Conciliation Has To Be Out In The Open

UNDER the new Arbitration and Conciliation Act 1996, wide powers are vested in the conciliator to arrive at an agreement between the disputing parties. The Act deals with conciliation proceedings separately, laying down rules which are different from those set for arbitration. If the procedures are not followed, the decision of the conciliator could be set aside, as the Supreme Court did last week, in Haresh Thakur vs State of Maharashtra.

The dispute arose over a property in Mumbai. The Bombay high court appointed a conciliator by consent of the parties. A retired high court judge was appointed as the conciliator. The parties undertook that the decision of the conciliator would be final and binding on them. He was to report to the high court.

 

Curiously, the conciliator proposed a settlement to the high court which was not signed by the parties. The terms were not even disclosed to them. The report was sent by the conciliator to the high court in a sealed cover. Therefore, one party filed an objection against the report of the conciliator setting out various grounds of challenge. The high court rejected these objections. It pointed out that the parties had undertaken that the decision of the conciliator would be final and binding and therefore "no amount of objections can be entertained at all."

On appeal, the division bench of the Supreme Court consisting of Justice D P Mohapatra and Justice R P Sethi set aside the high court judgment. They stated that "the conciliator, who is a former judge of the high court, failed to take note of the provisions of the Act and the clear distinction between arbitration proceedings and a conciliation proceeding." The high court failed to take note of the irregularities committed by the conciliator in drawing up the so-called settlement, keeping it secret from the parties and sending it to the court without obtaining their signature on it.

The Supreme Court further emphasised that when the law prescribes a procedure for doing a thing, it should be done according to that procedure only. In this case, the conciliator held some meetings with the parties in which there was some discussion and thereafter he drew up the so-called settlement by himself in secrecy and sent it to the high court in a sealed cover.

But the procedure laid down in Section 73 of the new Act is quite different. According to that provision, the conciliator shall formulate the terms of a possible settlement and submit them to the parties for their observations. After receiving their observations, the conciliator may reformulate the terms in the light of their observations. The law further provides that the conciliator shall authenticate the settlement and furnish a copy thereof to each of the parties. Only then the settlement would be final and binding on the parties. But in this case, the parties were unaware of the terms and thus the entire procedure was illegal.

The law grants extensive powers to the conciliator to arrive at an agreed settlement. He can decide the procedure to be followed, untrammelled by the procedural laws like the Civil Procedure Code and the Indian Evidence Act. However, the basic principles of fairplay cannot be forgotten. In any case, the minimum procedure laid down in the statute itself cannot be given a goby. This point has been illustrated well in the present judgment, which incidentally is the first one on conciliation proceedings after coming into force of the new law.