Arbitration vs Conciliation vs Mediation

Arbitration vs conciliation vs mediation turns on a single question: does the neutral decide the dispute, or do the parties? Arbitration is adjudicatory, and it ends in a binding award under the Arbitration and Conciliation Act, 1996. Conciliation and mediation are not adjudicatory, because the neutral only helps the parties reach their own settlement, which binds them once they sign it. The line between conciliation and mediation is far less settled than most explainers admit, and the statutory merger of the two is still not in force.

This article sets out how arbitration, conciliation and mediation differ, what the Supreme Court has actually held about those differences, and where the statutory position stands as on 16 July 2026.

SPONSORED

The three processes sit on one spectrum of control. At one end, an arbitrator hears the dispute and imposes an answer. At the other, a mediator holds no power to impose anything and works only on the conversation. Conciliation has traditionally been placed between them.

That spectrum decides what you walk away with. Arbitration produces a reasoned award you cannot appeal on the merits, enforceable as a decree. Conciliation and mediation produce a settlement that binds nobody until it is signed.

Here’s where most explainers go wrong. They present the three-way split as settled doctrine, when the Supreme Court has called mediation a synonym of conciliation, and the provision that was supposed to merge the two into one statutory process has never been brought into force.

Arbitration is adjudicatory, which is precisely what separates it from the other two. The Supreme Court of India put it in one line in Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd., (2010) 8 SCC 24: “Arbitration is an adjudicatory dispute resolution process by a private forum, governed by the provisions of the AC Act.” An arbitrator hears evidence and argument, then issues a binding award.

It starts with an agreement. Under Section 7 of the Arbitration and Conciliation Act, 1996, the arbitration agreement must be in writing and must record the parties’ intention to submit disputes to arbitration. Usually it lives as a clause inside the main contract.

No agreement, no arbitration. Afcons is blunt about it: “If there is no agreement between the parties for reference to arbitration, the court cannot refer the matter to arbitration under section 89 of the Code.” That consent requirement matters later, because it is one of the few points on which conciliation squarely matches arbitration and departs from court-referred mediation.

Once a party elects the adjudicatory route, it invokes arbitration by serving a notice under Section 21. LawSikho’s guide to drafting a notice invoking arbitration walks through what that notice has to contain and the consequences of getting it wrong. iPleaders covers the underlying mechanics separately in its primer on what arbitration is and how the process runs.

The trade-off arrives at the end. In exchange for choosing their decision-maker, the parties give up any appeal on the merits: the award can only be challenged on the narrow grounds in Section 34, and once it survives, it is enforced under Section 36 as if it were a decree of a civil court. So what does a party actually get? A determination, whether or not it wanted that answer.

Now the provision that does the real work. Under Section 67 of the Arbitration and Conciliation Act, 1996, the conciliator assists the parties in an independent and impartial manner, and Section 67(4) adds the power that textbooks treat as the great divider: “The conciliator may, at any stage of the conciliation proceedings, make proposals for a settlement of the dispute. Such proposals need not be in writing and need not be accompanied by a statement of the reasons therefor.” Worth flagging: a great deal of commentary now asserts that this provision was repealed in 2023. It wasn’t, and the reason why is set out below.

The settlement only bites when the parties sign it. Section 73 requires the conciliator to formulate the terms, put them to the parties for their observations, and then draw up the settlement in light of what they say. Section 74 gives the signed agreement the same status and effect as an arbitral award on agreed terms.

The Supreme Court has policed that sequence strictly. In Haresh Dayaram Thakur v. State of Maharashtra, (2000) 6 SCC 179, the conciliator held meetings, then drew up a settlement “by himself in secrecy” and sent it to the court in a sealed cover. That failed. The Court held that a successful conciliation ends only when a settlement agreement signed by the parties comes into existence, and that a document the parties never signed cannot be enforced under Section 74.

Mysore Cements Ltd. v. Svedala Barmac Ltd., (2003) 10 SCC 375 made the same point from the other direction, accepting the arbitration contrast in terms: “There is no difficulty in accepting the argument that a Conciliator is a person who is to assist the parties to settle the disputes between them amicably unlike an arbitrator who has an adjudicatory function. But that does not dispense with satisfying the requirements of Section 73 in bringing out a binding Settlement Agreement.” The Court refused to treat a letter of comfort and a memorandum of conciliation as a Section 73 settlement, holding that not every arrangement reached during conciliation acquires that status.

Confidentiality is where mediation has its sharpest judicial identity. In Moti Ram (D) Tr. LRs v. Ashok Kumar, (2011) 1 SCC 466, the Supreme Court held that “mediation proceedings are totally confidential proceeding. This is unlike proceedings in Court which are conducted openly in the public gaze.” The Court then gave a practical direction: if the mediation fails, the mediator writes one sentence to the court saying the mediation has been unsuccessful, and nothing more.

Note what that case actually compares. Moti Ram sets mediation against open court, not against arbitration or conciliation, which is a distinction worth keeping straight when the judgment is cited.

Confidentiality is not absolute. In Perry Kansagra v. Smriti Madan Kansagra (Supreme Court, 15 February 2019), the Court noted that “the element of confidentiality which is otherwise the basic foundation of mediation/conciliation, to a certain extent, is departed from in Sub-Rule (viii) of Rule 8 of the Rules.” The line it drew is narrow: statements the parents made in mediation stay protected, while the child’s own responses to the counsellor could be looked at, because custody turns on the child’s welfare.

The phrasing is telling. The Court writes “mediation/conciliation” as a single compound throughout, and never pauses to separate them.

