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IN SUPREME COURT OF INDIA Page 1 of 6

CASE NO.:
Appeal (civil) 3247 of 2000

PETITIONER:
HARESH DAYARAM THAKUR

RESPONDENT:
STATE OF MAHARASHTRA AND ORS.

DATE OF JUDGMENT: 05/05/2000

BENCH:
D.P. MOHAPATRA & R..P SETHI

JUDGMENT:
JUDGMENT

2000 (3) SCR 1140

The Judgment of the Court was delivered by

D.P. MOHAPATRA, J. Leave granted.

Appellant Haresh Dayaram Thakur and respondent No. 3 Pitambar Dayaram

Thakur are brothers. Raj Kumari Pitambar Thakur Respondent No. 4 is wife of
respondent no. 3. The dispute raised in the case centres round the flat
bearing No. 16/199 at Ramakrishna Nagar, Khar, (W), Mumbai, belonging to
the Maharashtra Housing and Area Development Authority, Mumbai (for short
’MHADA’). The MHADA had granted lease of the said flat to one N.H.
Krishanan, who transferred his right, title and interest thereunder to one
Manmeet Singh Chadha under an agreement of transfer dated 7th April, 1986.
By the agreement for transfer dated 21.11.1989 the right, title and
interest of the flat was purchased by the appellant for a consideration of
Rs. 3,45,000. The appellant also became a member of the society of flat
owners of the building called Melody Cooperative Housing Society of which
the flat in question is a part. The appellant had applied to MHADA for
regularisation of allotment of the flat in his name. In December 1992 on a
routine inspection of the premises the Estate Manager of MHADA reported
that the property was in occupation of the appellant and his family members
including respondent No. 3, though it stood in the name of N.H. Krishnan,
and therefore, they were unauthorised occupants of the flat. On receipt of
the report a proceeding was initiated under section 66(1) of the
Maharashtra Housing and Development Act, 1966 (for short ’the Act’). In
pursuance of the order dated 23.4.1997 MHADA evicted all the unauthorised
occupants from the flat and sealed the same. In the said order leave was
given to the present appellant to establish his claim in respect of the
property in light of the deed of transfer dated 21.11.1989 and other
documents executed by the allottee in his favour. Subsequently, after
examining the relevant documents MHADA regularised the allotment of the
flat in favour of the appellant by an order under the Act.

On 19.9.1998 respondent no. 3 filed Writ Petition No. 5072/98 before the
Bombay High Court challenging the order of eviction passed by MHADA under
section 66(1) of the Act against him. It was the case of the respondent no.
3(writ petitioner) that he had also contributed a sum of Rs. 1,25,000 for
the purpose of purchase of the flat alongwith his brother, the appellant
herein, though the documents stood in the name of the latter. A Division
Bench of the High Court disposed of the Writ Petition by the order dated
7.10.1998 directing, inter alia that the competent authority of MHADA would
re-examine the claims of the respondent No. 3 as well as the appellant
herein and pass a speaking order in accordance with the law. In compliance
with the directions of the High Court the competent authority of MHADA
passed the order dated 18.12.1998 rejecting the claim of respondent no. 3
and confirming the allotment/regularisation of the flat in the name of the
appel-lant.
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The respondent Nos. 3 & 4 challenged the order dated 18.12.1998 of MHADA by
filing a writ petition under Articles 226 and 227 of the Constitution, Writ
Petition No. 510/99, asserting their title to the property. They prayed for
a writ of certiorari or any other appropriate writ, direction or order
under Article 226 of the Constitution of India quashing the order of the
Appellate Authority dated 23.4.1997 and the eviction order dated
18.12.1998; for a writ of Mandamus or any appropriate writ, direction or
order directing MHADA and its Estate Manager and the respondent no. 7 in
the writ petition (appellant herein) to restore to them possession of the
flat No. 16/199 at Ramakrishna Nagar, Khar (W), Mumbai and for issue of a
writ of mandamus to MHADA to regularise allotment of the said flat in
favour of the writ petitioners and for an interim direction restoring
possession of the flat to them after obtaining possession thereof from
respondent No. 7 (ap-pellant herein).In the said writ petition the High
Court by the order dated 6.3.1999 appointed a conciliator with regard to
the dispute between the parties. The relevant portion of the order reads
thus :

"By consent of the Petitioners and Respondent No. 7 hereto, Shri H. Suresh,
Retired Judge of the Bombay High Court, is appointed as Conciliator with
regard to dispute between the Petitioners and Re-spondent No. 7 relating to
Flat No. 16/199. Melody Co-operative Housing Society Ltd., Ramakrishna
Nagar, 9th Road, Khar, Mumbai - 400 052 including the issue of title,
regularisation/possession and compensation, if any.

