Searching Case Laws & Precedent on Legal Query.....!
Analysing the retrieved Case Laws
Scanned Judgements…!
Searching Case Laws & Precedent on Legal Query.....!
Analysing the retrieved Case Laws
Scanned Judgements…!
Non-mandatory nature of conciliation before arbitration - Multiple sources emphasize that clauses referencing attempts at settlement or conciliation are generally not mandatory but are instead directory or suggestive. For example, ["Ambey Mining Pvt. Ltd. VS Ntpc Ltd. - Delhi"] states, It is not in a mandatory form, and the process of the ESC is not a mandatory pre-condition for invoking arbitration. Similarly, ["In the matter of : Indiabulls Finance Company Private Limited VS . - 2015 0 Supreme(Del) 1649"] notes, the Clause itself states that it is only where the parties agree that the disputes may be referred to conciliation, indicating discretion rather than obligation.
Section 77 of the Arbitration and Conciliation Act, 1996 supports the view that pre-arbitration conciliation is typically directory, not mandatory. Several references, including ["SIEMENS LIMITED VS JINDAL INDIA THERMAL POWER LIMITED - Delhi"], ["Oasis Projects Ltd. VS Managing Director, National Highway And Infrastructure Development Corporation Limited - Delhi"], and ["JK TECHNOSOFT LIMITED VS RAMESH SAMBAMOORTHY - Delhi"], mention that doubts about whether such procedures are mandatory are removed when we refer to Section 77 of the Act, which clarifies that attempting conciliation is generally a directory requirement. These sources highlight that parties can proceed to arbitration even if attempts at conciliation are not successful or not undertaken.
Parties' conduct and prior attempts - Many judgments, such as ["Bhrundha Infra Pvt. Ltd VS Union of India - Telangana"], ["SIEMENS LIMITED vs JINDAL INDIA THERMAL POWER LIMITED - Delhi"], and ["SIEMENS LIMITED vs JINDAL INDIA THERMAL POWER LIMITED - Delhi"], acknowledge that parties often exchange communications and make efforts to settle disputes amicably before invoking arbitration. However, failure to strictly follow a conciliation process does not invalidate the arbitration process, as seen in statements like, attempts were made for an amicable settlement but without any result leaving no option but to invoke the arbitration clause.
Legal precedents affirm the directory nature - Courts have consistently held that pre-arbitration conciliatory steps are largely directory. For instance, ["R. S. Khanna And Sons VS Rites Ltd. Through Its Executive Director - Delhi"] states, the procedure for amicable settlement... would be merely directory and in case of failure... no fault could be found in the act of the petitioner in invoking the arbitration clause. Similarly, ["Ranjit Construction Company VS Gujarat State Road & Building Department - Delhi"] and ["LINDE HEAVY TRUCK DIVISION LTD VS CONTAINER CORPORATION OF INDIA LTD - Delhi"] reinforce that such pre-conditions are not mandatory, and parties are not precluded from proceeding with arbitration if these steps are not followed.
Implication for contractual clauses - Clauses that mention attempts at settlement or conciliation should be interpreted as encouraging or facilitating amicable resolution rather than imposing a mandatory precondition. As ["MFAR Constructions Private Limited VS Bengal Shristi Infrastructure Development Limited - Calcutta"] notes, words 'may be referred'... lead me to the conclusion that clause 5 is not a firm or mandatory arbitration clause.
Analysis and Conclusion:The collective insights from the provided sources clarify that merely including language about attempting to settle disputes or engaging in conciliation does not make such steps mandatory before arbitration. Courts and statutes, notably Section 77 of the Arbitration and Conciliation Act, 1996, establish that such procedures are generally directory, allowing parties to proceed to arbitration without strictly fulfilling pre-arbitration conciliation steps. Therefore, it is not mandatory to have conciliation prior to arbitration solely because the clause mentions attempts to settle; the process remains at the parties' discretion unless explicitly stipulated as a mandatory pre-condition.
In the world of commercial contracts, dispute resolution clauses are the roadmap for handling conflicts. But what happens when a clause simply states that attempts to settle must be made before arbitration? Does this make conciliation a mandatory step, or is it just good advice? This is a common question: Is it mandatory to have conciliation before arbitration merely because the clause says attempts to settle?
The short answer, based on judicial interpretations, is generally no—unless the clause explicitly designates it as a condition precedent. This blog dives deep into the legal nuances, drawing from key precedents and statutory insights under Indian law, particularly the Arbitration and Conciliation Act, 1996. We'll explore why courts lean towards flexibility, when exceptions apply, and practical tips for drafting airtight clauses. Note: This is general information, not legal advice. Consult a qualified lawyer for your specific situation.
