Sections 78 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 78 says that on termination the conciliator fixes the costs of the conciliation, defines "costs" and shares them equally unless the settlement agreement says otherwise. Section 79 lets the conciliator direct equal deposits in advance, deals with default, and requires a final accounting. This follows the India Code consolidated text consulted.
On termination, the conciliator fixes the costs and gives written notice to the parties (section 78(1)). "Costs" means reasonable costs for the conciliator's fee and expenses, expert advice, assistance under sections 64(2)(b) and 68, and other expenses (section 78(2)). Costs are borne equally unless the settlement agreement provides otherwise; each party bears its own other expenses (section 78(3)). The conciliator may direct equal deposits in advance and supplementary deposits (section 79(1) and (2)). If they are not paid in full by both parties within thirty days, the conciliator may suspend the proceedings or terminate them by written declaration (section 79(3)). On termination the conciliator accounts for the deposits and returns any unexpended balance (section 79(4)).
The Mediation Act, 2023 and Part III
The India Code text consulted prints these sections. The Mediation Act, 2023 provides for sections 61 to 81 of this Act to be replaced by two sections. Its commencement is by notification, and the date is not in the sources consulted, so check whether that change is in force before relying on Part III. Our article on sections 58 to 61 of the Mediation Act, 2023 explains the amendments. The Mediation Act has its own cost provision; see our article on sections 25 and 26 of the Mediation Act, 2023.
Where these sections fit
Sections 78 and 79 deal with money in conciliation. They follow section 76, which lists how the proceedings end; see our article on sections 76 and 77. For MSME suppliers, the MSMED Act, 2006 applies sections 65 to 81 of this Act to conciliation before the Facilitation Council, so these sections are part of that group; see our article on section 18(1) and (2) of the MSMED Act. If you want to plan the cost side of an MSME conciliation, our MSME conciliation and arbitration team can help.
Section 78: costs
Sub-section (1): the conciliator fixes costs on termination
Upon termination of the conciliation proceedings, the conciliator shall fix the costs of the conciliation and give written notice thereof to the parties.
Sub-section (2): what "costs" means
For the purpose of sub-section (1), "costs" means reasonable costs relating to:
| Clause | Item |
|---|---|
| (a) | The fee and expenses of the conciliator and witnesses requested by the conciliator with the consent of the parties |
| (b) | Any expert advice requested by the conciliator with the consent of the parties |
| (c) | Any assistance provided pursuant to clause (b) of sub-section (2) of section 64 and section 68 |
| (d) | Any other expenses incurred in connection with the conciliation proceedings and the settlement agreement |
Three things to notice:
- "Reasonable" qualifies all four items. The text consulted prints no scale of fees and none is given here.
- Consent runs through clauses (a) and (b). Witnesses and expert advice count only when requested by the conciliator "with the consent of the parties".
- Clause (c) points to two other sections. Section 64(2)(b) is the appointment of conciliators directly by an institution or person; section 68 is administrative assistance. See our articles on sections 63 and 64 and sections 67 and 68.
Printing note: clause (c) ends with a full stop in the text consulted, and clause (d) follows; as printed, no "and" or semicolon links them.
Sub-section (3): who bears the costs
The costs shall be borne equally by the parties unless the settlement agreement provides for a different apportionment. All other expenses incurred by a party shall be borne by that party.
So the default is equal sharing of the fixed costs, which the settlement agreement can change; and a party's own other expenses (such as its own advisers) stay with that party.
Section 79: deposits
| Sub-section | Rule |
|---|---|
| (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 |
Points to notice in section 79
- Equal amounts. Both the initial and supplementary deposits are in "an equal amount from each party".
- Thirty days. The period is as printed in sub-section (3). The sub-section does not say from what date the thirty days run, and the text consulted does not fill that gap.
- Two options on default. The conciliator "may suspend" or "may make a written declaration of termination". Neither is mandatory.
- A termination route outside section 76. Section 76 lists four ways in which the proceedings end. Section 79(3) adds a conciliator's written declaration of termination effective on its date. We record both as printed and reconcile nothing.
- Accounting. The duty to account and return any balance is expressed as "shall". The section does not state a time for it.
- Printing note. Sub-section (1) is printed "sub-section(2) of section 78", without a space.
Section 79 beside section 38
Section 38, in Part I, is the matching provision for arbitral deposits. The text consulted prints the following.
| Point | Section 38 (arbitration) | Section 79 (conciliation) |
|---|---|---|
| Who fixes the deposit | The arbitral tribunal "may fix the amount of the deposit or supplementary deposit" | The conciliator "may direct each party to deposit an equal amount" |
| Costs it relates to | Costs referred to in section 31(8) | Costs referred to in section 78(2) |
| Sharing | Payable in equal shares by the parties | Equal amount from each party |
| Where one party does not pay | The other party may pay that share | Not provided in section 79 |
| Where neither pays | The tribunal may suspend or terminate proceedings in respect of the claim or counter-claim | If not paid in full by both within thirty days, the conciliator may suspend or terminate by written declaration |
| After termination | The tribunal renders an accounting and returns any unexpended balance | The conciliator renders an accounting and returns any unexpended balance |
See our article on sections 38 and 39 for section 38 in full.
An illustration
Rao Textiles (an MSME supplier) and Desai Garments reach a conciliator. She directs each to deposit an equal amount as an advance (section 79(1)). Later she asks for supplementary deposits in equal amounts (section 79(2)). Desai does not pay its half in full within thirty days; she may suspend the proceedings or make a written declaration of termination (section 79(3)). Had the parties signed a settlement agreement, she would fix the costs and give written notice (section 78(1)); the costs would be shared equally unless the agreement says otherwise (section 78(3)), and she would account for the deposits and return any unspent balance (section 79(4)). The names and facts are invented, and no amounts are suggested.
Need help with the cost side of conciliation?
Agreeing in advance how costs will be shared, and what a deposit covers, avoids argument at the end. Our MSME conciliation and arbitration team can help you read the deposit direction, plan the cash flow and record the costs in the settlement agreement.
Key takeaways
- The conciliator fixes the costs on termination and gives written notice (section 78(1)).
- "Costs" means reasonable costs under four heads (section 78(2)).
- Costs are borne equally unless the settlement agreement says otherwise; own other expenses stay with each party (section 78(3)).
- Deposits are equal amounts from each party, initial and supplementary (section 79(1) and (2)).
- Unpaid deposits after thirty days allow suspension or a written declaration of termination (section 79(3)).
- The conciliator accounts and returns any unexpended balance (section 79(4)).
- The Mediation Act, 2023 provides for replacement of sections 61 to 81; commencement by notification, date not in the sources consulted.
Read next
- Sections 38 and 39: deposits and lien on the arbitral award for costs
- Sections 76 and 77: termination of conciliation and resort to arbitral or judicial proceedings
- Section 31A: regime for costs in arbitration
- MSME Facilitation Council (MSEFC) process
Disclaimer: Based on the India Code consolidated text of the Arbitration and Conciliation Act, 1996, whose footnotes show amendments up to Act 3 of 2021 and a latest date of 12 October 2023, as consulted on 2 October 2026. Rules, regulations and notifications under the Act, later amendments and the commencement of the Mediation Act, 2023 should be checked. This article is general information, not legal advice; check the official text before acting.