2017 (8) TMI 1618 - SC - Indian Laws

Demarcation report made by a government agency, in the course of conciliation proceedings between the parties - Sections 75 and 81 of the Arbitration and Conciliation Act, 1996 - HELD THAT - The litmus test for determining whether the matter relates to conciliation proceedings was laid down by an earlier judgment of this Court. In Ruby General Insurance Co. Ltd. vs. Pearey Lal Kumar and Another, 1952 (2) TMI 27 - SUPREME COURT , the question to be decided was as to whether a dispute or difference arose out of a certain insurance policy. This Court laid down that the test for determining whether a dispute or difference arose out of the said policy is whether recourse to the contract, by which the parties are bound, is necessary for the purpose of determining the matter in dispute between them. If it is found that such recourse is necessary, then the matter would certainly fall within the policy. Following this judgment, and applying it to the facts of this case, it is clear that recourse needs to be had to conciliation proceedings as the genesis of this demarcation report is only in conciliation proceedings and not otherwise - This being the case, it is of no matter that the present case does not fall within the four pigeon holes contained in Section 81, as otherwise, if there are insidious encroachments on confidentiality, a free and fair settlement may never be arrived at, thus stultifying the object sought to be achieved by Part III of the 1996 Act. Appeal allowed.

Summary

Issues:
Interpretation of Sections 75 and 81 of the Arbitration and Conciliation Act, 1996 regarding confidentiality and admissibility of evidence in conciliation proceedings.

Analysis:
The Supreme Court of India addressed the issue of confidentiality and admissibility of evidence in conciliation proceedings under Sections 75 and 81 of the Arbitration and Conciliation Act, 1996. The appellants challenged a judgment allowing a demarcation report from conciliation proceedings to be admitted as evidence. The Special Judge had dismissed a Revision Petition against the report's admissibility, citing Sections 75 and 81 of the Act. The appellants argued that Section 75 mandates confidentiality in conciliation proceedings, while Section 81 restricts the admissibility of certain materials in arbitral or judicial proceedings, including proposals made by the conciliator. Conversely, the respondent contended that if a case does not fit within the restrictions of Section 81, the report can be admitted as evidence. The Court examined the provisions of Sections 75 and 81, emphasizing the wide import of the term "relating to" in Section 75, indicating the need for strict confidentiality in conciliation matters.

The Court referred to a previous judgment to establish that matters related to conciliation proceedings must be kept confidential. It highlighted the necessity of recourse to conciliation proceedings for matters arising from such proceedings, reinforcing the importance of maintaining confidentiality to facilitate a fair settlement. The Court also cited a Canadian Supreme Court judgment to support the principle that evidence of facts separate from settlement offers can be admissible. However, the Court distinguished the Canadian case from the present matter, emphasizing that the demarcation report in question solely originated from conciliation proceedings.

Ultimately, the Court allowed the appeal, setting aside the judgment that admitted the demarcation report as evidence. The respondent was granted the opportunity to introduce reports obtained from authorities for demarcating property, subject to legal admissibility. The appeal was disposed of accordingly, clarifying the interpretation of Sections 75 and 81 in maintaining confidentiality and regulating the admissibility of evidence in conciliation proceedings.