Until 1996, the law governing arbitration in India consisted mainly
of three statutes: (i) the 1937 Arbitration (Protocol and Convention)
Act, (ii) the 1940 Indian Arbitration Act, and (iii) the 1961 Foreign
Awards (Recognition and Enforcement) Act.4 The 1940 Act was the general
law governing arbitration in India along the lines of the English
Arbitration Act of 1934, and both the 1937 and the 1961 Acts were
designed to enforce foreign arbitral awards (the 1961 Act implemented
the New York Convention of 1958). The government enacted the Arbitration
and Conciliation Act, 1996 (the Act) in an effort to modernize the
outdated 1940 Act. The 1996 Act is a comprehensive piece of legislation
modeled on the lines of the UNCITRAL Model Law. This Act repealed all
the three previous statutes (the 1937 Act, the 1961 Act and the 1940
Act). Its primary purpose was to encourage arbitration as a
cost-effective and quick mechanism for the settlement of commercial
disputes. The Act covers both domestic arbitration and international
commercial arbitration.[i] Thus, up till the enactment of this Act,
arbitration was the only recognized exception to traditional court
litigation. Conciliation, mediation or any other alternative dispute
resolution procedures were not permissible for settling civil disputes
between parties.[ii]
ADR is now an integral segment of modern
practice in India. In order to accord statutory recognition to ADR
including mediation, the Law Commission in its 129th Report made
recommendation for making it obligatory for the Court to refer the
dispute to ADR including mediation for settlement.
The ADR framework in India finds statutory recognition in a two –fold manner:
(i) Under the Arbitration and Conciliation Act 1996 and
(ii) Under Section 89 of Code of Civil Procedure 1908 read with Order X, Rules 1A, 1B and 1C
As
a part of the scheme under Section 89 of the Code,[iii] various High
Courts in India framed their own rules with respect to mediation and
conciliation.[iv] The mediations and/or conciliations happening under
the aegis of the respective High Courts resort to the said rules for
proper implementation of the ADR methods.
As can be seen from the
two statutes, the Act covers (a) arbitration and (b) conciliation
whereas the Code is wider in its scope and covers five kinds of ADR
mechanisms one adjudicatory – arbitration and four non-adjudicatory -
(a) conciliation, (b) judicial settlement, (c) settlement through Lok
Adalat and (d) mediation.
In the modern techniques of dispute
resolution of commercial conflicts, emphasis has drifted from litigation
to arbitration. As things are never static, emphasis is further sliding
from arbitration to alternative dispute resolution procedures. Apart
from arbitration, which is primarily dealt with under the Act[v], the
other forms of ADR which are being seen as popular choices include
`mediation'[vi] and `conciliation'. Whilst arbitration is a more formal
adjudicatory process, conciliation offers greater flexibility to the
parties as it is facilitative, non-adjudicatory and yet binding if the
parties reach a settlement.[vii] Conciliation may play a pivotal role,
particularly in settling commercial disputes. It is more economic,
convenient, speedy and less formal mode of dispute resolution.
There
exists much confusion and ambiguity with respect to the meaning of the
terms `mediation' and `conciliation'. In India, though Section 89 treats
the two as being different from each other, in some jurisdictions like
the US the terms are used interchangeably.[viii] Let us understand the
concepts of `conciliation' and `mediation' under the Indian law.
What is conciliation?
Conciliation
is statutorily regulated by the Arbitration and Conciliation Act, 1996
but not defined by that statute. Section 67(1) of the Act however
impliedly defines "conciliation" as assistance rendered by a conciliator
or parties to a dispute, in an independent and impartial manner, in
their attempt to reach an amicable settlement of their dispute.[ix]
Confidentiality of conciliation proceedings has been statutorily
guaranteed under Section 75 of the Act.
What is mediation?
The
interpretation accorded by the Supreme Court to Section 89(2) (c)[x]
makes mediation a non-binding, non-adjudicatory dispute resolution
process, where a neutral third party renders assistance to the parties
in conflict to arrive at a mutually agreeable solution. To put it
differently, it refers to a voluntary and flexible negotiated conflict
resolution process with the assistance of experts. It involves a
structured negotiation where the mediator listens to the parties,
ascertains the facts and circumstances as also the nature of the
grievance, conflict or dispute, encourages the parties to open up to
identify the causes therefor, creates a conducive atmosphere to enable
the parties to explore various alternatives and ultimately facilitates
the parties to find a solution or reach a settlement. In short, it is a
professionally and scientifically managed negotiation process.[xi]
The
confidential nature of the mediation proceedings was upheld by the
Supreme Court in its decision in Moti Ram v. Ashok Kumar (2011) 1 SCC
466 where it observed that in the event the mediation is successful the
mediator should only send the agreement executed between the parties to
the Court and not mention what actually transpired in the proceedings.
However, if the mediation is unsuccessful, the mediator is expected to
send only a statement to the court conveying the failure of the
mediation proceedings.
Although `mediation' and `conciliation'
may seem fairly similar to each other a key distinction lies with
respect to recognition and enforceability of the settlement arrived at
through the two- methods. If the parties arrive at a settlement through
conciliation the Agreement is enforceable as if it is a decree of the
court whereas a settlement reached at in mediation needs to be placed
before the court which will make it a decree.[xii]
Conclusion:
There
is a growing concern as regards the interventionist stance adopted by
the Courts with respect to arbitration. The business community as well
as the legal fraternity has time and again hinted at the need for the
courts to re-look at the way arbitration is perceived to make it an
effective alternative remedy.
