Consequences of non-compliance

of conciliation orders by parties

Article submitted as part of coursework for the

Diploma in Entrepreneurship Administration and Business Laws course.

Navneet Bhatnagar

navneetbh@rediffmail.com

April 2017
 A mediator or conciliator must lead parties into the gray shaded areas
of a problem where a variable range of outcomes becomes available to
achieve a mediated consensual resolution. It is the skill with which this
“grey area” is negotiated that the success of Part III of the Act will
depend.

Fali S. Nariman

Noted Advocate in the Handbook on Arbitration

Background

Over the ages, people have used various modes to settle disputes amongst
themselves. These have ranged from negotiated settlements, court room dramas,
mini litigations, third party mediations and sometimes, even ruthless battles. As the
civilizations progressed and trade developed, there have been perceptible changes
and complexities in legal requirements of nation-states, multi-national corporations
operating over different continents, and individuals residents in various
jurisdictions and covered under differing legal systems. Even requirements of
governments and its contractors have also become highly complicated as the
underlying infrastructure projects and social welfare measures become highly
demanding.

Along with the complexities, the costs and timelines involved in viable resolutions
through legal ramifications also increased substantially. The normal legal system
also got burdened with increasing number of court cases; thus leading to
substantial time overruns before justice could have been assumed to prevail.

Due to these problems in legal system, the business communities started resorting
to options that were found to be much faster, less expensive, highly confidential
and away from public glare. These proceedings are collectively called Alternative
Dispute Resolution (ADR) and use mechanisms other than litigation to settle
disputes.

This article attempts to give a brief background as to what is ADR, what are the
prominent modes of redressal system and what are the Indian laws governing them.
The document will try to concentrate upon a practice called Conciliation and how
strongly orders passed under this can be enforced in India.
Alternative Dispute Resolution

As per the Oxford English Dictionary of Law, Alternate Dispute Resolution is defined as “any
of the variety of techniques for resolving civil disputes without the need for
conventional litigation. It may include mini-trial (a shortened and simplified form
of court hearing), informal methods of arbitration, and structured forms of
conciliation using specially trained mediator acting as a go- between.”

Types of ADR processes

Alternative dispute resolution (ADR) is a mechanism, used to resolve

disagreements and disputes between parties, by bringing them to an agreeable
settlement through discussion and negotiation. The main ADR processes are
negotiation, arbitration, mediation and conciliation. While their usage may depend
upon the case history and the legal entities involved, but in general, they are faster
and generally less expensive than usual litigation processes.

We begin with by briefly learning about the common Dispute Resolution

Processes .

Negotiation

It is a process, vide which the disputing parties, initiate a dialogue to resolve

underlying disputes. The objective is to arrive at an agreement by bargaining for
individual or collective advantage. This is the primary method of any dispute
resolution. It may be exercised in any proceeding, whether it involves, nations,
states, companies or individuals in situations as diverse as marriage, divorce,
employment or even wars. Negotiators may handle specialized assignments as in
hijackings, hostage, union disputes etc.

Arbitration

Arbitration is a form of dispute resolution in which parties at disagreement can find

a resolution without resorting to court litigation. It is very much like a mini court in
which the parties present their case to a panel of arbitrator(s), along with
supporting evidence. The word ‘arbitration’ has its origin in Latin word Arbitrari
,wherein one or more persons give a decision in a matter involving different
parties.

Under this ADR method, the disputing parties involved present their disagreement
to one arbitrator or a panel of private, independent and qualified third party
“arbitrators.” They then determine the outcome of the case. While it may be less
expensive and more accessible than trial, the arbitration process has some inherent
lacunae; primary being that this mechanism is very much similar to the usual court
process and sometimes, may turn out to be very expensive in terms of arbitrator
fees and counsel charges.

Generally, the procedural rules stipulate that the business contract must have the
Arbitration clause , and , then only, the dispute can be referred to an Arbitrator.
The Arbitration terminates into a decision called the “ Award “ (lodo arbitrale).
This generally has the force of law behind it. A determination arrived at through
an Award , though, can be appealed before a competent judge , if a party wishes to
seek revocation.

