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Conciliation is not a mandatory pre-condition to be done before proceeding with arbitration, rather it is a voluntary and directory process, held the court.
The Delhi High Court recently observed that conciliation proceedings are voluntary and directory in nature and it is not mandatory to invoke this before Arbitration proceedings.
A single judge bench of Justice Navin Chawla observed that even if a contract has a clause that says parties should first try to settle disputes through conciliation, such clauses can only be voluntary and not mandatory in nature.
Whenever a dispute arises, conciliation should be the first step considered by the parties but the same can be terminated by the parties to the contract at their free will, said the Court.
Conciliation can be referred as a form of alternative dispute resolution (ADR) in which a neutral third party, the conciliator tries to find out the disputed issues and try to give an agreement and result.
While referring to section 77 of the Arbitration and Conciliation Act 1996 and Clause 16 of Office Memorandum, the Court observed that if there is any urgency, arbitral proceedings can be initiated even when conciliation proceedings are pending and in order to determine the urgency of the matter, the opinion of parties is the governing factor.
The main issue, in this case, was whether it is mandatory for the petitioner to resort to the conciliation process before invoking arbitration. Dealing with the matter, court found that article 26.2 of the contract clearly stated that before accepting arbitration as a dispute resolution mechanism, the parties agreed to explore conciliation by the committee but the same was not mandatory in nature.
Conciliation expresses a broad notion of a voluntary process, controlled by the parties and conducted with the assistance of a third person who is known as a Conciliator.
Lastly, the court expressed that the petitioner very well justified the urgency in the initiation of arbitration for preserving its rights as per section 77 and clause 16 of the office memorandum.
Thus, the high court allowed the petition and appointed Justice Manmohan Sarin, former Chief Justice of Jammu & Kashmir as the sole arbitrator in the present matter.
Case Title – M/S Oasis Projects Ltd. vs. Managing Director, National Highway and Infrastructure Development Corporation Limited.
Statute – The Arbitration and Conciliation Act, 1996.
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