The parties agree and undertake to this Court that the decision of the
Conciliator will be final and binding on both the parties.

Court Receiver, High Court, Bombay is hereby appointed as Receiver of

aforesaid Flat No. 16/199, with a further direction to take formal
possession of the said flat from Respondent No. 7, and appoint Respondent
No. 7 as his agent, on monthly royalty of Rs. 1,000 to be deposited with
the Conciliator, subject to the final award. The Receiver shall not insist
tor security and shall not display his board at the suit flat.

The learned Conciliator is requested to submit his report/award, and

preferably within six months."

In pursuance of the said order Justice H. Suresh (Retired) held meetings on

20.4.99, 5.7.99, 25.7.99, 8.8.99 and on 24.8.99 in presence of the counsel
for the parties. In the minutes of the Meeting held on 8.8.99 it was
recorded :

"After hearing both the parties, the Conciliator suggested that the matter
could be settled on the petitioner paying an amount as may be fixed by the
Conciliator, to the Respondent, the petitioner would be entitled to the
flat in question and would be put in possession. The parties agreed to the
above and requested the Conciliator to settle on these lines, and the
Conciliator to fix all the relevant terms, including the requirement the
petitioner foregoing his claim for the ancestral flat i.e. 18/224,
R.K.Nagar.

The Meeting is now adjourned to 24th Aug., 1999 at 4.30 p.m. when the
Advocates will make all the relevant submissions which will enable the
Conciliator to fix the amount and the other terms of settlement."

In the minutes of the last meeting held on 24.8.1999 the Conciliator

recorded that both the advocates have completed their submissions in
respect of the amount to be paid by the petitioner to the respondent to
enable the Conciliator to fix the amount as noted in the last meeting; that
both the advocates stated that there are no further submissions to be made.
In the concluding portion of the minutes of the said meeting it is recorded
"accord-ingly these proceedings come to an ending excepting the Conciliator
will make a report to the High Court incorporating the terms of
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settlement". The Conciliator in his report dated 31.8.1999 which was sent
to the High Court stated inter alia, that after taking into account all the
submissions made by both the parties and after considering all the relevant
documents and papers and pleading he (Conciliator) proposes to settle the
dispute in the manner set out in the report. The proposals in the
Conciliator’s report included the stipulation i.e. (1) that on petitioner’s
(respondents 3 & 4 herein) paying a sum of Rs. 4,00,000 to respondent no. 7
(appellant herein) he shall vacate the flat No. 16/199 and the petitioners
shall be put in possession thereof; (2) Petitioner No. 1 (Respondent 3
herein) shall forego and relinquish all his claims in respect of flat No.
18/224 Sunshine Co-operative Housing Society Ltd. 9th Road, Khar, Mumbai
400 052.; (3) that on the basis of the above settlement, the possession of
the said Flat No. 16/199 by the Petitioners be regularised in their favour
by the Maharashtra Housing and Area Develop-ment Authority (Respondent No.
2) and that in view of the settlement respondent No. 7 (appellant herein)
will have no claim whatsoever in respect of flat No. 16/199 and the writ
petitioners (Respondent 3 & 4 herein) will have no claim whatsoever in
respect of flat no. 18/224. The other stipulations of the settlement set
out in the report are not very material for the purpose of the present
case. It is relevant to state here that the so called ’proposal’ by the
Conciliator was not signed by the parties, nor were its terms disclosed to
the parties by the Conciliator. As submitted by Sri Tulsi learned Sr.
counsel appearing for the appellant the report was sent by the Conciliator
in a sealed cover to the High Court directly.

