Analysing 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”.^[ii] 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^[iii] 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.”

Frequently Asked Questions

1. Why was Section 89 initially met with such heavy criticism?

This provision of law which is presently the most often used mechanism in India to refer the parties to mediation is also considered one of the most incorrectly drafted pieces of law in India. The Supreme Court of India in Afcons Infrastructure Ltd. vs Cherian Varkey Construction Co. Pvt. Ltd.^[iv], 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.”

Edited by Anubhuti Rastogi
Approved & Published – Sakshi Raje

Reference

[i] Salem Advocate Bar Association, Tamil Nadu v Union of India, (2005) 6 SCC 344.

[ii] Ibid.

[iii] Afcons Infrastructure Ltd. v Cherian varkey Construction Co. Pvt. Ltd., (2010) 8 SCC 24.

[iv] Ibid.