ASSIGNMENT.

ALTERNATE
DISPUTE RESOLUTION
TOPIC. SEC. 89 OF CPC

SUBMITTED TO. SUBMITTED BY.

SHATAKHI KAUL Kanika Goyal
18BLL1101
 ASSIGNMENT OF ADR

SECTION 89 OF CPC
The Code of Civil Procedure 1908 (CPC) lays down the procedure which the
courts will follow to adjudicate any dispute brought before them. Section 89 of
CPC empowers the civil courts to refer matters to alternative dispute resolution
methods – arbitration, conciliation, and judicial settlement including Lok
Adalat and mediation.

“(1) Where it appears to the Court that there exist elements of a settlement which
may be acceptable to the parties, the Court shall formulate the terms of settlement
and give them to the parties for their observations and after receiving the
observations of the parties, the Court may reformulate the terms of a possible
settlement and refer the same for—

(a) Arbitration;

(b) Conciliation;

(c) Judicial settlement including settlement through Lok Adalat; or

(d) Mediation.

(2) Where a dispute has been referred—

(a) For arbitration or conciliation, the provisions of the Arbitration and

Conciliation Act, 1996 (26 of 1996) shall apply as if the proceedings for
arbitration or conciliation were referred for settlement under the provisions of that
Act;

(b) To Lok Adalat, the Court shall refer the same to the Lok Adalat in accordance
with the provisions of sub-section (1) of section 20 of the Legal Services
Authority Act, 1987 (39 of 1987) and all other provisions of that Act shall apply
in respect of the dispute so referred to the Lok Adalat;
(c) For judicial settlement, the Court shall refer the same to a suitable institution
or person and such institution or person shall be deemed to be a Lok Adalat and
all the provisions of the Legal Services Authority Act, 1987 (39 of 1987) shall
apply as if the disputes were referred to a Lok Adalat under the provisions of that
Act;

(d) For mediation, the Court shall affect a compromise between the parties and
shall follow such procedure as may be prescribed.”

However, this section should not be read in isolation. To give full effect to the
provision, it must be read with Rules 1A, 1B and 1C of Order X, CPC.
Consequently, the cumulated procedure is as follows –

 The court will record the admissions and denials of the parties in relation
to the dispute;
 If it appears to the court that there exist elements of a settlement which
may be acceptable to the disputing parties;
 The court then formulates the terms of settlement, and will be given by
the court to the parties for their observations;
 After receiving the observations of the parties, the court will further
have the power to change the terms of a possible settlement as per its
discretion;
 The court will then provide an option to the parties to choose any one of
the four dispute resolution mechanisms listed previously and
accordingly refer the parties to the chosen forum;
 The court will fix the date of appearance before the ADR forum chosen
by the disputing parties;
 In generally more than one meeting/appearance, the parties appear
before the opted ADR authority and try resolving the dispute;
 However, if the ADR authority is of the opinion that it is not in the
proper interest of justice to proceed with the matter further, then it shall
again refer the matter back to the court.

Where a dispute is referred to mediation, the court endeavours to affect a

compromise between the parties through a further process which may be
prescribed. Unfortunately, there are no prescribed rules which uniformly govern
all mediations in India. Generally, each mediation centre formulates its own rules
and has its own procedural practices.

Section 89 of CPC was first challenged before the Supreme Court in the famous
Salem Bar Association Cases I and II. In Salem Bar association Case II,[i]the
Supreme Court made the following important observations about the mediation
mechanism under Section 89 of CPC