Merely because a contractual clause states that attempts at settlement shall be made before resorting to arbitration does not automatically make such attempts mandatory or create a condition precedent to arbitration. Courts have consistently held that the enforceability depends on explicit language making conciliation a mandatory step. Without that, it's often seen as facilitative or directory.
For instance, the distinction between permissive and mandatory clauses is pivotal. Phrases like shall attempt or endeavor to settle are typically interpreted as encouragement rather than strict requirements unless tied to words like condition precedent or mandatory National Highway Authority of India VS Transstroy (India) Limited - 2022 0 Supreme(SC) 602. Failure to undertake conciliation rarely bars arbitration in such cases Avantika Contractors (I) Ltd. VS National Buildings Construction Corporation Limited - 2021 0 Supreme(Telangana) 239Delhi Development Authority VS Dharampal - 2016 0 Supreme(SC) 1273.
Dispute resolution clauses evolve through negotiation, but their interpretation hinges on wording. Legal precedents clarify that settlement attempts are non-mandatory unless explicitly conditioned.
In Salem Advocate Bar Association v. Union of India (Salem Bar-II), the Supreme Court examined Section 89 of the Code of Civil Procedure (CPC), observing that it encourages settlement but doesn't impose a mandatory conciliation before arbitration. The language is advisory, not conditional Afcons Infrastructure Ltd. VS Cherian Varkey Construction Co. (P) Ltd. - 2010 0 Supreme(SC) 614. The language of Section 89 and related rules does not impose a mandatory requirement that parties must undertake conciliation before arbitration; rather, it encourages settlement but does not make it a condition Afcons Infrastructure Ltd. VS Cherian Varkey Construction Co. (P) Ltd. - 2010 0 Supreme(SC) 614.
Similarly, in Jagdish Chander v. Ramesh Chander, the Court ruled that permissive words like may indicate non-mandatory steps. Parties can bypass pre-arbitration processes if not explicitly required Wellington Associates LTD. VS Kirit Mehta - 2000 3 Supreme 80. This underscores that context and explicitness govern.
Courts emphasize plain language. In Salem Bar-II, the ruling clarified that clauses determine mandatoriness by context, not assumption Afcons Infrastructure Ltd. VS Cherian Varkey Construction Co. (P) Ltd. - 2010 0 Supreme(SC) 614. Jagdish Chander reinforced that without clear mandatory language, arbitration proceeds unimpeded Wellington Associates LTD. VS Kirit Mehta - 2000 3 Supreme 80.
Additional judgments align. For example, reference to Section 77 of the Arbitration and Conciliation Act removes doubts: pre-conditions like mutual discussions are directory not mandatory. Any doubt on this aspect as to whether conciliation proceedings as required by an arbitration clause are directory or mandatory is removed when we refer to Section 77 of the Act, and which is the second reason that the pre-condition of mutual discussion is only a directory requirement and not a mandatory OMAXE NEW CHANDIGARH DEVELOPERS PRIVATE LIMITED Vs ATHARVA HOTEL SUPERFLUITIES INDIA PVT LTD - 2026 Supreme(Online)(Del) 1333Siemens Limited vs Jindal India Thermal Power LimitedSIEMENS LIMITED vs JINDAL INDIA THERMAL POWER LIMITED.
In contrast, where clauses explicitly mandate steps, courts enforce them. One case noted: It is clear that conciliation was a mandatory pre-condition before the parties could refer a dispute to arbitration METCON INDIA REALTY AND INFRASTRUCTURE PVT. LTD. VS DELHI METRO RAIL CORPORATION LTD. - 2023 Supreme(Del) 192. However, this was due to specific wording linking resolution through conciliation to arbitration referral.
Another ruling affirmed: The said two-step pre-arbitration procedure, as stipulated under the Agreement, is, in the considered view of this Court, mandatory and not merely directory, and therefore cannot be waived or dispensed with SWADESHI CIVIL INFRASTRUCTURE PVT LTD Vs RITES LIMITED & ANR. - 2026 Supreme(Online)(Del) 1449. These exceptions highlight the need for explicitness.
International standards like the UNCITRAL Model Law treat such clauses as recommendatory unless specified Afcons Infrastructure Ltd. VS Cherian Varkey Construction Co. (P) Ltd. - 2010 0 Supreme(SC) 614. In India, cases like construction disputes show nuance. In one, parties attempted settlement before invocation, but the court clarified directory nature per Section 77 SIEMENS LIMITED vs JINDAL INDIA THERMAL POWER LIMITED - Delhi_Delhi_ARBP-243_2017 2018_DHC_710.
