Best Conciliation: A Settlement With the Force of an Award Lawyer

Conciliation is a structured way of reaching a settlement with the help of a neutral person, the conciliator. It is set out in Part III of the Arbitration and Conciliation Act, 1996, and has one feature that sets it apart from an ordinary negotiated settlement: a settlement agreement signed by the parties and authenticated by the conciliator has the same status and effect as an arbitral award on agreed terms. That means it can be enforced as a decree, without a fresh case.

This page is for businesses that want to settle a dispute with a neutral's help and want the result to be enforceable, and for parties in MSME council proceedings, where conciliation is the first stage. In short: conciliation starts when one party invites the other and the other accepts in writing; the conciliator helps the parties and may make proposals for settlement; what is said in conciliation is confidential and cannot be used in later proceedings; and a signed settlement agreement is enforceable like an award.

Conciliation suits disputes where both sides want to settle but need a neutral push, and want certainty that the settlement will be honoured.

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How conciliation works

Conciliation and mediation

Conciliation and mediation are closely related. Both involve a neutral who helps the parties reach their own settlement, and neither imposes a decision. The main differences in Indian law are these: conciliation under Part III has a statutory framework that gives the conciliator a more active role, including making proposals for settlement and formulating terms, and gives the settlement the status of an arbitral award. Mediation is now governed by the Mediation Act, 2023, which, as its provisions come into force, also makes mediated settlement agreements enforceable.

In practice, the labels are used loosely, and many conciliators work much like mediators. What matters for the parties is the framework they choose: if they want the Part III protections, including Section 74 enforceability, they should clearly agree to conciliation under Part III and follow its procedure. See mediation services.

How conciliation runs

Time and typical cost range

Our fees are agreed in writing at the start, stage by stage, and are not linked to the outcome.

Documents needed

Termination of conciliation

The settlement agreement and Section 74

Section 74 provides that a settlement agreement under Section 73 has the same status and effect as if it were an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal under Section 30. Since an arbitral award is enforceable as a decree under Section 36, a conciliation settlement can be executed in court if a party does not perform it.

To get this protection, the conciliation must be under Part III, and the settlement agreement must be drawn up and signed by the parties, and authenticated by the conciliator, as Section 73 requires. A settlement written up informally after a conciliation meeting, without the conciliator's authentication, may be only a contract. Follow the formalities carefully.

Limitation and conciliation

Parties sometimes worry that time spent in conciliation will be lost for limitation purposes. The Supreme Court in Sonali Power Equipments v MSEB (2025), dealing with MSME council proceedings, held that the Limitation Act applies to arbitration under Section 18 of the MSMED Act, but not to the conciliation stage. In ordinary Part III conciliation, Section 77 bars the parties from starting arbitral or judicial proceedings during the conciliation, except where necessary to preserve their rights, which allows a party to file to stop limitation running.

The practical lesson is to watch limitation during any settlement process. Where a claim is close to the limitation date, file proceedings to protect it, or obtain a written acknowledgment of liability, and then continue the conciliation.

Laws that apply

How we work

We are a litigation and advisory practice led by Advocate BK Singh, with offices in Dwarka (New Delhi) and Vaishali (Ghaziabad). This is what you can expect:

• Proper framework: conciliation under Part III, with the formalities followed.
• Preparation: clear statements and realistic settlement ranges.
• Enforceable drafting: settlements authenticated under Section 73.
• Limitation watch: protecting claims during the process.
• Written fee terms: agreed stage by stage, never linked to the outcome.

Mistakes in conciliation

Choosing a conciliator

A conciliator should be someone both sides trust and respect. For commercial disputes, retired judges, senior engineers, chartered accountants and experienced businesspeople often serve well. The conciliator's knowledge of the subject matters more in conciliation than in many other processes, because the conciliator may propose settlement terms, and those proposals carry weight only if they are seen as fair and well informed.

Section 64 allows the parties to ask an institution or a person to recommend or appoint a conciliator. Under Section 80, unless the parties agree otherwise, the conciliator cannot act as an arbitrator, representative or counsel of a party in any later arbitral or judicial proceedings on the same dispute, which protects the parties' confidence in the process.