Basically, arbitration is a private mode of settlement of disputes where as litigation

is a public mechanism of settlement of disputes. A key disadvantage of arbitration
is that the decision put forth by the arbitrators are binding. In comparison to court
proceedings, arbitration can be more advantageous as the parties involved could
select their preferred arbitrator instead of having to present their case to an
unknown judge. The materials discussed also have more privacy than in a court
proceeding as no media or public is allowed to such arbitration proceedings.
However, since the decision provided is binding, the parties cannot appeal their
case unless they can prove with clear evidence that a fraud has been committed or
the decision is very much against the concept of ‘public policy”.

Mediation

It is an ADR method where a neutral and impartial third party, called the “
mediator “ , facilitates dialogue in a structured process to help parties conclude a
mutually satisfactory agreement. A mediator assists the parties in identifying and
articulating their own interests, priorities, needs and wishes to each other.
Mediation is a “peaceful” dispute resolution tool that is complementary to the
existing court system and the practice of arbitration.
Mediation is regarded to be more time-efficient than even arbitration, since
proceedings are not as formal as the latter. It is a voluntary and non-binding
process and a very effective alternative to the court process. It is generally
successful as it allows the parties to express their own interests and anxieties
relevant to the dispute. It also allows mutually complementary solutions that are
uniquely tailored to meet the needs and objectives of the differing parties. A
mediator, on most occasions, may not actually decide or judge, but helps to drive a
mutual settlement between the parties. He may use specialized communication
techniques and negotiation tools to work out optimal solutions for the differing
parties.

During the process of mediation, the parties follow a specific set of protocols that
require everyone involved to work together. The process permits the mediator and
disputants to focus on the problems and underlying issues. The parties are free to
express their own interests and needs through an open dialogue in a less adversarial
setting than a courtroom. The main aim of mediation is to assist people in
dedicating more time and attention to the creation of a voluntary, functional and
durable agreement. The parties themselves posses the power to control the process
and also reserve the right to stop anytime and refer a dispute to the court system ,
even arbitration.
Conciliation
Conciliation is another dispute resolution process that involves building a positive
relationship between the parties of dispute. It helps in the settlement of a dispute
between two parties, by utilizing services of an impartial individual known as a
conciliator. He meets with the parties involved and arrives at a settlement or
resolution.

A conciliation proceeding could be initiated in India when one of the parties to the
dispute arising out of legal relationship invites the other parties to get the dispute
resolved through conciliation and the said request is accepted by the other party.
If, however, the other party rejects the invitation for settlement through
conciliation, no such proceeding would get initiated. Even if no response is sent
within thirty days to the invitation, it would be deemed that the said request is
rejected.

Conciliation proceeding could be of two types - facilitative conciliation and

evaluative conciliation. In facilitative conciliation, the conciliator avoids
opinion and judgments and he merely assists the parties to clarify their
communications, interest and priorities. On the other hand, in evaluative
conciliation, the conciliator expresses his opinion on the merit of the issues so as to
enable the parties to approach settlement. His opinion is a third party view on the
merit but such opinion would not be conclusive and binding.

A conciliator must be seen as an independent and impartial person and he must

enjoy confidence of both the parties. The parties should be able to repose trust and
confidence on him so as to enable them to share their secrets and their thinking
process with the conciliator with the belief that the same should not be divulged to
other party without specific instructions in that regard. Therefore, a conciliator is
bound by rules of confidentiality and not by the strict rules of the Code of Civil
Procedure, 1908 and the Indian Evidence Act, 1872.

A party desiring to avail of the remedy could take resort to the said procedure
during pre-litigation and even during the pendency of litigation. If the effort fails,
the parties can always come back to litigation. However, during the pendency of
conciliation preceding , a party is not entitled to pursue litigation.

This process does not require an existence of a prior agreement. The conciliator,
being an active participant in this process, works continuously works with both
parties to arrive at an agreement acceptable to all. The conciliation process
involves the conciliator going back and forth between the parties, discussing the
issues involved and what each party is willing to sacrifice, and negotiate in coming
to a settlement. The two parties to the process rarely meet, and most discussions
are done through the conciliator. One main advantage of conciliation is that it is
not legally binding and, therefore, parties can negotiate till a settlement that is
pleasing to all can be achieved.