 “Under Section 89, when it is provided that the Court will formulate a
‘settlement’ and refer it to one of the ADR mechanisms, it only means
that what is referred to one of the ADR modes is the dispute which is
summarised in the terms of settlement.”
 The provision is drafted in such a manner that “a doubt arose whether
the terms of compromise are to be finalised by or before the mediator or
by or before the court. The Supreme Court clarified that all the odes
mentioned in the Section are meant to be the action of the authorities
outside the court and therefore not before or by the court”.
 When mediation succeeds and parties agree to the terms of the
settlement, the mediator will report to the court. The court will ‘effect’
the compromise after giving the notice and hearing the parties and pass
a decree “in accordance with the terms of settlement as mutually decided
by the parties”.
 The Court which refers the matter to mediation/conciliation is “not
debarred from hearing the matter where settlement is not arrived at. The
Judge who makes the reference only considers the limited question as
whether there are reasonable grounds to expect that there will be
settlement. On that ground he cannot be treated to be disqualified to try
the suit afterwards if no settlement is arrived between the parties”.
 With a view to enable the court to refer the parties to mediation, where
parties are unable to reach a consensus on an agreed name, there should
be a “panel of well-trained mediators to whom it may be possible for the
court to make a reference”.
 The court acknowledged that Section 89 maintains “a fine line between
conciliation and mediation – in ‘conciliation’ there is more latitude as
 the conciliator can suggest some terms of settlement, while a mediator
has no such power”.
 When the parties come to a settlement upon a reference made by the
court for mediation, as suggested by the committee, there has to be some
public record of the manner in which the suit is disposed of. Therefore,
the court has to first record the settlement and pass the decree in terms
thereof and if necessary, execute it in accordance with law. It cannot be
accepted that “such a procedure would be unnecessary”. It is, however,
a different matter if the parties “do not want the court to record a
settlement and pass a decree and feel that the settlement can be
implemented even without decree. In such an eventuality, nothing
prevents them from informing the court that the suit may be dismissed
as the dispute has been settled between the parties outside the court.”

Even then, the section was vague and difficult to implement. Thus, the Supreme
Court again clarified the section and held that –

 “The stage at which the court should explore whether the matter should
be referred to ADR processes is after the pleadings are complete. Before
framing the issues, when the matter is taken up for preliminary hearing
for examination of parties under Order 10 of the Code. However, if for
any reason, the court had missed the opportunity to consider and refer
the matter to section 89 before framing the issues, then nothing stops the
court from resorting to section 89 even after framing issues”. But once
evidence is commenced, the court will be reluctant to refer the matter to
the ADR processes lest it becomes a tool for protracting the trial.
 Though in civil suits the appropriate stage for considering reference to
ADR processes is after the completion of pleadings, in family disputes
or matrimonial cases, the position can be slightly different. In those
cases, the relationship becomes “hostile on account of the various
allegations in the petition against the spouse. The hostility will be further
aggravated by the counter-allegations made by the respondent in their
written statement or objections”. Therefore, as far as family courts are
concerned, the ideal stage for mediation will be immediately after
service of respondent and before the respondent files objections/written
statements.
  If the reference is to “any other ADR process (including mediation), the
court should briefly record that having regard to the nature of the
dispute, the case deserves to be referred to Lok Adalat or mediation or
judicial settlement, as the case may be”. There is no need for an
elaborate order for making the reference.
 The requirement in Section 89(1) that the court should formulate or
reformulate the terms of settlement would only mean that court has to
briefly refer to the nature of dispute and decide upon the appropriate
ADR process.
 If the judge in charge of the case assists the parties and of settlement
negotiations fail, they should “not deal with the adjudication of the
matter to avoid apprehensions of bias and prejudice. It is therefore
advisable to refer the cases proposed for judicial settlement to another
judge”.
 Normally the court should not send the original record of the case
referring the matter for an ADR forum. It should make available “only
copies of relevant papers to the ADR forum. For this purpose, when
pleadings are filed, the court may insist upon filing an extra copy.
However, if the case is referred to a court-annexed Mediation Centre
which is under the exclusive control and supervision of a Judicial
Officer, the original file may be made available wherever necessary.”

The Supreme Court of India in Afcons Infrastructure Ltd. vs Cherian Varkey

Construction Co. Pvt. Ltd., a landmark judgment on Section 89 of CPC expressed
this anguish of the bar and bench in the following words:

“If Section 89 is to be read and required to be implemented in its literal sense, it

will be a trial judge’s nightmare. It puts the cart before the horse and lays down
an impractical, if not impossible, procedure in sub-section (1). It has mixed up
the definitions in sub-section 92). In spite of these defects, the object behind
Section 89 is laudable and sound. Resort to ADR processes in necessary to give
speedy and effective relief to the litigants and to reduce the pendency in and
burden upon the courts. As ADR processes were not being resorted to with the
desired frequency, the Parliament thought it fit to introduce Section 89 and Rules
1A to 1C in Order X in the Code, to ensure that ADR processes were preferred to
commencement of trial in suits. In view of its laudable object, the validity of
Section 89, with all its imperfections, was upheld in Salem Advocate Bar
Association case reported in (2003) 1 SCC 49 – for short, Salem Bar (1) but
referred to a Committee, as it was hoped that Section 89 could be implemented
by ironing the creases.”