Suppliers who file a delayed-payment reference on the MSME Samadhaan portal often expect an award; what they get first is a table. Under Section 18(2) of the Micro, Small and Medium Enterprises Development Act, 2006, the Facilitation Council — on receiving a reference — must either itself conduct conciliation or seek the assistance of an institution, and the provisions of Sections 65 to 81 of the Arbitration and Conciliation Act, 1996 apply to that exercise. Only when conciliation fails does Section 18(3) move the dispute into arbitration. Handled well, the conciliation stage recovers money faster than any award; handled carelessly, it wastes months and hardens positions.
The statutory sequence
1. Reference
The supplier files on the Samadhaan portal with Udyam registration, invoices and the claim computation under Sections 15-17.
2. Conciliation — Section 18(2)
The Council conducts it or refers it to an institution; Sections 65-81 of the A&C Act govern. Settlement here has award-on-agreed-terms status.
3. Termination without settlement
If conciliation fails, it is terminated under Section 76 — the jurisdictional gateway to the next stage.
4. Arbitration — Section 18(3)
The Council arbitrates or refers to an institution; the A&C Act applies as if under a Section 7 agreement; award follows, with Section 19's 75% pre-deposit guarding any challenge.
Why the stage is worth taking seriously
Conciliation before the Council operates under a pressure ordinary negotiation lacks. The buyer sits across the table knowing what failure produces: statutory arbitration, an award carrying compound interest at three times the bank rate with monthly rests, and a 75% pre-deposit before any court will hear its challenge. That asymmetry makes the conciliation table the cheapest point of exit a buyer will ever have — and suppliers who arrive with a precise, documented computation frequently leave with a schedule of payments worth more than a contested award two years later. The statute reinforces candour with confidentiality: Section 81 keeps offers and admissions out of the arbitration if talks fail, and Section 77 restrains parallel proceedings on the same dispute during conciliation, subject to rights-preservation.
Doing it well: the supplier's side
Come with the file, not the grievance: a reconciliation statement invoice by invoice; proof of supply and acceptance (or the expiry of the 15-day objection window under Section 2(b) definitions read with Section 15); the interest computation with monthly rests set out transparently; and a realistic settlement ladder — principal now versus principal plus part interest over instalments. Insist that any settlement be recorded and authenticated under Section 73 so it carries Section 74 enforceability, with a default clause reviving the full statutory claim on breach of an instalment.
Doing it well: the buyer's side
For buyers, conciliation is the stage where genuine defences purchase real value: documented quality rejections communicated within the statutory window, short-supply records, debit notes contemporaneously raised. Deploying them at the table — where a discount is negotiable — is usually wiser than saving them for arbitration, where Section 16 interest accrues throughout and the pre-deposit awaits. Buyers should also use the stage to correct the record: if the claimant's registration post-dates the supplies or the claim exceeds the supply dues, those jurisdictional and computational objections belong in a written response filed early, so they are preserved whatever the stage's outcome.
The commonest error on both sides is treating conciliation as a waiting room — sending juniors without authority, filing nothing, conceding nothing, learning nothing. The second commonest is the opposite: letting "talks" run for a year. The statute's design is a short, genuine attempt with a hard exit; parties should work it exactly that way, and ask the Council to record termination the moment settlement is realistically off the table.
The chamber of Advocate Manish Jha represents suppliers and buyers in Facilitation Council references, statutory arbitration and enforcement across Delhi. This article is for general information; it is not legal advice and does not create an advocate-client relationship.
Frequently Asked Questions
Is the conciliation stage compulsory?
Yes, structurally: Section 18(2) directs the Council to conduct or arrange conciliation on every reference, and Section 18(3) permits arbitration only "where the conciliation initiated is not successful and stands terminated without any settlement". A Council that leaps straight to an award without a discernible conciliation phase exposes the award to challenge on that ground.
Are things said in conciliation usable later?
No. Section 81 of the Arbitration and Conciliation Act — applied by Section 18(2) — bars reliance in subsequent proceedings on views expressed, admissions made, proposals and willingness to settle expressed during conciliation. Parties can therefore explore numbers candidly; the protection is statutory, not a matter of courtesy.
What does a settlement in conciliation amount to?
A settlement agreement drawn up and authenticated in accordance with Section 73 of the A&C Act has, by Section 74, the same status and effect as an arbitral award on agreed terms under Section 30 — that is, it is enforceable as if it were a decree. A conciliated settlement before the Council is thus not a gentleman's promise; it is an executable instrument.
How long does conciliation before the Council last?
The entire reference is meant to be decided within ninety days under Section 18(5), so conciliation is expected to occupy weeks, not seasons. In practice Councils allow a small number of sittings; a buyer who seeks adjournments to run the clock should be met with a request to record failure and terminate conciliation, moving the reference into arbitration where interim measures and an award become available.