In short. You can settle a DIAC arbitration at any stage. The safe way to lock the deal in is to have the tribunal record it as an award on agreed terms under Section 30 of the Arbitration Act. That consent award carries the same weight as any other award, and if the other side stops paying, you execute it like a court decree. Mediation at DIAC is also open to you while the case is still pending. This guide is for claimants and respondents who want a fair way out. Get the terms drafted properly before anyone signs.
Is this your situation?
- You're halfway through a DIAC arbitration and the other side's lawyer has just floated a payment plan.
- Both of you want to try mediation, but nobody wants to give up the arbitration if it fails.
- The terms got agreed on a phone call last week. Now you're wondering how to make them stick.
- Their side keeps saying you should simply withdraw the claim once the first instalment lands.
- You've been here before. A debtor paid once, the case closed, and the rest never came.
- There's a cheque bounce complaint, or a Section 9 petition, also pending between the same parties.
- The award is already out, and now everyone wants to settle before or during the challenge.
Can you settle a DIAC arbitration? Yes, at any stage
You can settle at any point, from the day the notice is served right up to the day before the award, and even after it. Section 30 of the Arbitration and Conciliation Act, 1996 allows the tribunal to encourage settlement and, if the parties agree, to use mediation or other procedures along the way. Once the parties settle, the tribunal ends the proceedings. If both sides ask, and the tribunal has no objection, it records the deal as an arbitral award on agreed terms.
That consent award is the whole point of settling inside the arbitration. Section 30(4) gives it the same status and effect as an award decided on merits, and Section 36 lets you enforce it like a court decree, so a default doesn't send you back to the start. Compare a private settlement letter followed by withdrawal of the claim, where all you hold is a contract and, if the debtor defaults, you begin again.
DIAC (the Delhi International Arbitration Centre) was set up by the Delhi High Court and has run from its premises since 2009. It offers mediation too. So parties in a pending arbitration can mediate there, agree terms, and go back to the tribunal to get them recorded. Below we cover how that works, what your terms need to say, what it costs, and the mistakes that turn a decent settlement into a second fight.
Which provisions make a DIAC settlement binding
Section 30, Arbitration and Conciliation Act, 1996
Arbitration and settlement aren't at odds. With the parties' agreement, the tribunal can use mediation, conciliation or other procedures at any time to encourage a deal. If the parties do settle, the tribunal terminates the proceedings. On request, and if it doesn't object, it records the settlement as an arbitral award on agreed terms. That award has to be made under Section 31 and has to say that it's an arbitral award. It then has the same status and effect as any other award.
Sections 31 and 32
Section 31 wants the award written and signed, though Section 31(3)(b) excuses an award on agreed terms from giving reasons. Under Section 32 the final award ends the proceedings. So can an order, where the claimant withdraws (unless the respondent objects and has a legitimate interest) or where the parties agree to terminate.
Sections 34 and 36
You can challenge a consent award under Section 34 on the same narrow grounds as any award, within three months plus up to 30 days. Once that window closes, or the challenge fails, Section 36 lets it be enforced as if it were a court decree.
Mediation Act, 2023
Under the Mediation Act, a signed mediated settlement agreement can be enforced like a court judgment, and it can be challenged only within 90 days and only on narrow grounds such as fraud, corruption or impersonation. Its provisions came into force in stages. Check what's in force today. Within a pending arbitration, we still find a Section 30 consent award the simpler, better-known route.
DIAC (Arbitration Proceedings) Rules, 2023
These rules cover how the tribunal records a settlement, closes the proceedings and issues the award through the Centre, while fees come under a separate set, the DIAC (Administrative Costs and Arbitrators' Fees) Rules, 2018, and the schedules made under them.
When can the case settle?
Whenever the parties are ready. Before a tribunal exists, you can settle and just inform the Centre, or ask the tribunal to record a consent award once it's appointed. Settlements are common during pleadings. The respondent has just seen your full claim and documents for the first time, and that tends to concentrate minds. In evidence, a deal usually follows a cross-examination that went badly for someone. After final arguments, with the award pending, it's rarer. Not impossible, though.
