India: Settlement Agreements Qua Arbitral Awards

Last Updated: 15 September 2017
Article by Raka Chatterjee

Meaning and Scope of Settlement Agreement

A settlement between the disputing parties is a much needed resort in the modern day commercial world. A settlement ensures that the disputes between the parties end in amicable terms leaving each party satisfied. In turn, outside Court settlement procedures like conciliation ensure fewer burdens on the Courts and also lessen the costs of litigation for the parties in dispute. Thus, these settlements have been welcomed by litigants and courts alike. Therefore, the Courts have not hesitated or disputed in giving finality to the terms of a settlement agreement, like an arbitral award, as under the Arbitration and Conciliation Act, 1996.

A settlement agreement is an agreement drawn out by a conciliator, when he sees that there is possibility of amicable compromise between the parties. A conciliator assists the parties to amicably settle the disputes between them.

The conciliator, on the basis of his notings during the conciliation proceedings and also on the basis of the written statements and the documentary evidence of the parties, draws up the terms of settlement agreement. The same is then forwarded to the parties for their comments, if any, and if necessary a reformulated settlement agreement is prepared on the basis of such comments.1

According to Section 73 (3) of the Arbitration and Conciliation Act, 1996, (hereinafter referred to as the Act) the settlement agreement signed by the parties is final and binding on them and the persons claiming under them. It follows, therefore, that a successful conciliation proceeding comes to an end only when the settlement agreement signed by the parties comes into existence. This type of an agreement has the legal sanctity of an arbitral award under Section 74 of the Act.

Interpretation by Judicial Bodies

The Supreme Court in the case of Haresh Dayaram Thakur v. State of Maharashtra2 has held as that the requirement of a conciliator is to assist the parties to settle the disputes amicably. If the conciliator is of an opinion that there exists an element of settlement between the parties then he can draw up an agreement under the provisions of Section 73 of the Act. The settlement reaches finality only when the settlement agreement is signed by both/all the parties in the dispute. Then such settlement agreement can have the legal sanctity of an arbitration award under Section 74 of the Act. The relevant portion of the judgement has been extracted herein:

"From the statutory provisions noted above the position is manifest that a conciliator is a person who is to assist the parties to settle the disputes between them amicably. For this purpose the conciliator is vested with wide powers to decide the procedure to be followed by him untrammelled by the procedural law like the Code of Civil Procedure or the Indian Evidence Act, 1872. When the parties are able to resolve the dispute between them by mutual agreement and it appears to the conciliator that there exists an element of settlement which may be acceptable to the parties he is to proceed in accordance with the procedure laid down in Section 73, formulate the terms of a settlement and make it over to the parties for their observations; and the ultimate step to be taken by a conciliator is to draw up a settlement in the light of the observations made by the parties to the terms formulated by him. The settlement takes shape only when the parties draw up the settlement agreement or request the conciliator to prepare the same and affix their signatures to it. Under sub-section (3) of Section 73 the settlement agreement signed by the parties is final and binding on the parties and persons claiming under them. It follows therefore that a successful conciliation proceeding comes to an end only when the settlement agreement signed by the parties comes into existence. It is such an agreement which has the status and effect of legal sanctity of an arbitral award under Section 74."

From a bare perusal of the above quoted paragraph, it can be concluded that if the Settlement agreement comes into existence under Section 73 satisfying the requirements stated therein, it gets the status and effect of an arbitral award on agreed term, on substance of dispute, rendered by an arbitral tribunal under Section 30 of the Act.

It is to be noted that not every agreement or arrangement between the parties in whatever form of manner acquires the status of a settlement agreement within Section 73 of the Act.

Only the agreement that has been arrived with in conformity with the manner stipulated and form envisaged and has been duly authenticated in accordance with Section 73 can be assigned the status of a settlement agreement within the meaning of the Act.

Furthermore, in the case of Mysore Cements Limited v. Svedela Barmac Ltd3., the Apex Court followed and reiterated its stand as taken by them in Haresh Dayaram Thakur (supra) case, the settlement agreement comes into existence under Section 73 satisfying the requirements stated therein, it gets the status and effect of an arbitral award on agreed terms on the substance of the dispute rendered by an Arbitral Tribunal under Section 30 of the Act. If a settlement agreement comes into existence under Section 73 satisfying the requirements stated therein, it gets the status and effect of an arbitral award rendered by the arbitral tribunal under Section 30 of the Act. It was further held that mere substantial compliance with Section 73 is not sufficient; all the statutory requirements must be complied with.

Recently, a Single Judge Bench of the Delhi High Court, in the case of Anuradha SA Investments LLC & Anr. v Parsvnath Developers Limited & Ors.4, also dealt with concept of a settlement agreement within the ambit/folds of an arbitral award. The Court had the opportunity to deal with the enforcement of a Settlement Agreement as an Award. The respondents had challenged the maintainability of the petition on the ground that the Settlement Agreement is not an agreement under Section 73 of the Act, or as a result of the conciliation proceeding under Part III of the Act. They further contend that they have not received the authenticated copy of the Settlement Agreement and that the said agreement is insufficiently stamped.

The Ld. Single Judge held that the parties themselves had engaged themselves in conciliation proceedings by appointing lawyers to actively negotiate and finalise the settlement agreement. The contents of the Settlement Agreement and the minutes of the meetings of the Respondents themselves are in accordance to Section 73 and the Respondents cannot contradict their own stand. The Court also quite regretfully observed that the Respondent failed to disclose that lawyers appointed by the Respondents had received the authenticated copy of the settlement agreement. The Respondent have also acted on the said agreement, and not only on a technical plea of non-service, they are maliciously trying to evade the terms of the Agreement.

The contention that the Settlement Agreement is not sufficiently stamped in unpersuasive. The Court observed that under "Section 74 a settlement agreement would have the status and effect "as if it is an arbitral award"; thus by legal fiction, a settlement agreement arrived at during the conciliation proceedings and authenticated by the conciliator has been provided the same status and effect as an arbitral award. In other words, the settlement agreement can be enforced as an arbitral award and it is not necessary for a party to institute fresh proceedings for obtaining a decree in terms thereof. However, it does not mean that the settlement agreement ceases to be an agreement voluntarily entered into between the parties and becomes an arbitral award; it merely has the status and effect of an award under the Act. The settlement agreement continues to be an agreement and would require to be stamped as such."

It further held that "it is well settled that a legal fiction cannot be extended beyond the purpose for which it is created. Section 74 of the Act creates a legal fiction to elevate the status and effect of a settlement agreement under Section 73 to an award. The purpose is clearly to enable enforcement of such agreements as an arbitral award without further adjudicatory process. The legal fiction cannot be extended to other statutes."

Thus, in the present case, the Settlement Agreement was held to be maintainable and can be enforced as an arbitral award.

Conclusion:

As in seen from the catena of case laws it has been reiterated that a Settlement Agreement can only then be given the colour of an arbitral award, if all the compliances as laid down under Section 73 is followed with. Thus a settlement agreement arrived at between the parties, duly authenticated by the conciliator will have the same effect of an arbitral award on the agreed terms of the substance of dispute, as rendered by a duly constituted arbitral tribunal under Section 30 of the Act.

Footnotes

1. P.C .Markanda, Law Relating to Arbitration and Conciliation: Commentary on the Arbitration and Conciliation Act, 1996, LexisNexis Butterworths Wadhwa, Nagpur, Seventh Edition (2009)

2. (2000) 6 SCC 179

3. (2003) 10 SCC 375

4. 2017 (4) ARBLR 72 (Delhi)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.