties fail to specify the number of
arbitrators. Also, in a landmark ruling in the same case, the court
said that it is not necessary to appoint a 3rd arbitrator, if the two
arbitrators are in consensus of giving the same award or if under
section 16, the parties to the dispute fail to raise objections in the
beginning regarding a two member panel or tribunal, they are
deemed to have waived their right.

2
AIR 2001 SC 2659 [
3
AIR 2002 (1) (RAJ) SC 381 at 390-391
 ➢ While the role of conciliator is to help and assist the parties to
reach an amicable settlement of their dispute {Section 72}, the
arbitrator does not merely assist the parties but he also actively
arbitrates and resolves the dispute by making an arbitral award.
➢ Section 62 again says that a party sending application for
conciliation must briefly identify the subject of the dispute.
However, in an arbitration agreement, the substance of dispute
must be clearly mentioned. Usually, the parties incorporate a clause
saying that any dispute arising out of the contract must be referred
to arbitration and damages will be awarded for the purposes of
same only. This clause is of utmost importance. However, such
clause’s existence is not needed in case of conciliation.
➢ In case of conciliation a party may require the conciliator to keep
the factual information confidential and not disclose it to the other
party, however this is only a requirement on request as the
conciliator is bound to share all such information with the other
party which helps it to better represent its case and clarify positions
of any allegations made on it. {S.72.}
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.

➢ A settlement agreement may be made by the parties themselves

and the conciliator shall authenticate the same. An arbitration
award on other hand is not merely a settlement agreement but it is
judgment duly signed by the arbitrator. This is the reason why
arbitration is called as most resembling a court room procedure of
litigation.
➢ 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.{ S.32 & S.76}
S.76 lays down four ways of the termination of conciliation
proceedings.
These are –
(i) The conciliation proceedings terminate with the signing of
the settlement agreement by the parties.
(ii) The conciliation proceedings stand terminated when the
conciliator declares in writing that further efforts at
conciliation are no longer justified.
(iii) The conciliation proceedings are terminated by written
declaration of the parties addressed to the conciliator to
the effect that the conciliation proceedings are terminated.
(iv) The conciliation proceedings are terminated when a party
declares in writing to the other party and the conciliator
that conciliation proceedings are terminated. As a general
rule, the parties cannot initiate arbitral or judicial
proceedings during the conciliation proceedings in respect
of a dispute which is the subject matter of the conciliation
proceedings.
The process for termination of arbitral proceedings is different.
They can be found under section 32 of the Arbitration and
Conciliation Act, 1996.
Termination of proceedings.-
(1) The arbitral proceedings shall be terminated by the final
arbitral award or by an order of the arbitral tribunal under sub-
section (2).
(2) The arbitral tribunal shall issue an order for the termination of
the arbitral proceedings where----
(a) the claimant withdraws his claim, unless the respondent objects
to the order and the arbitral tribunal recognizes a legitimate
interest on his part in obtaining a final settlement of the dispute,
(b) the parties agree on the termination of the proceedings, or
 (c) the arbitral tribunal finds that the continuation of the
proceedings has for any other reason become unnecessary or
impossible.
(3) Subject to section 33 and sub-section (4) of section 34, the
mandate of the arbitral tribunal shall terminate with the
termination of the arbitral proceedings. In the case of Maharashtra
State Electricity Board v. Datar Switch Gear Ltd.4 the court
observed that it is impossible to catalogue the circumstances in
which the arbitral tribunal may hold that it is either unnecessary or
impossible to continue the arbitral proceedings. Generally, it may
include such conduct by a party, in a consistent course which
renders the proceedings physically impossible to conduct.
➢ Conciliator is subjected to certain disabilities under section 80 of
the act and he cannot act as a arbitrator or as a council or a witness
in any arbitral or judicial proceedings but there is no such
disabilities imposed on an arbitrator or parties to arbitral
proceedings.

➢ The arbitration proceedings or awards may be used as evidence

in any judicial proceedings but the conciliation proceedings cannot
be used as evidence in any arbitral or judicial proceedings. This is
also provided for in section 81 of the act.
Last but not the least, an arbitrator has to decide according to law,
failing which the award can be cancelled or appealed rightfully by
the aggrieved party but a conciliator can conciliate irrespective of
law. He is not bound by certain enactments i.e., Civil Procedure
Code, Evidence Act etc. {S.66}