It can even happen after the award. Say the losing side has filed a Section 34 petition. You can settle in court, the court records the compromise, and the petition is disposed of on those terms. If the award is already in execution, the decree holder can accept a payment plan and get the executing court to record it. At these later stages there's already an enforceable award. The creditor usually holds the stronger hand. The terms tend to show it.
Timing affects cost. Part of the arbitrators' fee under DIAC's schedule depends on how far the case has gone, so an early deal generally means a smaller final bill. And the Section 29A clock doesn't pause while you talk. That matters if talks drag (more on this below).
Mediating while the arbitration is pending: who should mediate?
A separate mediator is the cleanest choice. Both sides agree to mediate, ask the tribunal for an adjournment of fixed length, and take the dispute to DIAC's mediation or to a mediator they both trust. The mediator sees each side alone, pushes on their positions and helps them find terms. If it works, you go back to the tribunal with signed terms, and if it doesn't, the arbitration picks up again and nothing said in mediation can be used against either side.
Section 30 also allows the arbitrator to mediate or conciliate personally, if the parties consent. Most lawyers are wary of that, and so are we. A mediator hears private admissions and bottom lines. If talks then fail, the same person has to decide the case, which hands the losing side an obvious bias or unequal treatment argument later. Should you still want the tribunal to mediate, put it in writing that both sides consent and that the arbitrator can carry on if mediation fails.
Sometimes a related court case is pending too, for example a Section 9 petition in the Delhi High Court. That court can send the parties to its own mediation centre. A settlement reached there can cover the court matter and the arbitration together. But it still has to go before the tribunal, so the arbitration closes properly with a consent award or a termination order. When Advocate B.K. Singh is asked whether to suggest mediation, the first thing he checks is whether the other side has the money, or the authority, to settle at all. If it has neither, mediation just adds a month.
From handshake to consent award at DIAC
Agree the terms in principle
Fix the amount, the schedule, interest if a payment is missed, costs, and what becomes of the counter claim and any other cases. Mark these talks without prejudice. Then offers can't be used as admissions if the deal falls through.
Write it up properly
Draft one signed settlement agreement with every term in it, and attach proof of each signatory's authority, such as a board resolution or a partner's authority. Use stamp paper as your state's stamp law requires. Both sides sign every page.
File a joint application with the tribunal
Both parties file the settlement together, with a joint request under Section 30(2) to record it as an award on agreed terms. Get it listed fast. Until the award is signed, either side can still back out.
The tribunal checks and records
Usually the tribunal confirms with each party, or its authorised representative, that the deal is voluntary and complete, and it can refuse to record terms that are unlawful or that affect people who aren't parties.
The award is signed and issued
The tribunal signs an award that says it's an arbitral award and contains the terms. No reasons are needed. Copies go to the parties under Section 31(5). The date you receive yours starts the Section 34 period.
Pay what's due, then perform
Clear any balance of DIAC fees and pay stamp duty on the award under the state's stamp law. Then start performing. If the debtor defaults, you execute the award under Section 36 once the Section 34 period is over.
Ways to record a settlement, and where each leaves you
| How it's recorded | What you end up with | If they stop paying |
|---|---|---|
| Consent award under Section 30 | An arbitral award, as strong as one decided on merits | Execute it like a decree under Section 36 |
| Settlement agreement, then withdrawal of the claim | Only a contract. The arbitration ends with a termination order | Sue or arbitrate all over again on the settlement agreement |
| Settlement agreement, then termination by agreement under Section 32(2)(b) | Only a contract | Same problem. You start a fresh claim |
| Mediated settlement agreement under the Mediation Act, 2023 | An agreement enforceable like a court judgment, subject to which provisions are notified | Enforce under the Act, after checking which sections are in force |
| Compromise recorded by a court at the Section 34 or execution stage | A court order on the compromise | Enforce it through the court that recorded it |
Why you shouldn't settle for a simple withdrawal
The debtor's lawyer will often suggest you withdraw the claim once the first instalment comes in, and sign a private agreement for the rest. It sounds fair. It also costs the debtor nothing. For you, though, it turns an arbitration that was close to an award into a contract claim. If the second instalment doesn't come, you'd have to bring that claim afresh, quite possibly with a new fee deposit.
