Alternative Dispute Resolution (“ADR”) refers to a variety of techniques resolving disputes by

means other than the litigation. Section 89 of the Code of Civil Procedure, 1908 which was
introduced by the Act of 1999 and came into effect from 01/07/2002, embodies the legislative
mandate to the court to refer civil disputes to various ADR mechanisms mentioned in the
Section where it finds it appropriate to do so. ADR system helps in providing parties with
cheap, simple, quick and accessible justice. The general principle behind all the matters is to
reach to a settlement, then why not opting for the ways which can be settled amicably by means
of compromise. These methods will also develop a culture of settlement amongst the parties and
is needed in today’s society. Inspite of such great objects the section is not effective due to
several flaws in the drafting and implementation of the section. Therefore this paper tries to
analyse the effectiveness of Section 89 of Code of Civil Procedure (“CPC”) and provide some
solution for making it more effective.

Section 89, Civil Procedure Code, 1908 : A Critical Analysis

The 1990s brought liberalization to India, and with it came a docket explosion crisis, the
ramifications of which we are still dealing with. S. 89 was inserted in the Code of Civil
Procedure through its 1999 Amendment Act,[1] based on the recommendations of the Malimath
Committee report and the 129thLaw Commission Report, in response to this crisis. The aim was
to increase access to justice through reducing costs and pendency.[2] A specific provision was
required as litigantsdid not refer to these much when left to their own devices due to reasons
such as ignorance, reluctance or indifference.[3]
In light of the above, S. 89, CPC enables courts to determine whether a matter can be resolved
through ADR. It provides for reference to arbitration, conciliation, judicial settlement (may also
be brought about through a Lok Adalat) and mediation. Eliciting parties' consent on the method
of dispute resolution to be adopted is preferred but not necessary.[4]
The effect of referring a dispute to each of these methods is different. For example, a case can
only be referred to arbitration if both parties consent to it. Once it is so referred, it goes "outside
the stream of the court"[5] and is decided finally by the arbitral tribunal itself, based on the
provisions of the Arbitration and Conciliation Act, 1996 ["AC Act"].[6] On the other hand, a
mediation settlement will have to be confirmed by the court. While the scheme of the section is
fairly simple prima facie, lacunae in drafting have created some complications. [7]
Deliberation on Section 89, CPC was initiated in Salem Advocate Bar Association v. Union of
India, 2003 (1) SCC 49.. The constitutional validity of the section was upheld and the intent
behind its inclusion lauded. Criticism was muted as S. 89, CPC was a recent insertion at the
time. It was opined that the section had not been very effective as its modalities were yet to be
determined. A committee was set up to draft model rules, and the apex court recommended the
adoption of these rules by the various High Courts so as to give effect to section 89(2)(d), CPC.
In the subsequent decision of Salem Advocate Bar Association v. Union of India, 2005 (6)
SCC 344, ["Salem II"] the apex court purposively reinterpreted S. 89, CPC to reduce
anomalies. For instance, the words shall and may in S. 89, CPC and Rules IA-IC, Order X, CPC
were read harmoniously and it was determined that may was intended to refer to only the
reformulation of terms of a potential settlement by the court. There was also an attempt to
resolve the issue created by inclusion of the phrase "terms of settlement" in the section. The
section mandates formulation of settlement at the pleadings stages. However, this is not feasible
since, firstly, there would not have been adequate application of mind of the judge at the
pleadings stage, and, secondly, determining terms of settlement is the domain of the ADR
forum. So, a plain reading of the section creates the futile situation wherein courts are expected
to do the ADR forums job before referring a matter to it. In light of the above, "terms of
settlement" was interpreted as summary of disputes.
The court further replaced the definition of mediation in the section with that suggested in the
model mediation rules.
The subsequent decision in Afcons Infrastructure Ltd v. Cherian Varkey Construction Co (P)
Ltd , 2010 8 SCC 24, ["Afcons case"]. is the most recent landmark judgement on the issue. The
primary issue herein was whether the court could refer a case to arbitration without the consent
of both parties. However, there was also an extensive discussion on the scope of S. 89, CPC. It
was noted that the language of S. 89(1), CPC is borrowed entirely from S. 73(1), AC Act which
is in reference to a conciliator in the final stages of conciliation and hence unsuitable vis-a-vis a
court of law referring disputes to be resolved through an ADR method. Thus, the phrase "terms
of settlement" was interpreted in light of the decision in Salem II.
The mix-up between the terms judicial settlement and mediation in sub clauses (c) and (d) of S.
89(2) CPC was recognized as a drafting error. It was also opined that a matter referred to a Lok
