Arbitration, Mediation and Conciliation · Introduction to Conciliation and its Importance for MSMEs

Termination of Conciliation Proceedings under Section 76

Updated 11 October 2026 · Fact-checked

Under Section 76 of the Arbitration and Conciliation Act, 1996, conciliation ends in four ways: the parties sign a settlement agreement, the conciliator declares in writing that further efforts are not justified, both parties declare termination jointly, or one party declares it in writing. Each mode has a fixed termination date.

Understand Termination of Conciliation Proceedings

Conciliation is a voluntary process. A conciliator helps the parties reach a settlement, but cannot impose one. Because it is voluntary, the law must say clearly when it ends. Section 76 does this.

The key idea is that every mode of termination has a date of termination. That date matters because the later steps depend on it: the conciliator fixes costs and returns deposits only after termination, and the parties can then go to arbitral or judicial proceedings.

Section 76 lists four modes. Clause (a): the parties sign the settlement agreement, and proceedings end on the date of the agreement. Clause (b): the conciliator makes a written declaration, after consulting the parties, that further efforts at conciliation are no longer justified. The date is the date of the declaration. Clause (c): both parties address a written declaration to the conciliator saying the proceedings are terminated. Clause (d): one party sends a written declaration to the other party and to the conciliator, if one is appointed, saying the proceedings are terminated.

Note the contrast. Modes (b), (c) and (d) all need a written declaration. Mode (a) needs a signed settlement agreement. Mode (d) lets one party walk away alone, without the other party's consent.

This matters for MSMEs. Under Section 18 of the MSMED Act, 2006, the Facilitation Council conducts conciliation, and Sections 65 to 81 of the 1996 Act apply. If that conciliation is not successful and stands terminated without settlement, the Council itself arbitrates the dispute or refers it to an institution or centre for arbitration. So termination under Section 76 without settlement is the trigger for the arbitration stage.

Section 79(3) adds a further route to an end: if the required deposits are not paid in full by both parties within thirty days, the conciliator may suspend the proceedings or make a written declaration of termination, effective on the date of that declaration.

Key rules to remember

Section 76(a): Settlement agreement signed by the parties → terminated on the date of the agreement; Successful conciliation. The settlement is final and binding under Section 73(3).
Section 76(b): Conciliator's written declaration, after consulting the parties, that further efforts are no longer justified → terminated on the date of the declaration; Consultation with the parties is required before the declaration.
Section 76(c): Written declaration of the parties addressed to the conciliator → terminated on the date of the declaration; Joint act of both parties.
Section 76(d): Written declaration of a party to the other party and the conciliator, if appointed → terminated on the date of the declaration; One party can end the process alone.
Section 79(3): Deposits not paid in full by both parties within thirty days → conciliator may suspend, or declare termination in writing, effective on the date of the declaration; The conciliator has discretion. Termination is not automatic.
Section 78 and Section 79(4): On termination: conciliator fixes costs and gives written notice; accounts for deposits and returns any unexpended balance; Costs are borne equally unless the settlement agreement provides otherwise.

How to solve Termination of Conciliation Proceedings questions

Use this method for any question on how conciliation ended, from which date, or what follows.

1Read the facts and find the event that ended the process: signing, a declaration, or non-payment of deposits.
2Identify who acted: both parties, one party, or the conciliator.
3Match the event to the clause of Section 76: (a) settlement, (b) conciliator, (c) both parties, (d) one party. For non-payment, use Section 79(3).
4Check the form: a declaration must be in writing, and under clause (b) the conciliator must first consult the parties.
5State the date of termination as the date of the agreement or the declaration.
6Name the consequences: costs fixed under Section 78, deposits accounted for under Section 79(4), and, for an MSME dispute with no settlement, arbitration under Section 18(3) of the MSMED Act.
7Conclude clearly whether the termination is valid.

Quickest way: Who acted, in what form

When to use it: For short-answer or case questions where you must pick the correct mode quickly.

Ask: was there a signed settlement? If yes, clause (a).
If no, ask who declared: conciliator (b), both parties (c), one party (d).
Check that the declaration is written and that the conciliator consulted the parties in (b).
Write the date and the follow-up of costs and deposits in one line.