A consent award avoids all that. On default, you file an execution petition on the award and ask for attachment of bank accounts and property. You don't have to prove anything again. So we'd tell a creditor to insist on a consent award even when the settlement figure is below the claim. Respondents get something from it too. It closes the claim for good, counter claim included, and the award records that the dispute is settled. Auditors and lenders like seeing that.
Already withdrawn on the strength of a settlement? It isn't hopeless. The settlement agreement is still an enforceable contract. If it has its own arbitration clause, or points back to DIAC, a fresh arbitration on it can be shorter. But it's a second case, and you didn't need it.
What your settlement agreement needs to say
- Exactly who the parties are, with company names, CINs or registration details, and proof that each signatory has authority
- The settlement figure, split into principal, interest and costs if that matters for tax
- Dates for every payment, how it'll be paid, and the bank details
- A default clause saying what becomes payable, and from when, if any instalment is missed
- Interest on any instalment that's paid late
- What happens to the counter claim and any set-off
- Who pays DIAC's fees and the arbitrators' fees, and how deposits already paid get adjusted
- Which other cases get withdrawn or closed, and when. Think Section 9 petitions, suits and cheque bounce complaints
- Return of goods, documents, bank guarantees, security cheques or title papers
- A mutual release and confidentiality, with any carve-outs (future warranty claims, for example)
- A request that the tribunal record the terms as an award on agreed terms under Section 30
Instalments and default clauses: write them for the bad day
Most mid-arbitration settlements are paid in instalments. Most of the later fights come from those instalments. So the default clause is what really counts. A common pattern goes like this. The full settlement amount is paid in fixed instalments. If any instalment isn't paid within a stated grace period, the whole unpaid balance falls due at once, with interest at a stated rate from the date of default. You can execute that straight from the consent award.
Some creditors go a step further and say the full original claim revives on default. That's a strong push to pay. But a revival clause invites argument in execution. The debtor may call it a penalty, or say the original claim was never decided. Precise wording helps. Put the exact sum payable on default in the award itself, not a formula that points back to the statement of claim, because the executing court needs a figure it can enforce.
Post-dated cheques for each instalment are common in Delhi NCR settlements, and they do add pressure, since a cheque given for a settled debt that bounces can found a fresh cheque bounce complaint. They don't replace a default clause in the award, though. When settlement drafts come to Advocate B.K. Singh, the gap he usually finds isn't the amount. It's what happens on the first missed payment.
Time and money when a DIAC case settles
| Item | What to expect | Worth knowing |
|---|---|---|
| Mediation during the arbitration | Often one session, or a few, spread over a few weeks | DIAC and private mediators charge separately. Ask the Centre for its current mediation charges |
| Adjourning the arbitration for talks | Usually a few weeks, on a joint request | The Section 29A period keeps running unless it's extended |
| Recording the consent award | Often at the next hearing after the joint application, sometimes by circulation | File a joint request and get it listed quickly |
| DIAC and arbitrators' fees | Depends on the stage reached and the fee schedule | Ask the Centre how the schedule applies. Settling early usually means a smaller final bill |
| Stamp duty on the award | Payable under the state's stamp law | Check today's rate. Duty can be higher if immovable property is transferred |
| Section 34 period | Three months plus up to 30 days from receiving the award | Execution normally begins once this period ends |
| Lawyer's fees | Discussed at the first meeting and agreed in writing, stage by stage | Settlement work is usually billed as a separate stage |
Fees and deposits when the case settles
Arbitrators' fees at DIAC follow the schedules under the DIAC (Administrative Costs and Arbitrators' Fees) Rules, 2018. They're based on the sum in dispute and, under Rule 3(ii), on claim and counter claim added together. Because the schedules link fees to stages of the case, what you finally pay on settlement depends on how far things had got. Whether any of the deposit comes back also turns on the schedule and the stage, so ask the Centre's registry before you settle the cost clause.
Your settlement should say who carries these fees. Often each side bears its own share and its own lawyers, and sometimes the respondent repays the claimant's share as part of the settlement amount. If one side refused to pay and the other paid both halves, deal with that money expressly. Otherwise it becomes the next dispute. Our guide on what happens when the other side won't pay DIAC fees covers that, and the guide on DIAC arbitration fees explains the schedules generally.