Adalat under section 89 would be different from a matter taken to a Lok Adalat independently
as the former would still need to be placed before the court subsequent to the Lok Adalat
passing its award. However, this aspect of the judgment has been subsequently disputed due to
the fact that it is in conflict with section 21, LSA Act.[8] [9]
Beyond Supreme Court judgments, further confusion exists section 89(2)(c) and 89(2)(d) even
if the words mediation and judicial settlement are switched as in that case, a mediation
agreement will get the same status as one reached through a Lok Adalat. However, as per S. 21,
Legal Services Authorities Act, 1987 ["LSA Act"], an award passed by a Lok Adalat is given
the same status as a decree passed by a civil court, while a mediation agreement has to be
confirmed by court.[10]" Another strand of opposition exists in the form of those who opine that
the distinction between mediation and conciliation is a false one and hence there is no need for
a separate mediation clause.[11]" The Law Commission of India has even recommended the
deletion of the provision for mediation under section 89(1) because that is an option that is
always open to the court anyway, leaving no need or reason to codify it.[12]"
The issue vis-a-vis court fees which has arisen in light of S. 16, Court Fees Act, 1870[13] must
also be resolved. The intent behind the section is to avoid penalizing litigants who choose ADR,
and also incentivizing them, by ensuring a refund of court fees. However, a plain reading of the
section itself gives rise to a problem. Section 89, CPC is supposed to be a mandatory provision
if the court feels that there is a chance of settlement. So, cases are referred for ADR
mandatorily. That does not always translate into a settlement taking place between the parties. If
such a thing happens in case of mediation, conciliation or Lok Adalats, then parties can come
back to court. Nonetheless, in this case, they would have been refunded their court fee so they
would have their case tried for free.[14] In Nutan Batra v. Buniyaad Associates, 2018 SCC
Online Del 12916., the Delhi High Court clarified that S. 16, Court Fees Act must not be given
a literal interpretation which would entitle a plaintiff to refund irrespective of successful
settlement through ADR methods.
Despite the above criticisms, it cannot be denied that S. 89, CPC is an admirable attempt to
reduce the burden on courts[15] and make justice a reality for litigants. The model that it attempts
to replicate has been very successful in various jurisdictions. California is a very successful
example of this with no arrears of cases older than two years. In fact, in San Diego, 97% of all
civil cases are settled through methods of ADR.[16] Further, the section has facilitated the
increased use of ADR methods by parties to legal disputes. For instance, there is an increased
trend of mediation in matrimonial disputes. Such avenues are also being preferred by parties
who prefer confidentiality.[17] Further, implementation has become more practicable in light of
the apex courts interpretation of the section, thus ensuring an overall positive impact. In brief,
section 89 is an attempt at innovative legislation to solve a problem that is plaguing the Indian
legal system and is only set to become bigger in the coming years. One can then safely surmise
that the idea behind section 89, CPC is one that is not only laudable it is also desperately
needed.
[1] Rules 1A-1C, CPC And Section 16, Court Fees Act, 1870 ["Court Fees Act"] were
incorporated along with Section 89 and are intended to be read together; MULLA ON THE
CODE OF CIVIL PROCEDURE, Vol 1, 874, (BM Prasad ed., 18th edn., 2011).
[2] MP Jain, THE CIVIL PROCEDURE CODE, 251, (2004).
[3] R.V. Raveendran, Section 89 CPC: Need For An Urgent Relook, SCC(J) 2007 (4) 23, 23.
[4] 238th Report of the Law Commission of India, Amendment of Section 89 of the Code of
Civil Procedure, 1908 and Allied Provisions, 10, 2011.
[5] Para 9, Salem Advocate Bar Association v. Union of India, 2003 (1) SCC 49.
[6] 176th Report of the Law Commission of India, The Arbitration and Conciliation
(Amendment) Bill, 2001, 32, 2001.
[7] It has been described as "not very happily worded" and having been "drafted in a hurry";
supra note 3, at 24.
[8] Supra note 4, at 19.
[9] The section provides that a Lok Adalats award will be deemed to be the decree of a civil
court.
[10] Supra note 4, at 19.
[11] Supra note 3, at 23.
[12] 163rd Report of the Law Commission of India, The Code of Civil Procedure (Amendment)
Bill, 1997, 21, 1998. However, there have not been too many takers for this particular point of
view.
[13] This section is not in effect in all states as many of them have their own Court Fees Act. A
lot of these state acts do not have a corresponding provision; supra note 3, at 30.]
[14] Supra note 3, at 24.
[15] A Xavier, Mediation: Its Origin and Growth in India, 27(2), HAMLINE JOURNAL OF
PUBLIC LAW & POLICY, 275, 281, (2006).
[16] Justice MS Shah, Study of the American Legal System for Procedural Reforms in Civil
Courts in India, available at http://gujarathighcourt.nic.in/mediation/study1.htm.
[17] BS Hanasi, A Critical Study of the Alternate Dispute Resolution System in India (with
special focus on Lok Adalats), 222, 2008.