The “conciliator” assists the parties by driving their negotiations and directing
them towards a satisfactory agreement. Conciliation is also more harmonious
proceeding than arbitration. It is generally employed in union, matrimonial,
employment and consumer disputes as they involve emotional angle and strong
feelings in the disputing parties, which are best settled by conciliation.

It tries to identify a right that has been withheld and searches for an optimal
solution by directing parties towards a common minimum agreement. It may be
noted that conciliation, as an ADR , has no legal standing . The conciliator awards
no decisions in favor of one or the other party, though, he guides the differing
parties towards a settlement.

Differences among the various ADR mechanisms

Though they may be serving similar objective, the differences are subtle among
various ADR alternatives. While arbitration is conducted in very court-like
settings, where the arbitrators hear the case of both the parties and critically
examine evidence to proclaim an Award. In conciliation, most of the
communication goes through the conciliator. He is trusted by both the parties, and
helps in arriving at a mutual settlement. Though the decision given by the
conciliator is not binding, and may have some more room for negotiation, the
Arbitrators’ Award is final and legally binding upon the parties, and has very little
room for appeal.
To a layman, the process and guidelines being followed in a conciliation exercise
may seem to be similar to mediation, but there are differences among the two
processes.

In conciliation, 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, and thus may not be the proverbial “neutral” figure in discussions.
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.

In this regard, the role of a conciliator is distinct from the role of a mediator. The
mediator maintains his or her neutrality and impartiality and does not assume sole
responsibility for generating solutions. Instead, a mediator works together with the
parties as a partner to assist them in finding the best solution to further their
interests. A mediator’s priority is to facilitate the parties’ own discussion and
representation of their own interests, and guide them to a workable solution. The
parties play an active role in mediation, identifying interests, suggesting possible
solutions, and making decisions concerning proposals made by other parties. The
parties come to mediator seeking help in finding their own best solution.

The role of the attorneys is also different in mediation. Attorneys are more active
in mediation in generating and developing innovative solutions for settlement. In
conciliation, they generally offer advice and guidance to clients about proposals
made by conciliators.

In plain speak; the mediator controls the process in mediation, while the parties
control the outcome. As against this, in conciliation, the conciliator may not follow
a structured process. He, may, instead drive the conciliation process through
various levels of negotiation, depending upon the case.

Conciliation is used , more in a preventive manner , as soon as a dispute or

misunderstanding surfaces. The conciliator, in such a case, tries to stop a particular
situation from deteriorating into a major conflict. Mediation is closer to arbitration
in the respect that it ”intervenes” in a substantial dispute that has already surfaced,
which is difficult to resolve without "professional" assistance. The parties
approach mediation as an alternative method to resolve their dispute, due to the
fact that they both recognize that the conflict has grown and may lead to litigation.
Mediation may be used, however, any time after the emergence of a dispute.
Generally, one may find mediation of an elder in family driven businesses.
Traditionally, the concept of “Panch Parmeshwar “ in Indian villages is based upon
the concept of Mediation as the “ panch” try to find a mutual satisfying dispute
amongst villagers, which may not be easily found in traditional legal remedies.

There may not be any major difference between conciliation and mediation.
However, conciliation is a much more formal mechanism of dispute resolution
than mediation and a conciliator has more powers than a mediator.
A conciliator also happens to be an expert in the field in which he tries to
adjudicate the matters. On the other hand, a mediator is an expert in the techniques
of communication and negotiation as he tries to make the parties arrive at an
amicable solution. A conciliator seeks concessions from the parties at dispute
whereas a mediator tries to make the parties see their own interests and needs in a
better light. The role of a ‘conciliator’ may be defined as “pro-active and
interventionist “, whereas the role of a ‘mediator’ can be looked upon as being a
‘facilitator’.

Mediation may be regarded as a half way house between conciliation and

arbitration. The role of the conciliator is to assist the parties to reach their own
negotiated settlement and he may make suggestions as appropriate. The mediator
proceeds by way of conciliation but in addition , is also expected to make his own
formal proposals or recommendations which may be accepted.

Laws governing ADR in India

Each of the ADR (alternative dispute resolution) processes : arbitration,

mediation, and conciliation, provide important benefits to parties and may be seen
as complementary to the judicial process.