Common mistakes in Termination of Conciliation Proceedings

Saying conciliation can end only by settlement or by the conciliator's decision.
Students remember the two most common modes and forget the party-driven ones.
Fix: Remember four modes: (a) settlement, (b) conciliator, (c) both parties, (d) one party.
Treating an oral statement of withdrawal as termination.
Conciliation is informal, so students assume everything is informal.
Fix: Clauses (b), (c) and (d) require a written declaration.
Stating the wrong termination date, such as the date of the last meeting.
Students overlook that each clause fixes its own date.
Fix: Use the date of the settlement agreement or of the declaration.
Forgetting that the conciliator must consult the parties under clause (b).
Students focus on the conciliator's power and skip the condition.
Fix: Write 'after consultation with the parties' whenever you cite clause (b).
Saying a party needs the other party's consent to end conciliation.
Students confuse conciliation with an agreed process like a contract.
Fix: Under clause (d) a party can terminate alone by written declaration to the other party and the conciliator, if appointed.
Saying non-payment of deposits automatically terminates the proceedings.
Students read the thirty-day period as a deadline with a fixed result.
Fix: Under Section 79(3) the conciliator may suspend or may make a written declaration of termination. It takes effect from that declaration.

Worked examples

Example 1

Sunrise Components Pvt. Ltd., a small enterprise in Coimbatore, referred a delayed payment dispute against Orion Machines Ltd. to the Facilitation Council. During conciliation, Orion's director sends a signed letter to Sunrise and the conciliator stating that Orion terminates the proceedings. Sunrise objects. Is the conciliation terminated, and what happens next?

Show the solution

Provision: Section 76(d) allows a party to terminate by a written declaration to the other party and the conciliator, if appointed.
Analysis: Orion acted alone, and its declaration is in writing and addressed to both Sunrise and the conciliator. The Act does not require the other party's consent.
Sunrise's objection therefore does not prevent termination. The date of termination is the date of the declaration.
Consequence: the conciliator fixes the costs and gives written notice under Section 78, and accounts for deposits under Section 79(4).
Since there is no settlement, Section 18(3) of the MSMED Act applies: the Council either takes up the dispute for arbitration itself or refers it to an institution or centre providing alternate dispute resolution services.

Answer: Yes. The conciliation stands terminated under Section 76(d) on the date of Orion's written declaration. As no settlement was reached, the Council proceeds to arbitration under Section 18(3) of the MSMED Act, 2006.

Example 2

In a conciliation between two companies, the conciliator directs each party to deposit ₹50,000 as an advance for costs. One party pays but the other does not pay within thirty days. State the conciliator's powers and what he must do on termination.

Show the solution

Provision: Section 79(1) lets the conciliator direct each party to deposit an equal amount as an advance for costs.
Section 79(3): if the deposits are not paid in full by both parties within thirty days, the conciliator may suspend the proceedings, or may make a written declaration of termination to the parties.
Analysis: only one party has paid, so the condition of full payment by both is not met. The power is discretionary, and termination takes effect on the date of the written declaration.
On termination, Section 78(1) requires the conciliator to fix the costs and give written notice to the parties.
Under Section 79(4), he must render an accounting of the deposits received and return any unexpended balance to the parties.
Costs are borne equally unless the settlement agreement provides otherwise, under Section 78(3).

Answer: The conciliator may either suspend the proceedings or terminate them by a written declaration, effective on the date of the declaration. On termination he must fix the costs, give written notice, account for the deposits and return any unexpended balance.

Exam tips

Always cite the clause of Section 76 and quote the date of termination. Examiners look for both.
In case questions, check the form first: is the declaration written, and was the conciliator's consultation done under clause (b)?
Link the topic to the MSME context. Mention Section 18(3) of the MSMED Act when conciliation ends without settlement.
Add Sections 78 and 79 as consequences. This turns a short answer into a complete one.
Write in the order: provision, analysis of facts, conclusion.

Practice questions from Introduction to Conciliation and its Importance for MSMEs

Termination of Conciliation Proceedings: frequently asked questions

How many ways can conciliation proceedings be terminated under Section 76?

Four. They end by a signed settlement agreement, by the conciliator's written declaration, by a joint written declaration of the parties to the conciliator, or by one party's written declaration to the other party and the conciliator, if appointed.

Can one party end conciliation without the other's consent?

Yes. Under Section 76(d), one party can terminate by a written declaration to the other party and to the conciliator, if appointed. The termination is effective on the date of the declaration.

What is the date of termination in each mode?

For a settlement it is the date of the agreement. For each type of declaration it is the date of that declaration.

What happens after conciliation of an MSME dispute ends without settlement?

Section 18(3) of the MSMED Act, 2006 says the Council either itself takes up the dispute for arbitration or refers it to an institution or centre providing alternate dispute resolution services. The Arbitration and Conciliation Act then applies as if there were an arbitration agreement under Section 7(1).