Section 30 of the Arbitration and Conciliation Act, 1996: Settlement

Section 30 of the Arbitration and Conciliation Act, 1996 encourages settlement even after arbitral proceedings have begun. It confirms that an arbitral tribunal may encourage the parties to settle and, with their agreement, may use mediation, conciliation or another appropriate procedure during the arbitration. If the dispute is settled, the tribunal may record the settlement as an arbitral award on agreed terms.

Current legal position: Section 30 continues to govern settlement during arbitral proceedings. An award on agreed terms must comply with Section 31 and has the same legal status and effect as any other arbitral award on the substance of the dispute.

Text of Section 30 - Settlement

(1) It is not incompatible with an arbitration agreement 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.

What Section 30 Means

Section 30 makes it clear that arbitration and negotiated settlement are not mutually exclusive. The existence of an arbitration agreement does not prevent the tribunal from encouraging settlement. The tribunal may assist the settlement process only within the limits set by the provision, including the requirement of party agreement where mediation, conciliation or another settlement procedure is to be used.

1. Tribunal may encourage settlement

Under Section 30(1), an arbitral tribunal may encourage the parties to resolve their dispute by agreement. This can occur at any time during the arbitral proceedings. Settlement efforts therefore need not wait until the evidentiary or hearing stage is complete.

2. Mediation, conciliation or another procedure requires party agreement

The tribunal may use mediation, conciliation or another settlement procedure with the agreement of the parties. The provision preserves party autonomy while allowing the tribunal to facilitate an efficient resolution where the parties are willing to settle.

3. Settlement terminates the arbitral proceedings

If the parties settle the dispute during arbitration, Section 30(2) requires the arbitral tribunal to terminate the proceedings. Where the parties request it and the tribunal does not object, the settlement may be formally recorded as an arbitral award on agreed terms.

4. Award on agreed terms must comply with Section 31

Section 30(3) links a consent or agreed award to Section 31 of the Arbitration and Conciliation Act, 1996. The document must state that it is an arbitral award and must satisfy the applicable requirements governing the form and contents of an award.

5. Same status and effect as another arbitral award

Section 30(4) gives an arbitral award on agreed terms the same status and effect as any other arbitral award on the substance of the dispute. Recording a settlement as an agreed award can therefore give the parties a formal arbitral disposition rather than leaving the settlement only as a private contractual arrangement.

Section 30 and the Mediation Act, 2023

The Mediation Act, 2023 created a wider statutory framework for mediation in India and amended provisions relating to conciliation in the Arbitration and Conciliation Act, 1996. Section 30 itself continues to expressly refer to mediation, conciliation or other procedures for encouraging settlement during arbitral proceedings. Where a separate mediation process is used, the applicable provisions of the Mediation Act, 2023 should also be considered.

Practical point: A settlement reached during arbitration does not automatically become an arbitral award. For a settlement to be recorded as an award on agreed terms under Section 30(2), the parties must request such recording and the arbitral tribunal must not object.

Key Requirements at a Glance

The arbitral tribunal may encourage settlement during the proceedings.
Mediation, conciliation or another settlement procedure may be used with the agreement of the parties.
Once the dispute is settled, the arbitral proceedings are terminated.
The parties may request that the settlement be recorded as an arbitral award on agreed terms.
The tribunal must not object to recording the settlement as an award.
The agreed award must comply with Section 31 and state that it is an arbitral award.
The agreed award has the same status and effect as another arbitral award on the merits.

Official Legal Sources

For the authoritative statutory text, see the Arbitration and Conciliation Act, 1996 on India Code and the Mediation Act, 2023 on India Code.