AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2003 (3) TMI 540
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....cement plant at Damoh vide two separate letters dated July 30, 1994. Mysore Cements also contracted with another subsidiary of Barmac Ltd. for the supply and commissioning of four Vibrating Ripo flo Screens. On failure of machinery to crush limestone in accordance with the respondent's assurances, the appellant served a notice for arbitration on the respondent. However, at the respondents's request subsequently, the appellant agreed to conciliation at New Delhi. As a result, a "Memorandum of Conciliation" dated December 18, 1987 was signed by both the parties and authenticated by the Conciliators. According to the appellant, on the same day, as a part of the same transaction and pursuant to the clauses 9 and 10 of the said Memorandum to compensate the appellant in cases of failure of completion or modification of the work on two lines, a letter was sent to the parties signed by the same Marketing Director, Mr. Ian Rodger, who had signed the 'Memorandum of Conciliation'. According to the appellant, this Letter of Comfort, having regard to the stipulations and undertakings contained in the Memorandum of Conciliation, formed part of the said Memorandum and that the parties had finally....
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....mac Crushing System. In addition, it called upon the respondent to compensate the appellant at the rate of Rs. 40 lacs per month in view of the Memorandum of Conciliation and Letter of Confort dated 18-12-1997. Thereafter as already stated above, the appellant filed Execution Petition No. 264/98 before the High Court of Delhi on 30-10-1998 claiming an amount of Rs. 200 lacs from May to September, 1998 and Rs. 40 lacs per month from October, 1998 onwards alongwith interest at the rate of 18 per cent per annum. The appellant also filed claim before the Arbitrators on remaining issues not covered within the reference of conciliation. It is stated that the issue of compensation as contained in the said Memorandum of Conciliation and the Letter of Comfort has not been raised in the arbitration proceedings. 4. In order to find answer to the question set out above, the two documents which have material bearing need a closer look. They are extracted below :- "(1) Memorandum of Conciliation Proceedings Reg : Disputes and differences between Mysore Cement Ltd. (Units Diamond Cement) and Svedala Barmac Ltd. I.Mysore Cements nominated Mr. D.C. Singhania as Conciliator on its part and Sveda....
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....he installation of a conveyor discharge device that will be activated by a metal detector (supplied by Mysore Cements Ltd.). This discharge device will allow for the removal of the portion of material on the conveyor that contains the metal, detected by the metal detector. 8. Supply Supervision of all installation and modification work as described in item 1 to 6 above including the engineering documentation required for Mysore Cements to carry out their scope of work. VI.Mysore Cements Ltd. is required to do the following :- 1. Provide, install and connect wiring of a suitable size and specification to connect the devices supplied by Svedala to the power supply and control room. 2. To ensure continuous and adequate power and material supply for a full 5-day trial. 3. Allow full control and access to the Barmac circuit to Svedala during the period of trial. 4. Provide access to the data required by Svedala to measure the total specific power requirement as it is at present and as the trials proceed. 5. Provide Engineering drawings and data to enable Svedala to engineer and carry out all the modifications as stipulated above. 6. Carry out the modifications and installation w....
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....f Line II shall be completed by 30th April, 1998 and on completion of the trial run of this line, modification work on Line I shall thereafter also be commenced and which shall be completed by 31st August, 1998. We hereby assure and guarantee that in case the modification work of Line II is not completed by 30th April, 1998, we shall compensate you at the rate of Rs. 20 lakhs per month (pro rate for part of a month) for the period of delay. 2.Similarly after the trial run of Line II, if we fail to complete the work of Line I by 31st August, 1998, we shall compensate you at the same rate for the delayed period. 3.In the event of any arbitration or court proceedings taking place at any time, between Svedala Barmac and Mysore Cements Ltd. in regard to the contract for the Barmac System supplied to Mysore Cements Ltd. and consequent to which we are required to make any payment to Mysore Cements Ltd., the amount of compensation, if any, already paid by us in terms of Paras 1 and 2 above shall be adjusted/deducted from the payment, if any, to be made by us consequent to the award of the arbitrators/courts. Yours faithfully, Svedala Barmac Ltd. Ian Rodger Marketing D....