The appellant filed an objection against the report of the Conciliator

setting out various grounds of challenge. A Division Bench of the High
Court summarily rejected the objections raised against the Conciliator’s
report. Referring to the statement in the previous order dated 6.3.1999
that the parties agreed to undertake to the Court that the decision of the
Conciliator would be final and binding on both the parties the Division
Bench was of the opinion that when the Conciliator has been appointed for
taking a decision, with the consent of the parties no amount of objections
raised in the form of appli-cation can be entertained at all. (emphasis is
mine). Division Bench observed in the order "but in the present case, at
the time when conciliator was agreed to be appointed, clear cut
understanding was there between the parties to given to finality". The
conclusion arrived at by the Court as expressed in paragraph 4 of the order
reads :

"The net result of the matter is that the report filed by the conciliator
shall be treated as the Order in the Writ Petition and parties’ rights will
be governed thereunder. Petition is disposed of accordingly. Civil
Application is disposed of."

The said order is under challenge in this appeal filed by the respondent
No. 7 of the writ petition.

The Arbitration and Conciliation Act, 1996, as the name itself suggests,
deals with two types of proceeding: arbitration proceedings and
conciliation proceedings. While provisions relating to arbitration
proceedings are con-tained in part-I in which are included Chapters 1 to X,
the conciliation proceedings are dealt with in part-Ill which includes
sections 61 to 81. On perusal of the provisions of the Act the position is
manifest that a clear distinction is maintained in the statute between
arbitration proceedings and conciliation proceedings.

Section 61 which deals with Application and Scope of the provisions, in

part-Ill provides, inter alia, that save 3s otherwise provided by any law
for the time being in force and unless the parties have otherwise agreed,
this Part shall apply to conciliation of disputes arising out of legal
relationship, whether contractual or not and to all proceedings relating
thereto.

In section 64 provision is made that the appointment of conciliators shall

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be by agreement of parties or if the parties agree they may request a
suitable institution or a person to appoint a conciliator on their behalf.
In section 65 it is provided, inte.r alia, that on being appointed the
conciliator shall request each party to submit to him a brief written
statement describing the general nature of the dispute and the points at
issue. Each party shall send a copy of such statement to the other party.

Section 67 which makes provision regarding role of conciliator pro-vides in

sub-section (1) that the conciliator shall assist the parties in an
independent and impartial manner in their attempt to reach an amicable
settlement of their dispute. In sub-section (2) thereof, it is provided
that the conciliator shall be guided by principles of objectivity, fairness
and justice, giving consideration to, among other things, the rights and
obligations of the parties, the usages of the trade concerned and the
circumstances surrounding the dispute including any previous business
practices between the parties. In sub-section (4) of section 67 it is laid
down that the conciliator may, at any stage of the conciliation
proceedings, make proposals for a settlement of the dispute. Such proposals
need not be in writing and need not be accompanied by a statement of the
reasons therefor. Section 69 contains the provision regarding communication
between conciliator and parties whether orally or in writing and about the
place of meetings etc. in section 70 provision is made regarding disclosure
of information. Therein it is provided, inter alia, that when the
conciliator receives factual information concerning the dispute from a
party, he shall disclose the substance of that information to the other
party in order that the other party may have the opportunity to present any
explanation which he considers appropriate. In the provision to the section
it is stated that when a party gives any information to the conciliator
subject to a specific condition that it he kept confidential, the
conciliator shall not disclose that information to the other party. Under
section 72 it is laid down that each party may, on his own initiative or at
the invitation of the conciliator, submit to the conciliator suggestions
tor the settlement of the dispute.

Section 73 in which provision is made regarding settlement agreement reads

as follows :

"73. Settlement agreement - (1) When it appears to the conciliator that

there exist elements of a settlement which may be acceptable to the
parties, he shall formulate the terms of a possible settlement and submit
them to the parties for their observations. Alter receiving the
observations of the parties, the conciliator may reformulate the terms of a
possible settlement in the light of such observations.

(2) If the parties reach agreement on a settlement of the dispute, they may
draw up and sign a written settlement agreement. If requested by the
parties, the conciliator may draw up, or assist the parties in drawing up,
the settlement agreement.

(3) When the parties sign the settlement agreement, it shall be final and
binding on the parties and persons claiming under them respec-tively.

(4) The conciliator shall authenticate the settlement and furnish a copy
thereof to each of the parties."