Scope and Procedure of Section 89 CPC:

(M/S Afcons Infra. Ltd. Vs. M/S Cherian)

The ADR mechanism does not evolve a short time ago in India. It is practiced since the human
kind believed in resolving disputes in India. However, the practice is still not immaterialized, it
is still a most powerful and efficient tool in the hands of civil courts in the form of section 89 of
the Code of Civil Procedure. The provision was enacted to enable courts to opt for ADR
process for resolving disputes. Nonetheless, the language used by the legislators was ambiguous
as to the scope and procedure of the provision. The apex shuttered the ambiguity and
emancipated the issue in M/S Afcons Infra. Ltd. Vs. M/S Cherian.
Ambiguity in Section 89 of CPC

 The first anomaly is the mixing of the definitions of ‘judicial settlement’ and ‘mediation’
under clauses (c) and (d) of section 89(2) respectively. The judicial compromise under
clause (d) cannot be treated as a ‘mediation’ or a reference made under clause (c) cannot
be described as ‘judicial settlement’. Therefore, if the terms ‘mediation’ and ‘judicial
settlement’ are interchanged, then the said clauses will make perfect sense.
 The second anomaly lies under section 89 clause 1. it requires courts to formulate the
terms of settlement and then give them to the parties for observation and then reformulate
the terms and refer the dispute to the ADR process. If formulating terms of settlement is
given to the courts then it will defeat the purpose of section 89. The present court
observed that, after the submission of pleadings and written statement, the courts will
have recourse to section 89 and prepare only the summary of the case. The ‘terms of
settlement’ may be equated as ‘summary of disputes’.

Whether reference to ADR process is mandatory

Section 89 starts with “where it appears to the court” shows that the court has to form an
opinion. The courts invariably refer cases to ADR process except in certain recognized cases.

 List of cases cannot be referred for ADR process

 Representative suit under order 1 rule 8, CPC involving public interest.
 Disputes relating to election to public offices.
 Cases involving grant of authority by the courts.
 Cases involving serious allegations of fraud, forgery, coercion, fabrication and
impersonation.
  Cases requiring protection of courts.
 List of cases can be referred to ADR process
 All cases relating to trade, commerce, contract, tortious liability and consumer disputes.
 All cases arising from strained or soured relationships.
 Cases where continuation of pre existing relationship is required in spite of disputes.

Which of the ADR process require mutual consent of the parties?

In the case of Arbitration, pre- existing arbitration agreement is necessary. However, if both the
parties file a joint memo or application in the courts showing their consent then it can be
considered equivalent to arbitration agreement. Nevertheless, if there is no such agreement the
court has no power to refer because the award given by an arbitrator is binding on the parties.
Similarly, in conciliation consent of parties is required. However, the court can refer to
mediation, judicial settlement or Lok Adalat because the parties can again recourse to the court
if settlement is not acceptable.
Is Settlement in ADR binding?
As discussed above, the arbitration is a adjudicatory process where the award becomes binding.
However, the settlements in conciliation, mediation, Lok Adalat and Judicial settlements are
non- adjudicatory and are different forms of negotiation. So, they are not binding on the parties
and they can still recourse to the courts.
Procedure under Section 89 to be followed by the courts

 After pleadings are complete, the court will acquaint itself with facts of the case
 The court should first consider the category of the case, if it is not fit for ADR process,
then court will record reasons in writing.
 If case is fit for ADR process, the court shall explain the five ADR processes
 It should be ascertained whether parties willing for arbitration or conciliation. The court
will inform parties that the award by arbitrator is binding
 If parties are agreeable on any other ADR process then court will refer them to any one of
them.
 If reference on ADR fails, then court will continue with the case.

By all counts, the top court has ascertained with all the perplexities of section 89 of CPC and
made the sturdy tool functional to facilitate the courts

 Scope of section 89 CPC

 Procedure under Section 89 CPC
 Recognition of cases for ADR process by courts