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....e arbitration proceedings separately being conducted pursuant to the arbitration clause; the two proceedings are distinct and independent and the Conciliation Settlement cannot be sent to the arbitral tribunal. He emphasized that heading of a document cannot determine its binding nature; in case of a contract, it is well-settled that it is really the intent of the parties that will govern whether it is to be construed as a binding agreement and not be heading of the document. Pursuing his submissions, he stated that various clauses of the Conciliation Settlement impose binding obligations on each of the parties and even the subsequent conduct of the parties also shows the binding character of the Conciliation Settlement. In the present case, the Letter of Comfort must be treated as integral part of the Conciliation Settlement and binding on the parties. He added that a reference in an agreement to another document such as Letter of Comfort can result in the Letter of Comfort being incorporated into the agreement as in this case, Settlement Agreement and Letter of Comfort are executed on the same day contemporaneously. In support of his submissions, he grew our attention to relevant....
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....f 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 affect as any other arbitral award on the substance of the dispute. 36. Enforcement - Where the time for making an application to set aside the arbitral award under section 34 has expired, or such application having been made, it has been refused the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the court. 73. Settlement agreement - (1) When it appears to the conciliator that there exist elements of a settlement which may be acceptable to the parties, he shall formulate the terms of a p....
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....) moreover, there was a dispute as to who was responsible for not completing the work within the period mentioned and (5) the Letter of Comfort written by the respondent to the appellant agreeing to pay compensation in case the work was not completed within the period mentioned could not be enforced under section 36 of the Act. From clause (IX) of the Memorandum of Conciliation Proceedings, it is clear that the respondent has agreed to give a Letter of Comfort in favour of the appellant ensuring (subject to Mysore Cements Ltd., performing their obligations) that the modification work would be completed within the time mentioned therein. It is not stated in the said Memorandum that the Letter of Comfort shall be part and parcel of it; the said clause only indicates that the respondent agreed to give a letter; there is nothing to show that the said letter gets incorporated in the Memorandum; under the Memorandum, quantum of compensation is not mentioned, so also it does not state what follows in case of default of completion of the modification work; the completion of modification of the work was subject to the appellant performing their obligations; there appears to be dispute in r....
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....raw up and sign a written settlement agreement. As per sub-section (3) when the parties sign the settlement Agreement, it shall be final and binding on the parties and persons claiming under them respectively. Under sub-section (4), the Conciliator shall authenticate the Settlement Agreement and furnish a copy thereof to each of the parties. From the undisputed facts and looking to the records, it is clear that all the requirements of section 73 are not complied with. 11. This Court in Haresh Dayaram Thakur v. State of Maharashtra [2000] 6 SCC 179 while dealing with the provisions of sections 73 and 74 of the Act, in para 19 of the judgment as expressed thus :- "19. From the statutory provisions noted above the position is manifest that a conciliator is a person who is to assist the parties to settle the disputes between them amicably. For this purpose the conciliator is vested with wide powers to decide the procedure to be followed by him untrammeled by the procedural law like the Code of Civil Procedure or the Indian Evidence Act, 1872. When the parties are able to resolve the dispute between them by mutual agreement and it appears to the conciliator that their exists an elemen....
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....ent agreement. Keeping it secret from the parties and sending it to the Court without their signatures on the same. The position is well settled and if the statute prescribes a procedure for doing a thing, a thing has to be done according to that procedure. Thus the order passed by the High Court confirming the settlement agreement received from the conciliator is wholly unsupportable." (p. 187) 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. 13. If the Settlement Agreement comes into existence under section 73 satisfying the requirements stated therein, it gets the status and effect of an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral Tribunal under section 30 of the Act. The submission that when there was substantial compliance with the requirements of section 73, as in the present case, when the parties have arrived at a Settlement Agreement like the parties b....
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....the submission that this Memorandum of Conciliation and the Letter of Comfort could be treated as interim award in the absence of any Settlement Agreement as already discussed above. It is not every agreement or arrangement between parties to the disputes, arrived at in whatever manner or form, during the pendency of conciliation proceedings that automatically acquires the status of a settlement agreement within the meaning of section 73 of the Act so as to have the same status and effect as if it is an arbitral award, for being enforced as if it were a decree of the court. It is only that agreement which has been arrived at in conformity with the manner stipulated and form envisaged and got duly authenticated in accordance with section 73 of the Act, alone can be assigned the status of a settlement agreement, within the meaning of and for effective purposes of the Act, and not otherwise. We find in spite of our careful scrutiny, serious deliberations and analysis of the materials on record, particularly the Memorandum of Conciliation Proceedings and the Letter of Comfort, that either taken individually or even together - they or any one of them can legitimately claim to be entitle....