Under Section 30 of the Arbitration and Conciliation Act, 1996, parties can settle their dispute at any point during the arbitration, and if they wish, the tribunal can record that settlement as an arbitral award on agreed terms, which carries the same enforceability as any other award.
This is often more attractive to parties than a purely private settlement agreement, because a recorded award on agreed terms can be directly enforced under Section 36 without needing a separate breach-of-contract action if one side later fails to honour the settlement.
Institutional tribunals routinely encourage without-prejudice settlement discussions between parties throughout the process — arbitration proceeding does not foreclose settlement, and in practice a meaningful share of institutionally administered disputes settle before a final award is ever issued.