Part III
Part III of the Act (Sections 61–81) covers Conciliation. In 2026, this part is in a unique transitional phase. While the Mediation Act, 2023 was designed to eventually replace Part III to align with international standards (where “mediation” and “conciliation” are used interchangeably), Part III remains the primary law for settlements initiated under the 1996 Act.
1. The Core Sections (61–81)
Conciliation is a non-binding, consensual process that only becomes “final” once both parties sign a Settlement Agreement.
- Section 62 (Commencement): Conciliation begins only when one party invites the other in writing, and the other party accepts in writing. (Silence for 30 days is a rejection).
- Section 67 (Role of Conciliator): The conciliator is a facilitator, not a judge. They are guided by principles of objectivity, fairness, and justice.
- Section 73 (Settlement Agreement): If parties agree on a settlement, the conciliator drafts the terms. Once signed by the parties, it is “final and binding.”
- Section 74 (Status and Effect): This is the “magic” section. It gives the signed settlement agreement the same status as an Arbitral Award. This means it can be enforced directly as a court decree without filing a fresh suit.
- Section 75 (Confidentiality): Everything said or written during conciliation is strictly confidential and cannot be used as evidence in future court or arbitration proceedings.
2. Key Case Law (2025–2026)
A. Enforceability & Section 74
B. Limitation and Statutory Conciliation
- MSME Facilitation Council Case (SC, July 2025):
- The Rule: The Limitation Act does not apply to conciliation proceedings.
- The Decision: The Supreme Court held that while arbitration is subject to time limits, conciliation is an attempt at peace. Therefore, even if a debt is “time-barred” for a lawsuit, parties can still voluntarily enter conciliation to resolve it. However, if conciliation fails and they move to arbitration, the limitation clock applies strictly to the arbitration stage.
C. Conciliator as Arbitrator? (Section 80)
- Tamil Nadu Cements Corp v. MSEFC (SC, 2025 Reference):
- The Conflict: Section 80(a) says a conciliator cannot act as an arbitrator in the same dispute. However, the MSMED Act allows the same Council to do both.
- Current Standing: The SC has referred this to a larger 5-judge bench to decide if the “special” MSME law overrides the “general” Section 80 ban. For now, in private conciliations, the ban remains absolute.
| Feature |
Conciliation (Part III) |
Mediation (2023 Act) |
| Voluntary? |
Yes, always. |
Mandated for commercial suits (pre-litigation). |
| Role of Neutral |
Can “suggest” terms of settlement. |
Primarily facilitates party-led solutions. |
| Finality |
Becomes an “Arbitral Award” (Sec 74). |
Becomes a “Mediated Settlement Agreement.” |
| Judicial Link |
Linked to the 1996 Act framework. |
Autonomous framework with its own Council. |
4. Part IV: Supplementary (Sections 82–86)
This part is essentially administrative, giving High Courts the power to make rules and ensuring that the 1940 Act remains repealed.
Final Pro-Tip for 2026
If you are drafting a settlement, ensure the Conciliator also signs the document and certifies that it was reached under Section 73. Without the conciliator’s signature and the specific mention of Part III, the document is just a “contract,” and you would have to file a fresh lawsuit to enforce it if the other party defaults.