The Supreme Court has assumed a
proactive role while dealing with ADR and went to the extent of setting
out the manner in which courts should approach/recommend the ADR methods
to litigants under Section 89.[xiii]
It is therefore heartening
to see the trend evinced by the various Supreme Court decisions cited
earlier which point towards a more conducive approach being adopted by
the courts with respect to mediation and conciliation. The two can be
seen to be gaining momentum thereby making the ADR system in the country
an effective means of tackling the problem of arrears as well as
providing comfort to the business community.
[i]Sarma K., Oinam
M. & Kaushik A., (October 2009) Development and Practice of
Arbitration in India – Has it evolved as an effective legal institution?
Working Papers, CDDRL Stanford
http://iis-db.stanford.edu/pubs/22693/No_103_Sarma_India_Arbitration_India_509.pdf[ii] Malhotra, O.P and Indu, The Law and Practice of Arbitration and Conciliation, Lexis Nexis, 2nd Edn. at page 63
[iii]Discussing
the intent behind introducing Section 89 in the Code, the Supreme Court
in Salem Advocate Bar Association v. Union of India AIR 2003 SC 189
held (in paragraphs 9 and 10):
"It is quite obvious that the
reason why section 89 has been inserted is to try and see that all cases
which are filed in court need not necessarily be decided by the court
itself. Keeping in mind the law's delays and the limited number of
judges which are available, it has now become imperative that resort
should be had to alternative dispute resolution mechanism with a view to
bring to an end litigation between the parties at an early date."
[iv]See
http://www.delhimediationcentre.gov.in/MediationConciliation.htm - Mediation Conciliation Rules 2004 framed by Delhi High Court;
http://bombayhighcourt.nic.in/libweb/rules/R2006.01.html - Civil Procedure Alternative Dispute Resolution Rules, 2006 framed by the High Court of Bombay.
[v]
The Act would apply if there exists an arbitration clause in an
agreement between the parties. In absence of an express agreement to
arbitrate, a court can only direct parties to a suit/proceeding to
arbitrate upon mutual consent and cannot force the parties to arbitrate.
[vi] The Delhi Mediation Centres statistics shows that out of
42984 cases referred to mediation, 25038 cases have been settled as on
June 2011.
http://www.delhimediationcentre.gov.in/april-2011.pdf[vii]
Section 74 of the Act accords sanctity of an arbitral award to a
settlement arrived at between the parties in a conciliation proceeding.
[viii]
Henry J. Brown and Arthur L. Mariot, `ADR Principles and Practice'
(1997, 2nd Ed. Sweet & Maxwell, Lord on Chapter 7, p. 272)
[ix] Justice R.V. Raveendran , Mediation – Its importance and relevance, (2010) 8 SCC (Jour) 1
[x]In
Afcons Infrastructure Ltd. and Anr. v. Cherian Varkey Construction Co.
(P) Ltd. and Ors. (2010) 8 SCC 24 (at paragraphs 15 and 16) – "……. for
"mediation", the court shall refer the same to a suitable institution or
person and such institution or person shall be deemed to be a Lok
Adalat and all the provisions of the Legal Services Authority Act, 1987
(39 of 1987) shall apply as if the dispute were referred to a Lok Adalat
under the provisions of that Act."
[xi] Justice R.V. Raveendran , Mediation – Its importance and relevance, (2010) 8 SCC (Jour) 1
[xii]
In Afcons Infrastructure Ltd. and Anr. v. Cherian Varkey Construction
Co. (P) Ltd. and Ors. the Supreme Court dealt with the ADR system in
India and clarified a key distinction between `mediation' and
`conciliation' in paragraph 27 as under:
"………When a matter is
settled through conciliation, the Settlement Agreement is enforceable as
if it is a decree of the court having regard to Section 74 read with
Section 30 of the Arbitration and Conciliation Act. Similarly, when a
settlement takes place before the Lok Adalat, the Lok Adalat award is
also deemed to be a decree of the civil court and executable as such
under Section 21 of the Legal Services Authorities Act, 1987. Though the
settlement agreement in a conciliation or a settlement award of a Lok
Adalat may not require the seal of approval of the court for its
enforcement when they are made in a direct reference by parties without
the intervention of court, the position will be different if they are
made on a reference by a court in a pending suit/proceedings. As the
court continues to retain control and jurisdiction over the cases which
it refers to conciliations, or Lok Adalats, the settlement agreement in
conciliation or the Lok Adalat award will have to be placed before the
court for recording it and disposal in its terms. Where the reference is
to a neutral third party ('mediation' as defined above) on a court
reference, though it will be deemed to be reference to Lok Adalat, as
court retains its control and jurisdiction over the matter, the
mediation settlement will have to be placed before the court for
recording the settlement and disposal. Where the matter is referred to
another Judge and settlement is arrived at before him, such settlement
agreement will also have to be placed before the court which referred
the matter and that court will make a decree in terms of it. …."
(emphasis supplied)
[xiii] In Afcons case [at paragraph 30 (f)]
it held that the if parties are not agreeable for arbitration and
conciliation, which is likely to happen in most of the cases for want of
consensus, the court should, keeping in view the preferences/options of
parties, refer the matter to any one of the other three other ADR
processes: (a) Lok Adalat; (b) mediation by a neutral third party
facilitator or mediator; and (c) a judicial settlement, where a judge
assists the parties to arrive at a settlement.
Ms. Madhavi Nalluri,
Associate, Amarchand & Mangaldas & Suresh A Shroff & Co has
written this descriptive post on the state of Mediation and Conciliation
in India.
(The views stated in the below post are the author's personal views and do not represent the views of anyone else.)