The Arbitration and Conciliation Act 1996 is the key law governing arbitration in
India. The act has four parts:

 Part I sets out general provisions on domestic arbitration;

  Part II addresses the enforcement of foreign awards (Chapter 1 deals with
New York Convention awards and Chapter II with awards under the 1927
Geneva Convention);
 Part III deals with conciliation; and ( This being the subject matter of this
discussion paper )
 Part IV sets out certain supplementary provisions.
Parts I and II are the most significant and are based on the UNCITRAL Model Law
and the New York Convention respectively.
The Arbitration and Conciliation Act is broadly based on the UNCITRAL Model
Law and was enacted to consolidate, define and amend the law relation to domestic
arbitration, international commercial arbitration and the enforcement of foreign
arbitral awards.
The 1996 Act was amended vide The Arbitration and Conciliation (Amendment)
Act 2015 (published in the Gazette on January 1 2016) and focused on certain
additional features to make the ADR process more investor friendly as well as
address concerns of foreign parties, who wished to enforce awards in the
jurisdiction of a foreign country.

Assumed inter-changeability of conciliation and mediation terms

It may be noted that the terms mediation and conciliation terms are very often used
interchangeably. Though, in common parlance, one may not distinguish between
conciliation and mediation, two statutes by Parliament treat them as being
different.

(a) In the year 1996, the Arbitration and Conciliation Act, 1996 was passed and
sec. 30 of that Act, which is in Part I, provides that an arbitral tribunal may
try to have the dispute settled by use of ‘mediation’ or ‘conciliation’.

Sub-section (1) of sec. 30 permits the arbitral tribunal to “use mediation,

conciliation or other procedures”, for the purpose of reaching settlement.

(b) The Civil Procedure Code (Amendment) Act, 1999 which introduced sec.
89, too speaks of ‘conciliation’ and ‘mediation’ as different concepts. Order
10 Rules 1A, 1B, 1C of the Code also go along with sec. 89.
Reference of a dispute to Conciliator

The functions of a ‘Conciliator’ are explained in the Part III of the 1996 Act.
The section 62 of the said Act deals with reference to ‘Conciliation’ by agreement
of parties , but sec. 89 permits the Court to refer a dispute for conciliation even
where parties do not consent, provided the Court thinks that the case is one fit for
conciliation.
This makes no difference as to the meaning of ‘conciliation’ under sec. 89 because;
it says that once a reference is made to a ‘conciliator’, the 1996 Act would apply.
Thus the meaning of ‘conciliation’ as can be gathered from the 1996 Act has to be
read into sec. 89 of the Code of Civil Procedure. The 1996 Act is, it may be noted,
based on the UNCITRAL Rules for conciliation.

Under section 65 of the 1996 Act, the ‘conciliator’ may ask each party to submit a
brief written statement describing the “general nature of the dispute and the points
at issue”. He can ask for supplementary statements and documents. Section 67
describes the role of a conciliator.
Subsection (1) states that he shall assist parties in an independent and impartial
manner.
Subsection (2) states that he shall be guided by principles of objectivity, fairness
and justice, giving consideration, among other things, to the rights and obligations
of the parties, the usages of the trade concerned and the circumstances surrounding
the dispute, including any previous business practices between the parties.
Subsection (3) states that he shall take into account “the circumstances of the case,
the wishes the parties may express, including a request for oral statements.
Subsection (4) allows the ‘conciliator’ to make proposals for a settlement.
It states as follows: “Section 67(4). The conciliator may, at any stage of the
conciliation proceeding, make proposals for a settlement of the dispute. Such
proposals need not be in writing and need not be accompanied by a statement of
the reasons therefor.”
Settlement Agreement in Conciliation Proceedings
Section 69 states that the conciliator may invite parties to meet him.

Sec. 70 deals with disclosure by the conciliator of information given to him by one
party, to the other party.

Sec. 71 deals with cooperation of parties with the conciliator.

Sec. 72 deals with suggestions being submitted to the conciliator by each party for
the purpose of settlement.

Sec. 73 states that the conciliator can formulate terms of a possible settlement if he
feels there exist elements of a settlement. He is also entitled to ‘reformulate the
terms’ after receiving the observations of the parties.

