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

In a section 18 MSMED reference by Lotus Spices, a micro supplier, against Zenith Foods Ltd, the conciliation conducted by the Council ends without settlement when the conciliator declares in writing, after consulting the parties, that further efforts are no longer justified. What must the Council do next, and by when must the reference be decided?

After conciliation terminates without settlement, the Council must itself arbitrate or refer the dispute to an ADR institution or centre for arbitration. The 1996 Act then applies as if there were an arbitration agreement under section 7(1). Every reference must be decided within ninety days of being made.

  1. AClose the file, since the supplier must then sue in court; no time limit applies
  2. BItself take up the dispute for arbitration or refer it to an ADR institution or centre for arbitration, with the Arbitration and Conciliation Act, 1996 applying as if under a section 7(1) arbitration agreement; decision within ninety days of making the referenceCorrect
  3. CAppoint a new conciliator indefinitely until a settlement is reached; no time limit applies
  4. DRefer the dispute to the High Court as a court under section 2(1)(e); decision within thirty days

Explanation

Conciliation terminates under section 76(b) by the conciliator's written declaration. Under section 18(3), an unsuccessful conciliation requires the Council to arbitrate itself or refer to an ADR centre, with the 1996 Act applying as if there were an arbitration agreement under section 7(1). Section 18(5) requires every reference to be decided within ninety days from the date of making it.

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