Section 74 provides that the settlement agreement shall have the same
status and effect as if it is an arbitral award on agreed terms on the
substance of the dispute rendered by an arbitral tribunal under section 30.

Section 75 which incorporates in the statute the confidentiality clause

provides that notwithstanding anything contained in any other law for the
time being in force, the conciliator and the parties shall keep
confidential all matters relating to the conciliation proceedings.
Confidentiality shall extend also to the settlement agreement, except where
its disclosure is necessary for purposes of implementation and enforcement.
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Section 76 wherein provision is made regarding termination of conciliation

proceedings is extracted hereunder :

"76. Termination of conciliation proceedings - The conciliation proceedings

shall be terminated -

(a) by the signing of the settlement agreement by the parties on the date
of the agreement; or

(b) by a written declaration of the conciliator, after consultation with

the parties, to the effect that further efforts at conciliation are no
longer justified, on the date of the declaration; or

(c) by a written declaration of the parties addressed to the conciliator to

the effect that the conciliation proceedings are terminated, on the date of
the declaration; or

(d) by a written declaration of a party to the other party and the

conciliator, if appointed, to the effect that the conciliation proceedings
are terminated, on the date of the declaration.

Section 77 contains the provision that the parties shall not initiate,
during the conciliation proceedings, any arbitral or judicial proceedings
in respect of a dispute that is the subject-matter of the conciliation
proceedings except that a party may initiate.arbitral or judicial
proceedings where, in his opinion, such proceedings are necessary for
preserving his rights.

At this stage it will be convenient to refer to section 30, which is a

provision in Chapter VI dealing with making of arbitration award and
termination of proceedings. Section 30 reads as follows:

"30. Settlement: (1) It is not incompatible with an arbitration agree-ment

for an arbitral tribunal to encourage settlement of the dispute and, with
the agreement of the parties, the arbitral tribunal may use mediation,
conciliation or other procedures at any time during the arbitral
proceedings to encourage settlement.

(2) If, during arbitral proceedings, the parties settle the dispute, the
arbitral tribunal shall terminate the proceedings and, if requested by the
parties and not objected to by the arbitral tribunal, record the settlement
in the form of an arbitral award on agreed terms.

(3) An arbitral award on agreed terms shall be made in accordance with

section 31 and shall state that it is an arbitral award.

(4) An arbitral award on agreed terms shall have the same status and effect
as any other arbitral award on the substance of the dispute."

From the statutory provisions noted above the position is manifest that a
coneiliator is a person who is to assist the parties to settle the dispute
between them amicably. For this purpose the conciliator is vested with wide
powers to decide the procedure to be followed by him untrammeled by the
procedural laws 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
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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.

In the case in hand, as appears from the materials on record, no such

procedure as prescribed under part-Ill of the Act has been followed by the
conciliator. The conciliator appears to have held some meetings with the
parties in which there was discussion and thereafter drew up the so called
settlement agreement by himself in secrecy and sent the same to the court
in a sealed cover. Naturally the so called settlement agreement drawn up by
the conciliator does not bear the signatures of the parties. As the
impugned order shows the said settlement has been given a status higher
than an arbitral award in as much as the court has refused to even
entertain any objection against the said settlement agreement reiterating
the position that the settle-ment arrived at by the conciliator will be
binding on the parties. The conciliator who is a former judge of the High
Court and the learned Judge who passed the impugned order failed to take
note of the provisions of the Act and the clear distinction between an
arbitration proceeding and a con-ciliation proceeding. The learned judge in
passing the impugned order failed to notice the apparent illegalities
committed by the conciliator in drawing up the so called settlement
agreement, keeping it secret from the parties and sending it to the Court
without obtaining their signature on the same. The position is well settled
that if the statute prescribes a procedure for doing a thing, a thing has
to be done according to that procedure. Thus the order passed by the High
Court confirming the settlement agreement received from the conciliator is
wholly unsupportable.

Accordingly, the appeal is allowed. The order dated 6.10.1999 passed by the
High Court of Bombay in Civil Application No. 7117 of 1999 is set aside.
The settlement agreement dated 31.8.1999 filed by Justice H. Suresh before
the High Court is also set aside. The High Court is directed to dispose of
the Writ Petition afresh on merit in accordance with law. Parties to bear
their own costs.