Subsection (1) of sec. 73 reads thus:

“Sec. 73(1) settlement agreement. (1) When it appears to the Conciliator that there
exist elements of a settlement which may be acceptable to the parties, he shall
formulate the terms of a possible settlement and submit them to the parties for their
observations. After receiving the observations of the parties, the Conciliator may
reformulate the terms of a possible settlement in the light of such observations.

The above provisions in the 1996 Act, make it clear that the ‘Conciliator’ under
the said Act, apart from assisting the parties to reach a settlement, is also permitted
to make “proposals for a settlement” and “formulate the terms of a possible
settlement” or “reformulate the terms”. This is indeed the UNCITRAL concept.
The disputing parties may submit their statements to the conciliator, with copy to
the opposite party. These may outline the nature of dispute and the amounts,
involved, if any. The conciliator may ask for further details, may ask for meeting
the parties, or communicate with the parties orally or in writing. Parties may even
suggest settlement alternatives to the conciliator. A typical example is the union
negotiations in any major manufacturing company where the Chief Labour Officer
or the District Magistrate may act as the conciliator.

When the Conciliator feels that the two parties can be brought about to a mutual
settlement point, he may draw up the Terms of Settlement and send it to the parties
for their acceptance. Generally, an agreement reached through mediation or
conciliation process specifies time periods for performance with measurable and
realistic goals. It is advisable for the parties to put their agreement in writing to
create tangible evidence, showing mutual settlement.

If the parties reach agreement on a settlement of the dispute, they may draw up and
sign a written settlement agreement. If requested by the parties, the conciliator may
draw up, or assist the parties in drawing up, the settlement agreement. When the
parties sign the settlement agreement, it shall be final and binding on the parties
and persons claiming under them respectively. The conciliator shall authenticate
the settlement agreement and furnish a Status and effect of settlement agreement.

The written agreement reminds the parties of their common ground and prevents
future misunderstandings. A written agreement also indicates a clear terminal stage
for provides a clear ending point to the mediation process. The agreement binds the
parties contractually. Once both the parties sign the settlement document, it
becomes final and binding upon both.
In case of disputes concerning compliance with the mediated agreement (e.g.,
whether a party carries out an agreement) or implementation of a mediated
agreement (e.g., disputes concerning the precise terms for carrying out an
agreement), the agreement is enforceable as a contract, as it would be in cases of
the non-fulfilment of any ordinary contractual provision.

Effectiveness of Conciliation orders

Conciliation is usually more effective as it is undertaken by experts in the subject

matter and command trust and respect from the disputants. If a conciliator was to
be a mere amateur, the conciliation process may end up in failure . It is too be
noted that the settlement agreement shall have the same status and effect as if it is
an arbitral award on agreed terms on the substance of the dispute rendered by an
arbitral tribunal under section 30.

30. Settlement. – (1) It is not incompatible with an arbitration agreement for an

arbitral tribunal to encourage settlement of the dispute and, with the agreement of
the parties; the arbitral tribunal may use mediation, conciliation or other
procedures at any time during the arbitral proceedings to encourage settlement.
(2) If, during, arbitral proceedings, the parties settle the dispute, the arbitral
tribunal shall terminate the proceedings and, if requested by the parties and not
objected to by the arbitral tribunal, record the settlement in the form of an arbitral
award on agreed terms. (3) An arbitral award on agreed terms shall be made in
accordance with section 31 and shall state that it is an arbitral award. (4) An
arbitral award on agreed terms shall have the same status and effect as any other
arbitral award on the substance of the dispute.

Enforcement of a Conciliation Order

Under the earlier Arbitration Act, 1940, an Arbitration Award was required to be
confirmed by a decree of the court, but in terms of Section 35 of the Arbitration
and Conciliation Act, 1996, the award itself is enforceable as a decree of the Court.
Thus an Arbitral Award is considered final .

In terms of Section 36 of the Act, 1996, Arbitration Award becomes enforceable as

a decree of the Court after lapse of the period of 3 months of receipt of the award
by the parties or if an application challenging the award is made to the appropriate
court under Section 34 of the Act and the same is refused, from the date of the
refusal of the Application.

