Conciliation Gets Award Status Under Arbitration Act Unless Expressly Excluded by Parties: Supreme Court

The Supreme Court has recently restored a civil suit challenging a family partition deed and an alleged conciliation award, observing that any conciliation conducted in accordance with Part III of the Arbitration and Conciliation Act, 1996 would attain the status and effect of an award unless the parties have expressly agreed to exclude its application.

“On a reading of Section 61, any conciliation between two parties brought about by following the procedure in Part III of the Act of 1996 would definitely get the status and effect of an Award under the Act of 1996 unless the parties have agreed otherwise; which agreement should be expressly for the exclusion of Part III of the Act of 1996, despite a conciliation having been proceeded with and concluded,” the Court observed.

A Bench of Justices Sanjay Kumar and K. Vinod Chandran allowed appeals filed by J. Muthurajan and another, representing the Jegatheesan group, challenging the rejection of their partition suit.

Setting aside the orders of the trial court and the Madras High Court, which had rejected the plaint under Order VII Rule 11 of the CPC, the Court held,

“The grounds of coercion, undue influence and more importantly misrepresentation, resulting in an inequitable partition, cannot be peremptorily rejected while considering an application under Order VII, Rule 11 of the CPC.”

The dispute arose between two branches of a business family over a partition deed dated December 31, 2018 and a document dated January 2, 2019, described as a “Conciliation Award.”

While the Vaikundarajan group maintained that the two documents together constituted a conciliation award executable under the 1996 Act, the Jegatheesan group alleged that the award was fabricated and that the partition deed was vitiated by coercion, undue influence, and misrepresentation.

Earlier, the Madras High Court had rejected petitions under Section 11 of the 1996 Act seeking appointment of an arbitrator and declined to interfere with execution proceedings initiated on the basis of the alleged conciliation award, while leaving it open to the parties to pursue remedies in accordance with law. Special leave petitions were dismissed with liberty to work out remedies. The present suit was filed thereafter.

Examining Section 61 of the 1996 Act, which provides that Part III (Conciliation) applies when parties agree to resolve disputes through conciliation, the Supreme Court held that if a conciliation has in fact proceeded under Part III and culminated in a settlement under Section 73, it would necessarily acquire the status and effect of an award under Section 74, unless there is an express agreement excluding Part III.

The Court further clarified: “Hence, if it is found to be an award of conciliation then there is no exclusion of Part III pleaded and if it does not have that status, then there is no application of Part III.”

Holding that serious triable issues were raised as to whether a valid conciliation had taken place and whether the 2019 document was authentic, the court ruled that the plaint disclosed a real cause of action and could not be rejected at the threshold.

Setting aside the rejection of the plaint, the Court restored the suit to the file of the Principal District Court, Tirunelveli, to be tried along with the objections filed under Section 47 of the CPC in the pending execution proceedings.

It also held that constructive res judicata would not bar the present challenge, as earlier orders had expressly left remedies open.