Arbitration and Conciliation Act, 1996
Section 79: Deposits for Costs in Conciliation Proceedings
Section 79 of the Arbitration and Conciliation Act, 1996 empowers the conciliator to require equal advance and supplementary deposits from the parties towards expected conciliation costs, provides consequences for non-payment within thirty days, and requires an account and refund of any unused balance when conciliation ends.
Current-law note: The Mediation Act, 2023 contains provisions that, when brought into force, would substitute Sections 61 to 81 of the Arbitration and Conciliation Act, 1996. However, Section 61 of the Mediation Act, 2023 was not included in the Central Government commencement notification dated 9 October 2023. Accordingly, Section 79 of the 1996 Act continues to remain relevant to conciliation proceedings unless and until the substitution is brought into force by notification.
Text of Section 79
Section 79 - Deposits.
(1) The conciliator may direct each party to deposit an equal amount as an advance for the costs referred to in sub-section (2) of section 78 which he expects will be incurred.
(2) During the course of the conciliation proceedings, the conciliator may direct supplementary deposits in an equal amount from each party.
(3) If the required deposits under sub-sections (1) and (2) are not paid in full by both parties within thirty days, the conciliator may suspend the proceedings or may make a written declaration of termination of the proceedings to the parties, effective on the date of that declaration.
(4) Upon termination of the conciliation proceedings, the conciliator shall render an accounting to the parties of the deposits received and shall return any unexpended balance to the parties.
Meaning and Purpose of Section 79
Section 79 creates the funding mechanism for the costs of statutory conciliation. Instead of requiring the conciliator or one party to carry the expected common costs, the provision allows the conciliator to require equal advance deposits from both parties.
The section also allows further equal deposits if the original advance is insufficient. If both parties do not pay the required deposits in full within the statutory thirty-day period, the conciliator may either suspend the proceedings or terminate them by a written declaration.
Section 79 at a Glance
| Provision | Legal Effect |
|---|---|
| Section 79(1) | The conciliator may require equal advance deposits from each party for expected costs covered by Section 78(2). |
| Section 79(2) | The conciliator may require equal supplementary deposits during the conciliation proceedings. |
| Section 79(3) | If both parties do not pay the required deposits in full within thirty days, the conciliator may suspend or terminate the proceedings. |
| Section 79(4) | On termination, the conciliator must account for deposits received and return any unexpended balance. |
Advance Deposit Under Section 79(1)
The first deposit is an advance against the costs that the conciliator expects will be incurred. The amount directed from each party must be equal. The provision links the deposit directly to the costs described in Section 78(2).
What Costs Are Covered?
Section 78(2), which is expressly referred to in Section 79(1), defines the relevant reasonable costs. These include the fee and expenses of the conciliator and approved witnesses, approved expert advice, specified administrative assistance, and other expenses incurred in connection with the conciliation proceedings and the settlement agreement.
Supplementary Deposits Under Section 79(2)
If additional money is required while conciliation is continuing, the conciliator may direct supplementary deposits. Section 79 requires these supplementary deposits also to be made in equal amounts by each party.
Thirty-Day Rule for Non-Payment
Section 79(3) provides a specific consequence where the deposits required under sub-sections (1) and (2) are not paid in full by both parties within thirty days. The conciliator may choose either to suspend the conciliation proceedings or to terminate them by making a written declaration to the parties.
If the conciliator makes a written declaration of termination, the termination becomes effective on the date of that declaration.
Accounting and Refund on Termination
Section 79(4) requires financial accountability at the end of the conciliation process. Upon termination, the conciliator must provide the parties with an account of the deposits received and return any unexpended balance.
Relationship Between Sections 78 and 79
Section 78 determines what constitutes the reasonable costs of conciliation and provides the default rule for sharing them. Section 79 provides the mechanism by which money may be collected in advance to meet those costs.
Read together, the two provisions establish a practical sequence: expected costs may be funded through deposits during the proceedings, the final costs are determined on termination, and unused money must be returned.
Relationship With Section 76
Section 76 contains the general rules governing termination of conciliation proceedings. Section 79(3) adds a specific ground on which the conciliator may terminate proceedings when required deposits remain unpaid in full by both parties within thirty days.
Practical Effect of Section 79
- The conciliator may seek funding in advance for expected conciliation costs.
- Each party is directed to deposit an equal amount.
- Additional equal deposits may be required while the proceedings continue.
- The statutory period for full payment by both parties is thirty days.
- Non-payment may lead to suspension or written termination of the conciliation.
- Any termination declaration under Section 79(3) takes effect on the date of the declaration.
- After termination, the conciliator must account for deposits received.
- Any unspent balance must be returned to the parties.
Mediation Act, 2023 and Section 79
The Sixth Schedule to the Mediation Act, 2023 provides for substitution of Sections 61 to 81 of the Arbitration and Conciliation Act, 1996. The Mediation Act uses phased commencement. The Central Government notification S.O. 4384(E), dated 9 October 2023, brought specified provisions of the Mediation Act into force but did not include Section 61, which is the provision that would give effect to the Sixth Schedule amendment of the Arbitration and Conciliation Act. Therefore, the existing Section 79 should not be treated as displaced merely because the Mediation Act, 2023 has been enacted.
Related Provisions
Frequently Asked Questions
Can a conciliator require advance payment of costs?
Yes. Section 79(1) permits the conciliator to direct each party to deposit an equal amount as an advance for the expected costs referred to in Section 78(2).
Can additional deposits be demanded during conciliation?
Yes. Section 79(2) permits supplementary deposits in equal amounts from each party during the conciliation proceedings.
How long do parties have to pay the required deposits?
Section 79(3) refers to a period of thirty days for the required deposits to be paid in full by both parties.
What can happen if the deposits are not paid?
The conciliator may suspend the proceedings or make a written declaration terminating the proceedings.
Must unused deposit money be refunded?
Yes. Upon termination, the conciliator must account for deposits received and return any unexpended balance to the parties.