The division bench of the Calcutta High Court, comprising Justice I. P. Mukerji and Justice Biswaroop Chowdhury, determined that an arbitrator’s attempts to facilitate a settlement between parties cannot be considered a ‘conciliation proceeding’ under Part III of the Arbitration and Conciliation Act, 1996. The court clarified that conciliation is an independent process aimed at reaching a settlement, distinct from the role of an arbitrator who renders decisions akin to a court.
In this case, the matter concerned an arbitral award that was annulled by the Commercial Court on grounds that the arbitrator, Justice Amitava Lala, had engaged in conciliation efforts between the parties. The award amounted to Rs. 1,54,86,728/- with an interest rate of 18% per annum from the award date until payment. Despite the arbitrator’s documented efforts to facilitate settlement, these attempts were unsuccessful.
The respondent, who was the debtor under the award, argued that the arbitrator’s involvement in conciliation invalidated the subsequent arbitration and award under Section 80 of the Arbitration and Conciliation Act, 1996, which prohibits a conciliator from acting as an arbitrator in the same dispute.
The High Court observed that Section 30 of the Arbitration Act empowers arbitral tribunals to promote settlement discussions among parties during proceedings, similar to provisions in the Civil Procedure Code (CPC). The court noted the common practice of judges encouraging settlements during litigation, which may involve suggesting settlement amounts or interventions to facilitate agreements.
The High Court distinguished between formal conciliation proceedings and settlement efforts by arbitrators, emphasizing that arbitrators’ facilitation of settlements resembles judicial attempts to encourage settlements during court proceedings. Consequently, the court overturned the Commercial Court’s judgment, holding that the arbitrator’s actions did not invalidate the arbitration and award.
