The Delhi High Court recently issued a ruling on the matter of M/s. Oasis Projects Ltd. vs. Managing Director, National Highway and Infrastructure Development Corporation Limited. The ruling sheds light on the nature of conciliation proceedings in the context of alternative dispute resolution (ADR) mechanisms.
In this case, the main issue was whether it was mandatory for the petitioner to resort to the conciliation process before invoking arbitration. The court found that even if a contract has a clause that requires the parties to settle disputes through conciliation, such clauses are only voluntary and not mandatory in nature. The court referred to Section 77 of the Arbitration and Conciliation Act 1996 and Clause 16 of the Office Memorandum, which states that if there is any urgency, arbitral proceedings can be initiated even if conciliation proceedings are pending. The opinion of the parties is the governing factor in determining the urgency of the matter.
The court observed that conciliation is a voluntary process, controlled by the parties and conducted with the assistance of a neutral third party, known as a conciliator. The goal of conciliation is to find a solution to the disputed issues and reach an agreement. However, it is up to the parties to decide if they wish to terminate the conciliation process and proceed with alternative dispute resolution mechanisms.
In this case, the court found that Article 26.2 of the contract clearly stated that the parties agreed to explore conciliation before resorting to arbitration, but it was not mandatory. The court noted that the petitioner had justified the urgency in the initiation of arbitration for preserving its rights as per Section 77 and Clause 16 of the Office Memorandum. As a result, the court allowed the petition and appointed Justice Manmohan Sarin, former Chief Justice of Jammu & Kashmir, as the sole arbitrator in the matter.
The ruling by the Delhi High Court highlights the voluntary and directory nature of conciliation proceedings in the context of alternative dispute resolution mechanisms. The court emphasized that conciliation should be the first step considered by the parties in case of a dispute, but it can be terminated by the parties at their free will. The court also emphasized the importance of the parties’ opinions in determining the urgency of the matter and emphasized the importance of preserving their rights through arbitration if necessary.