Conciliation in MSME council proceedings

When a micro or small enterprise refers a delayed payment dispute to a Micro and Small Enterprises Facilitation Council under Section 18 of the MSMED Act, the council first conducts conciliation itself or through an institution or centre, applying Sections 65 to 81 of the Arbitration Act as if the conciliation were under Part III. If conciliation succeeds, the settlement has the status of an award. If it fails, the council takes up the dispute for arbitration or refers it to an institution.

Buyers sometimes treat the conciliation stage as a formality. That is a mistake: it is often the best chance to settle on reasonable terms, before the council arbitration and before the deposit requirement under Section 19 applies to any challenge. Suppliers, too, can use conciliation to obtain prompt payment of undisputed amounts. See MSEFC conciliation and arbitration.

Preparing for conciliation

Section 65 asks each party to submit a brief written statement describing the general nature of the dispute and the points at issue, and allows the conciliator to ask for further statements and documents. A clear, honest statement helps the conciliator understand the dispute quickly. Separately, prepare an internal assessment of your case's strengths and weaknesses, the cost and time of litigation, and your realistic settlement range.

During separate meetings, the conciliator may ask questions that test your position. Answer candidly; what you say in a separate meeting is kept confidential unless you agree otherwise (Section 70 allows the conciliator to disclose information to the other side, but not if a party asks for it to be kept confidential).

Conciliation clauses in contracts

Some contracts provide for conciliation as a step before arbitration: for example, "Any dispute shall first be referred to conciliation under Part III of the Arbitration and Conciliation Act, 1996. If the dispute is not settled within 60 days of the invitation, it shall be referred to arbitration." Such multi-tier clauses can help resolve disputes early, but must be drafted clearly, stating the time limit and what happens if a party does not participate.

Courts have differed on whether pre-arbitration steps are mandatory or directory, depending on the wording. Where the clause is clear and mandatory, follow it before starting arbitration, to avoid objections. Where urgent relief is needed, a Section 9 application can still be filed.

Costs of conciliation

Section 78 provides that the conciliator fixes the costs of the conciliation on termination, including the conciliator's fee and expenses, and the costs of witnesses and experts requested by the conciliator with the parties' consent. Section 79 allows the conciliator to ask for deposits. Unless the settlement provides otherwise, costs are borne equally by the parties, and each party bears its own other expenses. Agree the conciliator's fee at the outset.

When conciliation fails

If conciliation does not produce a settlement, it ends by a declaration under Section 76, and the parties are free to arbitrate or litigate. Nothing said in the conciliation can be used against a party in those later proceedings under Section 81: views or suggestions about a possible settlement, admissions made during the conciliation, proposals made by the conciliator, or the fact that a party indicated willingness to accept a proposal.

Even an unsuccessful conciliation often narrows the issues, clarifies the numbers, and makes later settlement easier. Many disputes that do not settle in conciliation settle soon after, once each side has seen the other's position clearly.

Conciliation for government and PSU disputes

Disputes with government departments and public sector undertakings are often hard to settle, because officers worry that any settlement will be questioned by audit or vigilance. A structured process with an independent conciliator, who examines the claims and proposes terms, gives officers a documented basis for agreeing. Many public sector bodies have internal conciliation or dispute resolution committees, and the Ministry of Finance's 2024 guidelines on arbitration and mediation in government procurement encourage settlement through such processes.

For contractors and suppliers, proposing conciliation with a respected neutral, such as a retired senior engineer or judge, can unlock settlements that direct negotiation cannot. The settlement agreement, once authenticated under Section 73, is enforceable like an award, which protects the contractor if the department later delays payment.

Conciliation and stamp duty

A settlement agreement under Section 73 has the status of an award under Section 74, and awards may attract stamp duty under the state Stamp Act. Where the settlement involves transfer of property or creation of rights in immovable property, stamp duty and registration may be required. Check the requirements in the relevant state before signing, and pay the duty promptly, since an unstamped instrument may be impounded when produced for enforcement.

Using conciliation alongside proceedings

Where litigation or arbitration is already pending, the parties can agree to try conciliation without withdrawing the case. The court or tribunal can adjourn the proceedings for a period to allow it. If conciliation succeeds, the settlement can be recorded in the pending case as a decree or award, which removes any doubt about enforceability.