[Guest Post] Amicable Settlement in Commercial Contracts by Tarun Bhowmick | Expert Views

-Tarun Bhowmick
In view of the current situation due to Pandemic Covid-19, where the business houses from the top-notch to small scale enterprises are being impacted due to the numerous guidelines and threshold being implemented by the Government of India, as a resultant, entities are facing financial crunch to run their business and at the same time, business entities are into the difficult situation to perform their obligations on-going commercial contracts which are slowly and gradually converting into the disputes between the contracting parties. The commercial disputes must be resolved in such manner which saves time, money, reputation and goodwill of businesses of the disputing parties under the commercial contracts.
Amicable settlements
A settlement between the disputing parties under the commercial contracts is much more needed at this time to resort and cope up with the present conditions of the commercial world. Thus, the strongest tool to implement at the moment is “Amicable Settlement”. An amicable settlement between the disputing parties leaves each party satisfied, which lessens the cost of litigation and also ensures to minimise the burdens of the Court.
Under a model dispute resolution, clauses that can be found in commercial contracts are:-
  1. In the event of disagreement/dispute between the parties under the agreement shall be settled amicably;
  2. If amicable settlement fails the parties will invoke the clause of arbitration or will address to the competent court of law.
The word Amicable Settlement itself means clear, friendly, peaceful and win-win situation of taking the actions to settle the dispute between the parties under the commercial contracts. 
The scope of Amicable Settlement is also available to the parties at an early stage of dispute under the commercial contract. Under the amicable settlement process, the efforts made by the parties are in proportion to their interest to settle. Such efforts by the parties can be drawn through by themselves or by involving any legal or technical expert. Sometimes the disputing party agrees to appoint the mandate mediator or conciliator so as to bring the dispute to end through neutral and an impartial process.
Therefore, a question arises, what is the strongest and effective tool to bring the amicable settlement on a common platform to bring the dispute to end under the contract between the parties:
The strongest and effective tool under the amicable settlement is the process of “Negotiation”- During the amicable settlement discussions, the parties under the dispute must follow the method of cooperative and interest-based negotiation. The parties must come up with the clean hands and raise the claim under the discussion in a transparent manner so as to the parties under the dispute shall be stressed into the common interest, values and goal which is fair and mutually agreeable.
Even the courts have started to recognise the agreements to settle the dispute amicably or agreements to negotiate. In Emirates Trading Agency vs. Prime Mineral Exports [2014], Mr. Justice Teare in its judgement stated that, where a dispute arose, the parties should first seek to resolve the problem by friendly discussion.
Settlement during Arbitration/Conciliation
The conciliator, on the basis of his noting 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 the 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, 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 agreement has the legal sanctity of an arbitral award under Section 74 of the said Act.
The Supreme Court in the case of Haresh Dayaram Thakur v. the State of Maharashtra2 has held that the requirement of a conciliator is to assist the parties to settle the disputes amicably. If the conciliator is of the 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. Such a settlement agreement can have the legal sanctity of an arbitration award under Section 74 of the Act.
Therefore, Amicable Settlement to be considered as one of the forms of Alternate Dispute Resolution, where disputing parties agree to conciliate the dispute in a friendly manner. However, at the same time, the governing bodies should improve the legal framework and affirming to enhance the scope of the amicable settlement process in commercial contracts, which will decrease the backlogs of the courts and to improve the access to justice.  
Mr. Tarun Bhowmick is presently working as in-house legal counsel with M/s CG Power and Industrial Solutions Limited. You can reach him @ [email protected]

  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. 2. (2000) 6 SCC 179

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