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Section 89 of The Code of Civil Procedure

Section 89 of the Code of Civil Procedure was introduced in 1999 to promote extra-judicial settlements through alternative dispute resolution (ADR) mechanisms, aiming to reduce court burdens and expedite dispute resolution. The section outlines the court's role in formulating settlement terms and referring disputes to various ADR processes, while also highlighting procedural redundancies and the necessity of party consent for arbitration and conciliation. The court cannot compel unwilling parties to engage in ADR, and alternatives like Lok Adalat and mediation can be pursued without consent, although the latter's effectiveness relies on the parties' willingness to participate.

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6 views1 page

Section 89 of The Code of Civil Procedure

Section 89 of the Code of Civil Procedure was introduced in 1999 to promote extra-judicial settlements through alternative dispute resolution (ADR) mechanisms, aiming to reduce court burdens and expedite dispute resolution. The section outlines the court's role in formulating settlement terms and referring disputes to various ADR processes, while also highlighting procedural redundancies and the necessity of party consent for arbitration and conciliation. The court cannot compel unwilling parties to engage in ADR, and alternatives like Lok Adalat and mediation can be pursued without consent, although the latter's effectiveness relies on the parties' willingness to participate.

Uploaded by

agrawalsastika
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Section 89 of the Code of Civil Procedure (CPC) was inserted in 1999 to facilitate extra-judicial

settlements through participation of parties in alternate dispute resolution mechanisms (ADR) to


alleviate the burden on courts and enable speedy resolution of disputes.1 Section 89 reads as follows
— 89. Settlement of disputes outside the Court.— (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; and (d) mediation. (2) Were a dispute has been referred: (a) for arbitration or conciliation,
the provisions of the Arbitration and Conciliation Act, 19962 (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 Authorities Act, 19873 (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
Authorities Act, 19874 (39 of 1987) shall apply as if the dispute were referred to a Lok Adalat under
the provisions of that Act; and (d) for mediation, the Court shall effect a compromise between the
parties and shall follow such procedure as may be prescribed.5 Formulation of settlement terms
prior to ADR referral — Procedural redundancies The judgment in Afcons Infrastructure Ltd. v.
Cherian Varkey Construction Co. (P) Ltd.6 noted that if Section 89(1) was to be followed literally, then
every trial Judge would, before framing issues, need to assess the existence of a settlement
acceptable to both parties, formulate and reformulate its terms of such settlement as per the
observations of the parties and refer it to the relevant ADR forum.7 Post this juncture, there would
be nothing for the dispute resolution forum to do, making the process redundant.8 The Judge cannot
arrive at a settlement merely based on pleadings, and there must be some deliberation with
parties.9 However, once the matter is referred to arbitration, the arbitrator is free to make the award
as they deem fit and not bound by the court’s settlement. This would render the time of the court
wasted, accelerating delays and procedural inefficiencies.10 ADR mechanisms and consent of parties
Although a pre-existing arbitration agreement would allow for a referral to ADR much earlier in the
course of proceedings, parties can also bring such an agreement into existence via a joint memo or
affidavit when being given the choice of ADR proceedings by the court under Section 89.11 The main
consideration in such matters would not be the existence of the arbitration agreement prior to the
suit but the willingness of both parties to engage in arbitral proceedings. The Court has no authority
to refer unwilling parties to arbitration or conciliation under Section 89.12 If the parties are not
agreeable to arbitration or conciliation, then the court can take recourse to the three other ADR
processes — Lok Adalat, mediation and judicial settlement. According to the court, these alternatives
do not require the consent of parties to make the reference.13 Foregoing of consent is especially
problematic in the case of mediation, wherein voluntariness of the party is integral to the resolution
sought through the process.14 Section 3(h) of the Mediation Act highlights the need for amicability
of the attempted settlement and likens it to a conciliatory process.15...

https://www.scconline.com/blog/post/2025/02/26/the-evolution-of-section-89-of-the-code-of-civil-
procedure-from-case-law-to-reform/

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