The Section 29A clock, and the other cases you've got running
A DIAC award is due within 12 months of pleadings closing. Both sides can agree to six months more, and after that only the court can extend, on an application. Settlement talks don't stop the clock. Suppose you take a long adjournment to mediate and talks collapse. The tribunal may run out of time, and someone then has to apply to court for an extension. Keep the window for talks short. If the mandate is near expiry, record a consent extension under Section 29A(3) at the same time. Our guide on DIAC arbitration time limits explains the mechanism.
Settle everything in one go. Commercial parties often have a Section 9 petition in court, a cheque bounce complaint under Section 138 of the Negotiable Instruments Act and sometimes a police complaint, all alongside the arbitration. The cheque case is compoundable under Section 147 of that Act. It can be closed by recording the settlement before the magistrate at Saket or Tis Hazari or wherever it's pending. Our page on running cheque bounce and civil recovery together explains how the two interact. Your document should say who withdraws what, and by when. Criminal complaints get withdrawn after payment. Never before.
Can a consent award be challenged later?
On paper, yes. A consent award is an arbitral award, and Section 34 applies. In practice, a party that asked the tribunal to record agreed terms has very little left to argue, since it can't say the award got the merits wrong when no merits were decided. Courts generally entertain a challenge only where the settlement itself is tainted. Fraud, coercion, a signatory with no authority, or terms that are unlawful or against public policy, for instance.
So the signatory's authority matters a great deal. A company should sign through a director or officer backed by a board resolution, a partnership through a partner with authority, and a proprietor personally. Maybe a group company or guarantor who isn't a party to the arbitration is part of the deal. Get them to sign the settlement as well. But understand the limit. The consent award binds only the parties to the arbitration, and you may have to enforce the outsider's promise as a contract.
Where you enforce a DIAC consent award
You enforce it just like any other DIAC award. If the Section 34 period passes with no challenge, the award holder files an execution petition under Section 36, which treats the award as a court decree. For a Delhi-seated arbitration, Section 10 of the Commercial Courts Act decides the court. That's the Delhi High Court's Commercial Division where the value is above Rs 2 crore, and the district Commercial Court below that (check the current limit).
You can also execute directly where the debtor's assets are. In Sundaram Finance v. Abdul Samad (2018), the Supreme Court held that an award can be filed for execution anywhere in India where it can be enforced. No transfer from the court of the seat is needed first, so a debtor sitting in Noida or Gurugram can be pursued in that district's court. Our guide on enforcing a DIAC award covers attachment, garnishee orders and the Rahul S. Shah directions on speedy execution.
An invented example: settling halfway through evidence
This is made up, not a real client. A Faridabad engineering firm has a DIAC claim of Rs 92 lakh against a Delhi developer for fabrication work. The developer counter claims Rs 30 lakh, blaming delay. Once the firm's witness has been cross-examined, both sides ask the tribunal for three weeks off and try mediation.
They land on Rs 70 lakh, paid in five monthly instalments, and the counter claim is dropped. Under the default clause, if any instalment is more than 10 days late, the unpaid balance falls due immediately with interest at 12 percent a year from the date of default. The award spells out the exact balance after each instalment. Each side bears its own costs and its share of DIAC fees. The developer had also filed a cheque bounce complaint against the firm over a security cheque. That gets withdrawn within a week of the first payment.
A joint application goes in, and at the next hearing the tribunal records an award on agreed terms. The Section 29A deadline never comes close. The developer pays three instalments. Then it misses the fourth. The firm lets the Section 34 period run out, files an execution petition for the stated balance with interest, and gets the developer's bank account attached. Nobody re-argues the fabrication work.
How a settlement turns into a second dispute
- Withdrawing before the money is in. With no consent award, a default leaves you holding just a contract claim.
- Vague default clauses. "The claimant may revive its claim" gives the executing court nothing definite to enforce. Write down the amount.
- Signatories who had no authority. A manager signs without a board resolution, and a challenge follows later.