However an order passed by mediation or conciliation proceedings does not have

inherent legal strength or capacity to impose any liability on the parties in case of
its non-compliance. In the developed economies, compliance with mediated
settlement or a conciliation order is found to be generally high. Thus, enforcement
proceedings are relatively rare there. But the same is not very true in our country.

To cover up for these non-compliance issues, The Arbitration and Conciliation Act
states that a Terms of Settlement, deduced as part of ADR process ( be it
Arbitration Award , Mediation proceeding or Conciliation order ) , may be
enforced as if it were a decree pronounced by an Indian court. The Award or
order thus pronounced can be enforced in local courts, within the territorial
limits , where the defendant resides or has its business or where its assets are
located.
Since India is a party to the New York Convention governing ADR, an Award
issued through any ADR mechanism in India can be exercised in the foreign
country, depending upon, whether that country has signed the New York
Convention or not.

Interim Measures under Arbitration & Conciliation Act

The Act provides for effective Alternate Dispute resolution system. This was
enacted on the lines of the United Nations Commission on International Trade Law
( UNCITRAL ) , so as to ensure a fair and efficient settlement of disputes in an
international contract. In case of any non-compliance of any conciliation order, the
court can be moved against the defendant, seeking interim measures, so as to
safeguard its assets or the moneys.

Such interim measures can include :

 Injunctions against alienations of assets or properties

 appointment of a receiver over defendant’s assets or receivables
 orders for preservation, custody, sale and protection of goods;
 securing the amount in dispute in the arbitration/ conciliation order;
 Garnishee order for the sums due to the defendant from any known source
of income and business operations , and
 Any other interim measure that may be just and convenient.

The Arbitration and Conciliation (Amendment) Act has clarified that Indian courts
will have the ability to grant interim measures of protection in relation to
arbitrations seated outside India.
Applicability of ADR alternatives as a stand –alone mechanism ?

It is interesting to note that this method of resolving dispute through mediation and
negotiation is, actually, not an alien concept in our country. Village Panchayats and
Nyaya Panchayats have been functioning in the villages and many disputes at the
village level have been settled through conciliation and mediation in these forums
since ages. But, earlier, a remedy through Panchayat was sought, as it was more
approachable than a Court, which might be located in a major town away from the
village. Today, this mechanism is preferred for the savings on costs and time.

With the passage of time, litigation system is getting besotted with a number of
problems: rise in number of cases, shortage of judges and judicial officers,
insufficient infrastructure and increase in population. Higher awareness of rights
and economic benefits by the general public has also led to filing of more cases in
the courts. The government is also promoting the device of alternative dispute
resolution system like conciliation and mediation.

This process is settlement geared and is results in substantial cost savings. It also
helps the parties to adopt a problem solving approach to find out a “win -win”
outcome. When a dispute is resolved through this process, there is no winner or
loser for the parties agree to the solution whereas in litigation there is always a
loser. Even the winner of the litigation goes back home at times, feeling frustrated:
be it in terms of time, efforts, money or mental solace.

This is the reason, why the government, recognized the importance of conciliation
while enacting the Arbitration and Conciliation Act, 1996, be devoting a separate
chapter to this concept.

Even in civil litigation, provisions have been made for getting the disputes
resolved through the process of arbitration, mediation, conciliation or Lok Adalats,
if the court is of the opinion that the case could be settled through one of the said
modes. The said procedure is generally adopted after completion of the process of
admission/denial of the documents as at that stage when issues are framed in the
suit; the court becomes aware of the actual issues involved in the suit.

Under the provisions of section 89 Code of Civil Procedure, 1908, the court is
given the power and jurisdiction to refer the dispute/litigation to an arbitrator
without even existence of an arbitration clause. In such an instance, when a
reference is made by the court to a conciliator or a mediator, not only the court
retains the supervisory jurisdiction over the matter but the lawyers and the litigants
continue to be participants therein. It is with the active support of all the three
participants along with an additional player, namely, the mediator or conciliator
that a negotiated mutual settlement is arrived at. Therefore, the system of
alternative dispute resolution through mediation and conciliation should not be
seen in isolation and being competitive to litigation in court.