4
AIR 2003 (2) RAJ. LRJ 3135
 CONCLUSION

The UNCITRAL Model Law and Rules on Arbitration and Conciliation

is a cornerstone for arbitration tribunals worldwide. Almost 145
countries have till date ratified this convention and adopted it in
their domestic arbitration law. Article 19 of the act clearly specifies
that a conciliator shall not be an arbitrator in the same dispute for
which he/she conciliated. Section 80 of Arbitration and Conciliation
Act, 1996 is similar to this provision and based on it. It reads as
under, Role of conciliator in other proceedings: - Unless otherwise
agreed by the parties: ---- (a) The conciliator shall not act as an
arbitrator or as a representative or counsel of a party in any arbitral
or judicial proceeding in respect of a dispute that is the subject of
the conciliation proceedings; (b) The conciliator shall not be
presented by the parties as a witness in any arbitral or judicial
proceedings. Thus, a conciliator as a general rule of international
practise cannot act as an arbitrator. However, if the parties are
willing and have agreed in writing that their conciliator can also be
their arbitrator in the same dispute resolution, then this privilege
cannot be denied. Now, the conciliator will be bound to follow the
substantive and procedural law and give his award in accordance
with law. The Permanent Court of Arbitration in their annual law
journal in 1994 (written by Fuller and Fuller) expressed the
advantages of enabling a conciliator of the same dispute to act as an
“Amicus Curiae” in the arbitration proceedings or appoint him/her
as one of the arbitrators in the panel. This was said in view of the
new ADR and more refined techniques being adopted such as “med-
arb” or “negotiation award” to gain maximum out of these alternate
processes. Professor Kirti Kannan terms this opinion as undue
stretching of the teenage processes of ADR. However, no such
provision has been so far made as the risk factor of losing neutrality
in the proceedings cannot be ruled out. In the case of Alcove
Industries Ltd. V. Oriental Structures Engineers Ltd.5 the court
explained that under section 12 the arbitrator must submit in
writing at the outset, such facts which may give rise to justifiable
doubts to his independence or impartiality. An arbitrator who has
conciliated for Respondent 1 before cannot arbitrate, even in a
separate dispute resolution where the same party is involved. In the
case of Welspun Corp. Ltd v. Micro and Small, Medium Enterprises
Facilitation council, Punjab and Ors6, Justice Kannan held that the
council appointed by the state to conciliate in the dispute, on the
termination of the conciliation proceedings, shall have power to act
as an arbitrator if there is an arbitration clause, agreement or
contract between the parties. Thus the council can arbitrate in the
given dispute. Therefore, the conciliator can act as an arbitrator in
certain cases if the Arbitration clause doesn’t lay any bar. However,
this is not be followed as a general rule and it must be ensured that
neutrality of presiding conciliator and arbitrator is ensured.

5
AIR 2008 1 ARBLJR 393 Delhi
6
2012 166 PLR 195
 BIBLIOGRAPHY
[1] B.P. Saraf and M. Jhunjhunuwala, Law of Arbitration and
Conciliation (2000),Snow white, Mumbai.
[2] Gerald R. Williame (ed.), The New Arbitration and Conciliation
Law of India, Indian Council of Arbitration (1998), New Delhi
[3] A.K. Bansal, Law of International Commercial Arbitration
(1999), Universal Law Publications, Delhi
[4] P.C. Rao & William Sheffield, Alternative Disputes Resolution-
what it is And How it works? (1997) Universal Law Publications,
Delhi
[5] G.K. Kwatra, The Arbitration and Conciliation Law of India
(2000) Universal Law Publications, Delhi
[6] Basu , Law of Arbitration and Conciliation (9th edition reprint
(2000) Universal Law Publications, Delhi.
[7] Johari, Commentary on Arbitration and Conciliation Act 1996
(1999) Universal Law Publications,
[8] Delhi Markanda. P.C, Law Relating to Arbitration and
Conciliation, 7th Ed. (2009) Lexis Nexis Butterworths & Wadhwa,
Nagpur
[9] Ajay Gulati & Jasmeet Gulati, Public Interest Lawyering, Legal
Aid & ParaLegal Services (2009), Central Law Agency, Allahabad
CITED CASES:
[10] Collins v. Collins 28 LJ CH 186: (1858) 26 Beav 306
[11] Ethiopian Airlines v. Stic Travels (P.) Ltd., AIR 2001 SC 2659
[12] Narayan Prasad Lohia v. Nikunj Kumar Lohia AIR 2002 (1)
(RAJ) SC 381 at 390-391
[13] Maharashtra State Electricity Board v. Datar Switch Gear Ltd
AIR 2003 (2) RAJ. LRJ 3135
[14] Alcove Industries Ltd. V. Oriental Structures Engineers Ltd AIR
2008 1 ARBLJR 393 Delhi
[15] Welspun Corp. Ltd v. Micro and Small, Medium Enterprises
Facilitation council, Punjab and Ors. 2012 166 PLR 195
STATUTES:
[16] The UNCITRAL Model Law and Rules on Arbitration and
Conciliation, 1985
[17] Arbitration and Conciliation Act, 1996