- Forgetting the counter claim. Unless the settlement says it's withdrawn or satisfied, it may survive.
- Ignoring the fee deposit. When one party paid both halves of the DIAC fee, the settlement has to say who finally bears it.
- Letting the Section 29A deadline lapse mid-talks. Mediation fails, the mandate has expired, and now you need a court application before the arbitration can carry on.
- Leaving other cases hanging. Cheque bounce complaints, Section 9 petitions and suits between the same parties belong in the same document.
Tax, stamp duty and property, before you sign
Settlement money can have tax consequences. Interest components may attract TDS, and some payments, like compensation for termination or for putting up with a breach, raise GST questions. Where it helps, split the amount into principal, interest and costs in the agreement. Ask your chartered accountant before signing.
An award attracts stamp duty under the stamp law of the state where it's made. Courts may refuse to act on an unstamped award until the duty and penalty are paid. If the deal transfers or creates rights in land or a building, the stamp duty and registration requirements can get much heavier. Take advice before putting property terms into a consent award. Don't guess.
What to do this week
If there's an offer on the table, write down two lists: the terms you'd accept and the ones that would make you walk away. Check whether the person signing for the other side actually has authority. Ask your lawyer for a draft settlement agreement with a default clause and a request for a Section 30 award. Don't negotiate it piecemeal over email. If you want a mediator, ask the tribunal for a short, fixed adjournment and settle how the Section 29A deadline will be handled.
If you're close to an award and the other side has gone silent, an approach may still be worth making. In our experience, a consent award with instalments often gets paid more reliably than a contested award that's dragged into Section 34. Our DIAC arbitration process guide shows where your case stands. The DIAC arbitration lawyer page explains how we act in these matters, and our page on settling a commercial suit midway covers the court version.
If you'd like a settlement draft or an offer looked at before you sign, share it with Advocate B.K. Singh's team through the contact page.
Frequently asked questions
Can a DIAC arbitration be settled midway?
Yes. You can settle at any stage: before or after the tribunal is formed, during pleadings or evidence, even after the award. Section 30 of the Arbitration Act expressly lets the tribunal encourage settlement and use mediation if the parties consent.
What is a consent award?
It's an arbitral award, also called an award on agreed terms, that records the parties' settlement under Section 30(2). It carries the same status and effect as an award decided on merits, and you can enforce it like a court decree under Section 36. It doesn't need reasons.
Should I withdraw my claim after the other side agrees to pay?
Not until you've been paid or a consent award is recorded. Withdraw on a private settlement, and if they default, you're left with a contract claim and a fresh case to file. A consent award takes you straight to execution.
Does DIAC offer mediation during a pending arbitration?
Yes. Parties in a pending arbitration can ask the tribunal for a short adjournment to try it. If they reach terms, they go back to the tribunal to have them recorded as a consent award. Check with the Centre for its current mediation process and charges.
Can the arbitrator act as mediator?
Section 30 allows it if the parties consent, but many lawyers would rather use a separate mediator. An arbitrator who hears private positions in mediation, and then decides the case when talks fail, invites a challenge. If you agree to it, get both sides' consent in writing.
Do we get DIAC fees back if we settle?
That depends on how far the case has gone and on DIAC's fee schedule, which links arbitrators' fees to progress. Settling early usually means a smaller final bill, but ask the Centre's registry how the schedule applies to your case.
Can a consent award be challenged under Section 34?
Technically yes, within three months plus up to 30 days of receiving it, but the grounds are very thin, since the parties agreed the terms. A challenge usually works only where the settlement came from fraud or coercion, was signed without authority, or is unlawful.
How is a consent award enforced if the other side stops paying?
Once the Section 34 period ends, file an execution petition under Section 36. A Delhi-seated award can be executed in the Delhi courts, or directly where the debtor's assets are, and the executing court can attach bank accounts and property. A clear default clause with a stated amount speeds this up.
Advocate B.K. Singh
Founder of B.K. Singh & Associates. MCA, LL.B., LL.M. More than twenty years in practice before the Supreme Court, the Delhi High Court, district and commercial courts in Delhi NCR, and tribunals.
This guide explains the law in general terms and is not legal advice. For advice on your own papers, contact the team.