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

Conciliation between Bharat Packaging and Nila Logistics ends under section 76 with no settlement. The conciliator had received Rs 40,000 from each party as deposits (total Rs 80,000) and fixes costs of Rs 50,000, all within section 78(2) heads. Each party also spent Rs 10,000 on its own lawyer. The settlement agreement is absent. What is the correct outcome?

Each party bears Rs 25,000 of the Rs 50,000 costs plus its own Rs 10,000 lawyer expense, and the conciliator returns Rs 15,000 to each. Costs are shared equally under section 78(3), other expenses stay with the party incurring them, and unspent deposits are returned under section 79(4).

  1. AEach bears Rs 25,000 of costs plus own Rs 10,000; conciliator returns Rs 15,000 to eachCorrect
  2. BEach bears Rs 35,000; conciliator returns Rs 5,000 to each
  3. CEach bears Rs 25,000 and shares the lawyer fees equally; conciliator returns Rs 15,000 to each after adjusting Rs 10,000 each
  4. DThe party who terminated bears all Rs 50,000; the other receives a full refund of Rs 40,000

Explanation

Section 78(3): costs are borne equally unless the settlement agreement provides otherwise, so Rs 50,000 splits into Rs 25,000 each. Other expenses, such as own lawyer fees, stay with each party. Under section 79(4) the unexpended balance is returned: 40,000 - 25,000 = Rs 15,000 each. Check: 30,000 returned + 50,000 costs = 80,000.

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