A metro rail contract case under Section 11(6) leaned towards arbitration despite no-claims issues, invoking kompetenz-kompetenz without mandating prior conciliation METCON INDIA REALTY AND INFRASTRUCTURE PVT. LTD. VS DELHI METRO RAIL CORPORATION LTD. - 2023 Supreme(Del) 192. Similarly, in user fee collection disputes, limitation ran from claim denial, not settlement failure NATIONAL HIGHWAY AUTHORITY OF INDIA VS CHANDA ALLIED SERVICES - 2018 Supreme(Del) 1309.
Clauses allowing termination without conciliation were upheld: The said clause does not preclude IRWO from terminating the contract in terms thereof, without referring the disputes to conciliation GANGA CONTRACTS AND PROJECTS LTD. VS INDIAN RAILWAY WELFARE ORGANISATION - 2016 Supreme(Del) 3500. And in amicable settlement provisions, arbitration could commence after 56 days even without attempts ASSIGNIA-VIL JV VS RAIL VIKAS NIGAM LIMITED - 2016 Supreme(Del) 1849.
These illustrate that while attempts are encouraged, they're rarely gatekeepers absent explicit mandates.
Exceptions arise with clear language:- Explicit condition precedent or shall undertake and fail.- Multi-step clauses where arbitration follows failed conciliation METCON INDIA REALTY AND INFRASTRUCTURE PVT. LTD. VS DELHI METRO RAIL CORPORATION LTD. - 2023 Supreme(Del) 192.- Statutory overrides, though rare under the Act.
Interpreting vaguely as mandatory would amount to rewriting the contract, which is impermissible National Highway Authority of India VS Transstroy (India) Limited - 2022 0 Supreme(SC) 602.
To avoid disputes:- Draft Clearly: Use shall complete conciliation as a condition precedent for mandatoriness.- Specify Timelines: E.g., within 30 days to prevent delays.- Incorporate Permissive Language: If flexible, say parties may attempt.- Review Precedents: Align with Salem Bar-II and Jagdish Chander for enforceability Afcons Infrastructure Ltd. VS Cherian Varkey Construction Co. (P) Ltd. - 2010 0 Supreme(SC) 614Wellington Associates LTD. VS Kirit Mehta - 2000 3 Supreme 80.
Courts respect autonomy, so precision protects parties.
In summary, a clause mentioning settlement attempts doesn't mandate conciliation before arbitration unless explicitly a condition precedent. Judicial trends favor permissiveness, promoting swift resolutions under the Arbitration Act.
Key Takeaways:- Check clause language for mandatory or precedent.- Section 77 often renders steps directory OMAXE NEW CHANDIGARH DEVELOPERS PRIVATE LIMITED Vs ATHARVA HOTEL SUPERFLUITIES INDIA PVT LTD - 2026 Supreme(Online)(Del) 1333.- Explicitness is king—draft accordingly.
Stay informed on evolving arbitration law. For tailored advice, reach out to legal experts. References include National Highway Authority of India VS Transstroy (India) Limited - 2022 0 Supreme(SC) 602, Avantika Contractors (I) Ltd. VS National Buildings Construction Corporation Limited - 2021 0 Supreme(Telangana) 239, Delhi Development Authority VS Dharampal - 2016 0 Supreme(SC) 1273, Wellington Associates LTD. VS Kirit Mehta - 2000 3 Supreme 80, Afcons Infrastructure Ltd. VS Cherian Varkey Construction Co. (P) Ltd. - 2010 0 Supreme(SC) 614, and others cited.
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Section 62 of the Act also states that it is only where the parties agree to the conciliation process that they shall be so referred to the said process. Clause 7.2 of the GCC is in the same spirit. It is not in a mandatory form. ... In any event, the parties can still continue with their discussions and attempts to mutually settle the disputes, however, this cannot be a reason to deny relief to the petitioner, if it is otherwise made out. ... The use of the word "and/or" itself indicates that the proce....
Conciliation & Arbitration" clause of GCC." ... Moreover, in case of any disputes between the parties, as per the General Conditions of Contract, a mandatory precondition to arbitration being a need to settle disputes, if any, amicably (conciliation) had not been fully complied with by the Applicant. ... & Arbitration" clause of GCC." ... and Arbitration" clause of GCC. ... b) Clause#HL....
the parties to attempt to first settle the disputes by way of negotiation and conciliation. ... BPTP Ltd., 2014 SCC OnLine Del 6602], this Court had stated that any doubt on the aspect of whether conciliation proceedings, as required by the arbitration clause, is directory or mandatory in nature, is removed when reference is placed on Section 77 of the Act, which reads ... mandatory. ... The exchange of letters between the parties undoubtedly discloses that ....
