Settlement Agreement under Section 73
Part III of the arbitration and conciliation act, 1996 deals with the provisions related to the process of conciliation, this process is very different from arbitration. Here conciliator tries to settle the dispute between the parties by assisting them and helping them to reach to the conclusion or solution of the matter. Under this process one party reaches out to other or send the invitation to settle the dispute through the process of conciliation. If the other party accepts the invitation of the party, then both the parties proceeds to choose the conciliator which is generally one but in some cases there might be more than once conciliator.
The settlement process takes place under section 73 of The Arbitration and Conciliation Act, 1996 when the conciliator sees the possibility of settlement of dispute. Generally decision of the conciliation proceedings are not binding on the parties but if the parties resort to settlement of award under this section then the settlement agreement becomes binding on the parties. Parties have the option of either drawing up the terms settlement agreement by themselves or take the assistance of conciliator and at last the agreement is signed by both the parties and authenticated by the conciliator. As per section 74 of The Arbitration and Conciliation Act, 1996 settlement agreement drawn under section 73 is kept in par with arbitral award in the arbitration proceedings under section 30 of The Arbitration and Conciliation Act, 1996 and it is binding like arbitral award.
In case of Haresh Darayam Thakur Vs. State of Maharashtra The Supreme Court addressed the issue of importance of signature of both parties on the settlement agreement. Court said that settlement agreement under section 73 of The Arbitration and Conciliation Act, 1996 can be given legal sanctity of arbitral award under section 74 of The Arbitration and Conciliation Act, 1996 only when both the parties sign the settlement agreement. Settlement agreement can be drawn by conciliator only when he sees that there is some possibility of mutual settlement of dispute between the parties. Similarly, in the case of Anuradha SA Investment LLC & Anr. Vs. Parsvnath Developers Limitid & Ors. Enforcement of settlement agreement was challenged on the basis of the agreement being not stamped properly by the parties and the conciliator. Court said that the fact that the settlement agreement is not duly stamped does not make the whole agreement invalid. Keeping settlement agreement in par with arbitral award does not mean that parties have to obtain a decree to enforce the settlement agreement or initiate the fresh proceedings, settlement agreement under section 73 is only given the status of an arbitral award given under section 30 so that it can be enforced and can be binding on the parties like the arbitral award. In case of agreement which is not properly stamped, the only thing parties need to do is to get the settlement agreement stamped properly.
It is clear from words given in section 73 and section 74 of The Arbitration and Conciliation Act,1996 and the case laws given above that settlement agreement drawn in the conciliation proceedings under section 73 are given the same status of an arbitral award made in the arbitration proceedings under section 30 of The Arbitration and Conciliation Act,1996.