Knowledge Centre

Conciliation as a DR Mechanism: Merits & Demerits

Ashhab Khan

2nd Year, National Law Institute University, Bhopal


Conciliation is one of the alternative dispute resolution (hereinafter “ADR”) methods, wherein the parties go out-of-court to seek remedy. The Halsbury’s Laws of England defines conciliation as a process of persuading the parties to reach an agreement. It is a procedure where a neutral third person is appointed as a conciliator by the parties to the dispute to reach a settlement. The mutual consent in this allows parties to engage in a friendly search for a solution, without litigation and formal technicalities and enables parties to envision alternatives which provide solutions keeping in view the interests and priorities of both.

Conciliation under Arbitration & Conciliation Act of 1996

Section 61 of the Arbitration & Conciliation Act, 1996 (hereinafter “Act”) defines the application and scope of conciliation. Section 61 says that the process of conciliation applies to disputes, whether contractual or not, arising out of a legal relationship. This means that the one party to the dispute has the right to sue the other party and the other party can be sued. Secondly, the Part III of the Act will not be applied to any disputes which cannot be submitted to conciliation by the virtue of any law for the time being in force.
A written invitation to conciliate is sent to the other party briefly identifying the subject matter of the dispute by the party initiating the conciliation. Conciliation proceedings commence when the other party accepts the invitation in writing.
Section 64 of the Act provides for the appointment of the conciliators. When the other part accepts the written invitation to conciliation, the parties must agree on the composition of the conciliation tribunal. There will be only one conciliator in the absence of any agreement to the contrary. The conciliation process may be conducted by a single conciliator, appointed with the consent of both sides. If it is failed, then two conciliators may conduct the same (maximum number is three), where each party appoints its own conciliator, and all parties jointly appoint the third conciliator. The third conciliator so named shall be the conciliator who shall preside.
The conciliator may ask each of the parties to send, with a copy to the opposing side, a brief written statement outlining the basic nature of the dispute and the points at issue. The conciliator can require a party to submit such additional details to him at any point of the conciliation process as it considers necessary. Section 67 provides that the conciliator should assist the parties in an independent and impartial manner to reach a settlement. Further it says that he must follow the principles of objectivity, fairness and justice considering 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.
The conciliator and the parties to the dispute are obliged to keep all matters relating to conciliation confidential. Also, when a party provides the conciliator with some information on the condition that it shall be kept confidential, the conciliator should not reveal such information to the other party. The parties should act in good faith and cooperate with the conciliator. They should provide the conciliator with written materials, evidence and attend meetings, when asked by him for the purpose of proceeding.
If it occurs to the conciliator that there are aspects of a settlement that might be agreeable to both the parties, the conciliator may develop the terms of a settlement and send them to the parties for their input. After obtaining the observations of the parties, the conciliator may, in the light of those observations, reformulate the conditions of a potential settlement. The legislative provisions instruct the conciliator to draw up a settlement document and to authenticate it. He should ensure the parties are well informed of the terms of the settlement. It is available to the parties, by conciliation, to settle some of their disputes and to leave the pending disputes between them for resolution by other forms of adjudication. The settlement document must have the parties’ signatures. Until the parties have signed the agreement, the parties and individuals suing under them, respectively, shall be valid and binding.

Merits and Demerits of Conciliation



  1. Cost Effective: Conciliation is a cost effective as opposed to litigation as well as arbitration which makes it a marvelous ADR method. The Act also asks the conciliator to conduct the proceedings by keeping in mind the need for speedy settlement of the dispute which increases the cost efficiency.
  2. Party Autonomy: Conciliation is very versatile. The parties are free to negotiate on the protocol to be followed by the conciliator, the time and venue of the proceedings and, thereby, to effectively controlling the process. The conciliator may perform the conciliation proceedings in the manner considered reasonable by the conciliator, taking into account the circumstances of the situation, in order to ensure the convenience of the parties.
  3. Confidentiality: Section 75 of the Act provides for confidentiality of conciliation proceedings. It says that “Notwithstanding anything contained in any other law for the time being in force, the conciliator and the parties shall keep confidential all matters relating to the conciliation proceedings. Confidentiality shall extend also to the settlement agreement, except where its disclosure is necessary for purposes of implementation and enforcement.”
  4. Enforceability of Settlement Agreement: The settlement agreement has the same effect to that of an arbitral award given under Section 30 of the Act. Therefore, it can be executed as a decree of a civil court.


  1. The conciliation proceeding relies on the goodwill of the parties. Therefore, it may lead to prolonging the duration of proceeding or may not result in resolution of the dispute.
  2. The conciliator in resolving the dispute provides information to one party from another party, and vice versa. Often, this method of exchange of information leads to inaccurate information and confusion.
  3. It may not always lead to settlement agreement, thereby delaying the resolution of the dispute.
  4. The conciliator is usually not a legally qualifies person and this may not lead to an effective resolution of legal dispute.


Conciliation is a beneficial mode of dispute resolution due to the fact that it is cost effective, flexible because parties the control the proceedings, fast and convenient as opposed to that of litigation. It is also secure due to the confidentiality of the process. However, its effectiveness relies on the attitude of parties, competence of the conciliator and proper environment. But overall, it is should preferred over litigation to resolve disputes.

9 replies on “Conciliation as a DR Mechanism: Merits & Demerits”

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