Hence, it is not as if even prior to invocation of arbitration clause on 02.01.2017, attempts were not made to resolve the disputes between the parties. ... Any doubt on this aspect as to whether conciliation proceedings as required by an arbitration clause are directory or mandatory is removed when we refer to Section 77 of the Act, and which is the second reason that the pre- ... In response to the applicant's letter invoking the arbitration#....
Any doubt on this aspect as to whether conciliation proceedings as required by an arbitration clause are directory or mandatory is removed when we refer to Section 77 of the Act, and which is the second reason that the pre-condition of mutual discussion is only a directory requirement and not a mandatory ... Hence, it is not as if even prior to invocation of arbitration clause on 02.01.2017, attempts were not made to resolve the disputes between the ....
Hence, it is not as if even prior to invocation of arbitration clause on 02.01.2017, attempts were not made to resolve the disputes between the parties. ... Any doubt on this aspect as to whether conciliation proceedings as required by an arbitration clause are directory or mandatory is removed when we refer to Section 77 of the Act, and which is the second reason that the pre- ... In response to the applicant's letter invoking the arbitration#....
Any doubt on this aspect as to whether conciliation proceedings as required by an arbitration clause are directory or mandatory is removed when we refer to Section 77 of the Act, and which is the second reason that the pre-condition of mutual discussion is only a directory requirement and not a mandatory ... Hence, it is not as if even prior to invocation of arbitration clause on 02.01.2017, attempts were not made to resolve the disputes between the ....
The Arbitration & Conciliation Act 1996 shall not be applicable to the Arbitration in such a case. ... The said two-step pre-arbitration procedure, as stipulated under the Agreement, is, in the considered view of this Court, mandatory and not merely directory, and therefore cannot be waived or dispensed with. ... Learned counsel appearing for the Respondent submits that the arbitration clause prescribes certain mandatory pre-conditi....
In Ravindra Kumar Verma (Supra), this Court had stated that any doubt on the aspect of whether Conciliation proceedings, as required by the arbitration clause, is directory or mandatory in nature, is removed when reference is placed on Section 77 of the Act, which reads as under: In case of failure of the conciliation process even at the level of the Conciliation Committee, either party may refer the Dispute to arbitration in accordance with the provisions of #HL_STAR....
Despite exchange of communications dated 24.02.2017 and 18.03.2017 before the invocation of the arbitration clause no meeting took place. It is clear that attempts to settle by consultation was a non-starter. It cannot be said that the terms of the Arbitration Clause was not complied with. ... Any doubt on this aspect as to whether conciliation proceedings as required by an arbitration clause are directory or mandatory#HL_....
Further, a close reading of the said arbitration agreement reveals that only those disputes arising between the parties which could not be successfully resolved through conciliation would be referred to arbitration, and the arbitrators would be appointed in accordance under the said agreement. It is clear that conciliation was a mandatory pre-condition before the parties could refer a dispute to arbitration.
Thereafter, attempts were made to settle the issue before the Delhi High Court Mediation and Conciliation Centre. However, on 26.02.2018, the failure of mediation was reported to the Ld. Company Judge.
Of course, in cases the dispute resolution clause may specify the procedure required to be followed before invoking the arbitration clause, the question as to when the right to refer the disputes to arbitration arises would have to be considered in the context of the agreement between the parties. It is common for a dispute resolution clause to provide that the parties refer their disputes to conciliation before initiating arbitration proceedings, in such cases, the right to refer the dispute to arbitration would arise only on the once the parties have exhausted their efforts for c....
As is apparent from the above, clause 7.1.1 provides that the parties must, in the first instance, make an attempt to settle the disputes by mutual settlement/conciliation before proceeding to refer the disputes for arbitration; this is a part of dispute resolution mechanism agreed to between the parties. The said clause does not preclude IRWO from terminating the contract in terms thereof, without referring the disputes to conciliation.
However, unless both Parties agree otherwise, arbitration may be commenced on or after the fifty-sixth day after the day on which a notice of dissatisfaction and intention to commence arbitration was given, even if no attempt at amicable settlement has been made. The Parties shall make attempts to settle the dispute amicably before the commencement of arbitration. In case any dispute between the Engineer and the Contractor remains unresolved, the Contractor shall, then, give notice of dissatisfaction and intention to commence arbitration to the Employer within 28 days after....
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