Fair warning on the current state of the Act. Sections 22, 27, 28 and 55 of the Mediation Act, 2023, which deal with confidentiality, enforcement of a mediated settlement as a decree, grounds of challenge, and overriding effect, are not yet in force. A mediated settlement agreement is therefore not presently enforceable under Section 27, whatever the commentary says.

Pulling the other way are the Model ADR and Mediation Rules annexed to Salem Advocate Bar Association v. Union of India, (2005) 6 SCC 344. Rule 4(a) describes a conciliator acting “in exercise of his powers under sections 67 and 73 of that Act, by making proposals for a settlement of the dispute and by formulating or reformulating the terms of a possible settlement; and has a greater role than a mediator.” Rule 4(b) confines the mediator to facilitating discussion and “emphasizing that it is the parties own responsibility for making decisions which affect them.”

But these Rules are not a holding. They were drafted by a committee chaired by Justice M. Jagannadha Rao and reproduced by the Court, which left High Courts to adopt them with modifications. So the familiar proposition that a conciliator may propose terms while a mediator may not rests on Rules and practice, not on a ratio.

Two corrections are worth making, because both errors are widespread. First, the drafting mix-up in Section 89 interchanged the definitions of “mediation” and “judicial settlement”, not mediation and conciliation. Afcons called it “a clerical or typographical error in drafting, resulting in the two words being interchanged in clauses (c) and (d)”. Second, that point is Afcons’ own observation, and it is regularly misattributed to Salem, which does not contain it.

So where does that leave the practitioner? The distinction that survives every source is the adjudicatory one: arbitration decides, conciliation and mediation do not. Beyond that line, the conciliator-proposes and mediator-facilitates split is a convention of practice, defensible in a viva and useful at the drafting table, but not something a court has laid down as binding doctrine.

It has not commenced. The commencement notification, S.O. 4384(E) dated 9 October 2023, brought into force only Sections 1, 3, 26, 31 to 38, 45 to 47, 50 to 54, and 56 to 57 of the Mediation Act, 2023. Section 61 is not on that list.

The consequence is straightforward. An amending provision that has not been notified has no legal effect, so the Sixth Schedule has never operated, and Part III of the Arbitration and Conciliation Act, 1996 continues in its original form. Section 67(4) still permits a conciliator to propose settlement terms, and Sections 73 and 74 still govern how a conciliation settlement becomes binding.

Arbitration practitioners have seen this exact problem before, in their own statute. Section 3 of the Arbitration and Conciliation (Amendment) Act, 2019 omitted Section 11(6A) of the 1996 Act, but Section 3 was never notified, so Section 11(6A) continues on the statute book and courts continue to apply it. Un-notified amendments do nothing at all.

That parallel carries a warning for anyone researching this. Several legal databases render Section 11(6A) as “omitted by Act No. 33 of 2019”, because they show the amendment as drafted rather than as commenced. The same trap is what makes the conciliation position so widely misreported.

The practical reality is that a lot of published commentary, including from serious sources, states flatly that the Mediation Act “repealed” or “rendered otiose” Part III. Some of it says so in the same article in which it notes that the Act commences only on notification. Read carefully, those statements describe the Act as enacted, not the law as it currently operates.

One caveat, stated plainly. This position is verified as on 16 July 2026 against the Gazette text and India Code’s live database of the 1996 Act, which still returns the original Section 61 under its heading “Application and scope”. Commencement can happen at any time by notification, so anyone relying on this for advice should check the latest gazette before doing so.

Most of this is decided long before a dispute exists, in the dispute resolution clause. That is a drafting decision about governing law and forum, and Skill Arbitrage’s guide to contract drafting for foreign clients deals with the two questions a cross-border contract has to answer: which country’s law governs, and where disputes will be heard. Get the clause right and the choice makes itself.

Our recommendation for anyone drafting today is to name the process precisely and not rely on the labels doing the work. Given that Section 3(h) treats conciliation as mediation while Part III still governs conciliation on its own terms, a clause that says “conciliation” without specifying the statute or the rules is asking a future tribunal to guess. Say which Act, and which institution’s rules, apply. iPleaders’ wider survey of ADR in India sets out how the mechanisms fit together across the system.

1. Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd., (2010) 8 SCC 24
2. Haresh Dayaram Thakur v. State of Maharashtra, (2000) 6 SCC 179
3. Moti Ram (D) Tr. LRs v. Ashok Kumar, (2011) 1 SCC 466
4. Mysore Cements Ltd. v. Svedala Barmac Ltd., (2003) 10 SCC 375
5. Perry Kansagra v. Smriti Madan Kansagra (Supreme Court, 15 February 2019)
6. Salem Advocate Bar Association v. Union of India, (2005) 6 SCC 344. Model ADR and Mediation Rules, Rule 4(a) and 4(b), annexed to the judgment.

1. Arbitration and Conciliation Act, 1996. Sections cited: 7, 21, 34, 36, and 61 to 81 (Part III, conciliation, in force in its original form), including Section 67.
2. Mediation Act, 2023 (Act 32 of 2023). Sections cited: 3(h), 22, 27, 28, 55, 61, and the Sixth Schedule.
3. Code of Civil Procedure, 1908. Section 89.
4. Commencement notification S.O. 4384(E) dated 9 October 2023, Gazette of India, Extraordinary, Part II, Section 3(ii). Brought into force Sections 1, 3, 26, 31 to 38, 45 to 47, 50 to 54 and 56 to 57 of the Mediation Act, 2023.

Statutory position verified as on 16 July 2026.

This article is for informational and educational purposes only and does not constitute legal advice. The commencement status of provisions of the Mediation Act, 2023 can change by notification at any time. Readers should verify the current position and consult a qualified advocate before acting on any of the above.