The Supreme Court of India considered a case where two parties signed a compromise after conciliation proceedings but did not follow the proper procedure under Section 73 of the Arbitration and Conciliation Act for the compromise to have the effect of an arbitral award. The Court discussed that under Section 73 and 74, a compromise must be accepted by the Court and receive its seal of approval to be enforceable. The Court also found deficiencies in the content of the compromise signed by the parties. Prior case law establishes that for a conciliation proceeding to be successful, the signed settlement agreement must conform to the requirements of Section 73 to have the status and effect of an arbitral award.
The Supreme Court of India considered a case where two parties signed a compromise after conciliation proceedings but did not follow the proper procedure under Section 73 of the Arbitration and Conciliation Act for the compromise to have the effect of an arbitral award. The Court discussed that under Section 73 and 74, a compromise must be accepted by the Court and receive its seal of approval to be enforceable. The Court also found deficiencies in the content of the compromise signed by the parties. Prior case law establishes that for a conciliation proceeding to be successful, the signed settlement agreement must conform to the requirements of Section 73 to have the status and effect of an arbitral award.
The Supreme Court of India considered a case where two parties signed a compromise after conciliation proceedings but did not follow the proper procedure under Section 73 of the Arbitration and Conciliation Act for the compromise to have the effect of an arbitral award. The Court discussed that under Section 73 and 74, a compromise must be accepted by the Court and receive its seal of approval to be enforceable. The Court also found deficiencies in the content of the compromise signed by the parties. Prior case law establishes that for a conciliation proceeding to be successful, the signed settlement agreement must conform to the requirements of Section 73 to have the status and effect of an arbitral award.
The Supreme Court of India considered a case where two parties signed a compromise after conciliation proceedings but did not follow the proper procedure under Section 73 of the Arbitration and Conciliation Act for the compromise to have the effect of an arbitral award. The Court discussed that under Section 73 and 74, a compromise must be accepted by the Court and receive its seal of approval to be enforceable. The Court also found deficiencies in the content of the compromise signed by the parties. Prior case law establishes that for a conciliation proceeding to be successful, the signed settlement agreement must conform to the requirements of Section 73 to have the status and effect of an arbitral award.
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ANALYSIS
It is said that for want of a pin a war was lost. In the field of commerce and law it can happen that for want of form, an agreement could become a nullity. Corporations spend millions on procuring sound legal advice, and still at times they tend to commit, what can be called elementary mistakes. Somewhat similar was the case that came up for the consideration of the judges of the Supreme Court of India in the present case.
According to the doctrine of strict compliance, it is well-settled that if the statute prescribes a procedure for doing a thing in a particular way, it has to be done accordingly. Section 73 of the Arbitration and Conciliation Act, 1996, lays down the steps which need to be fulfilled for the settlement agreement to have the same effect as that of an arbitral award as provided under Section 74 of the Act. However, a compromise signed by both the parties to conciliation and authenticated by the conciliators by itself, as in the present case, does not become enforceable unless such a compromise petition is accepted by the Court and the Court puts its seal of approval for drawing a decree on the basis of compromise petition.
The apex Court listed some of the shortcomings in the Memorandum, particularly failure to mention the quantum of compensation, consequences in case of default of completion of the modification work, etc. The apex Court noticed that the LoC in the beginning itself stated that it was pursuant to the agreement in the conciliation proceedings, but not that it was to form part of the Memorandum of Conciliation.
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. In Bengal Immunity Company Limited v. State of Bihar and Ors 1, a Constitution Bench of the Supreme Court held that "Legal fictions are created only for some definite purpose.....a legal fiction is to be limited to the purpose for which it was created and should not be extended beyond that legitimate field"
The apex Court also made a reference to its earlier decision in the case of Haresh Dayaram Thakur v. State of Maharashtra2, wherein it had dealt with the provisions of sections 73 and 74 of the Act. In that case the Supreme Court had, inter-alia, concluded that, It follows 1 (1955) 2 SCR 603 2 (1955) 2 SCR 603 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 of the Act.
In the words of the Supreme Court, it is only an agreement which has been arrived at in conformity with the manner stipulated and form envisaged and which is duly authenticated in accordance with section 73 of the Act, that can be assigned the status of a settlement agreement.
