A way to settle disputes more amicably

The past several months have seen a flurry of policy making. Parliament has made laws amending the 2013 Companies Act, the Arbitration and Conciliation Act, and introduced the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2016.

Additionally, the government has proposed the Code on Insolvency and Bankruptcy, and the Public Contracts (Resolution of Disputes) Bill. The latter proposes a separate tribunal for disputes under public private partnerships.

All these initiatives are concerned with putting together an effective package to ensure ease of doing business in India, of which an important component is the speedy resolution of disputes. Cases are beset by delays in disposal on account of the volume of litigation, made worse by the absence of effective procedures and vacancies in the system.

The World Bank Report on Doing Business in India 2016, pegs India at a poor 130 on the ease of doing business, with a ranking of 178 (the same as last year) for effectiveness in enforcement of contracts — this out of the 189 countries ranked.

The amendment to the Arbitration Act, for example, sets time limits in the completion of arbitration proceedings by arbitral tribunals and the courts. The Commercial Courts Act provides for the constitution of commercial courts at the district level and in the High Courts, which will exclusively hear commercial disputes of a specified value (of ₹1 crore or more).

The Code on Insolvency and Bankruptcy designates the National Company Law Tribunal and the Debts Recovery Tribunal to hear cases relating to the rehabilitation, insolvency and bankruptcy of corporate bodies and individuals. This will be done within strict time limits.

While these policies are well intentioned, all of them continue to rely exclusively on formal dispute resolution processes, to the exclusion of alternative dispute resolution processes such as conciliation, which is available at the litigants’ choice. Arbitration is beset with its own problems, which has triggered the amendments to the arbitration process referred to earlier. While arbitration and litigation in the courts are adversarial in nature, conciliation is a co-operative method.

Conciliation provides the advantages of resolving a dispute by a flexible, systematic and expeditious mechanism. In conciliation, the parties to the dispute, assisted by a neutral conciliator, meet to discuss various aspects of the dispute with a view to reaching a settlement.

Through a series of joint and separate meetings, the parties are guided from their expectations and their demands, towards assessing and arriving at a settlement.

The parties can agree to a time within which the conciliation will be undertaken, and if no settlement is arrived at within this time, a party has the option to take the dispute to court or arbitration. The process is voluntary and the discussions are confidential.

The legal framework for conciliation was set out in the Arbitration and Conciliation Act, when it was enacted in 1996. This 1996 Act sets out the essential elements of the conciliation process – namely, voluntary and confidential discussions between parties to a dispute with a view to reach a settlement on the differences between them. During conciliation proceedings, parties are not permitted to initiate arbitration proceedings or proceedings in courts. However, parties can initiate proceedings for interim orders, where such orders are necessary to preserve the rights of a party.

The 1996 Act elevates a settlement agreement arrived at between the parties through conciliation, as a final and binding agreement on the parties which has the same status as an arbitral award on agreed terms. This means that the conciliated agreement can be enforced in the same manner as an arbitration award. The challenge to an award on agreed terms would be on the same grounds as an arbitration award. However, it must be added that it is unlikely that parties would challenge an agreement that they have crafted and agreed to.

There is much to be commended for the conciliation process as a method of resolving disputes. In conciliation, it is the parties who decide how their disputes will be closed. There is no winner and or loser. Conciliation accommodates alternative ways of assessing issues and in settling the dispute.

We have seen parties to a winding up dispute agree to continue their commercial relationship with certain varied terms, which ensures repayment, which a winding up would not have allowed for.

Litigants are unaware of the alternative dispute resolution choices available to them, and approach formal dispute resolution mechanisms notwithstanding the problems with these processes.

Instead of creating new structures or tightening the timelines in the mainstream dispute resolution processes, what we need today is enhanced focus on alternative methods that exist, but are underutilised. It is important for the government, which is concerned about effectiveness and expeditiousness in dispute resolution, to reinforce conciliation in other laws and strengthen policies on conciliation. Conciliation should emerge as an important means to resolve commercial disputes.

The writer is a lawyer and co-founder of Foundation for Comprehensive Dispute Resolution