Execution of Decrees and Orders

Under the Code of Civil Procedures 1908 - Schedule I, express provisions are
contained in the form of Order XXXII A, Rule 3 , where under , a duty is cast upon
the courts to make efforts for settlement in suits relating to matters concerning a
family. Similarly, under Order XXXVII Rule 5B, a duty is cast upon the court in
a suit against the government or a public officer to assist in arriving at a settlement.
Rule 10 explains the process for Application of execution, through which a
conciliation order can be put in execution.

Thus, in case, any party defaults on the directives given in the conciliation order, it
can be hauled up by the competent court by executing decree against its money or
assets.

Interest

As per the Amendments to Section 31 done in 2015 to the 1996 Act, a sum
directed to be paid by an arbitral award ( conciliation order for our purview in this
article ) shall, unless the award otherwise directs, carry interest at the rate of two
per cent higher than the current rate of interest prevalent on the date of award, and
shall be payable from the date of award to the date of payment.
This also acts as a dampener against the defendant not to take the orders under
ADR easily.

Can Arbitrator pass an order of contempt ?

Very often, questions are raised as to the efficacy of the orders passed as part of
Alternative Dispute Resolution mechanism. As recourse of last level, contempt
proceedings may also be asked to be moved in such cases, in case the defendant
absolutely disobeys the orders passed by the Conciliator or Arbitrator.

Section 27 (5) of the Arbitration and Conciliation Act, expressly confers the power
on the arbitral tribunal to punish for its contempt. It specifies that “[P]ersons
failing to attend in accordance with such process, or making any other fault, or
refusing to give their evidence, or guilty of any contempt to the arbitral tribunal
during the conduct of arbitral proceedings, shall be subject to the like
disadvantages, penalties and punishments by order of the Court on the
representation of the arbitral tribunal as they would incur for the like offences is
suits tried before the Court”.

In a case titled Sri Krishan v. Anand, reported at (2009) 3 ArbLR 447 (Del):
MANU/DE/1828/2009 , the Delhi High Court was seized of the question whether
a petition under Section 9 of the Arbitration and Conciliation Act would lie for the
same interim measure which has already been granted by the arbitral tribunal under
Section 17.

The petitioner had sought to justify the petition under Section 9 on the ground that
orders passed by an arbitral tribunal are toothless and unenforceable.

Justice R.S Endlaw of the Delhi High Court while rejecting the contention of the
petitioner held that the legislative intent of enacting Section 17 of the Arbitration
and Conciliation Act is to make the arbitral tribunal a complete forum not only for
finally adjudicating the disputes between the parties but to also order interim
measures. The Court further held that no purpose would be served in approaching
the arbitral tribunal under Section 17, if for enforcing orders under Section 17, a
separate petition under Section 9 has to be filed subsequently.
The Court held that under Section 27 (5) of the Arbitration and Conciliation Act,
any person failing to comply with the order of the arbitral tribunal would be
deemed to be “making any other default” or “guilty of any contempt to the arbitral
tribunal during the conduct of the proceedings”.

Accordingly, the remedy of aggrieved party in a case of disobedience of the order

of the arbitral tribunal (aka conciliation order) is to apply to the tribunal for
making a representation to the Court to meet out such punishment to the
disobedient party, as would have been warranted for contempt of Court. The
arbitral tribunal should make such a representation to the Court only upon being
satisfied that the defaulter is in default or in contempt.

Once such a representation is received by the Court from the arbitral tribunal, the
Court is competent to deal with such disobedient party as if in contempt of order of
the Court. This could be either under the provisions of the Contempt of Courts Act
or under the provisions of Order 39 Rule 2A of the Code of Civil Procedure, 1908,
which provides for consequences of disobedience or breach of injunction.

Thus in a nutshell, conciliation and mediation are recognized as two important and
effective modes of alternative dispute resolution system. These are considered as
effective and meaningful alternatives to litigation through courts for resolution of
disputes through the guidance and assistance of a neutral and impartial third party.
Not only that, the government also wishes the differing parties to make greater use
of this forum so as to reduce the number of live cases in the courts, besides saving
on time and money involved. At the same time, the legal fraternity should also
advise their clients to use Part III of the 1996 Act more often by educating and
explain the benefits of conciliation to save on time, money and unnecessary
litigation. Thus, by a judicious use of alternative dispute resolution through
mediation and conciliation, we can see steady decrease in number of court
cases.