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CPC and Alternative Dispute Resolution

Under CPC there are few provisions which provide for peaceful settlement of disputes by
way of adopting ADR mechanisms. These are section 89 of CPC, Order X, Rules 1A, 1B and
1C.
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 observation 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 LokAdalat; or
(d) mediation.
(2) Where a dispute had been referred(a) for arbitration or conciliation, the provisions of the Arbitration and Conciliation Act, 1996
shall apply as if the proceedings for arbitration or conciliation were referred for settlement
under the provisions of that Act.
(b) to LokAdalat, the court shall refer the same to the LokAdalat in accordance with the
provisions of sub-section (1) of section 20 of the Legal Services Authority Act, 1987 and all
other provisions of that Act shall apply in respect of the dispute so referred to the LokAdalat;
(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 LokAdalat and all the provisions of the
Legal Services Authority Act, 1987 shall apply as if the dispute were referred to a LokAdalat
under the provisions of that Act;
(d) for mediation, the court shall effect a compromise between the parties and shall follow
such procedure as may be prescribed.

Order 10 Rule 1A.


Direction of the Court to opt for any one mode of alternative dispute resolution
After recording the admissions and denials, the Court shall direct the parties to the suit to opt
either mode of the settlement outside the Court as specified in sub- section (1) of section 89.
On the option of the parties, the Court shall fix the date of appearance before such forum or
authority as may be opted by the parties.
Order 10 Rule 1B.
Appearance before the conciliatory forum or authority
Where a suit is referred under rule 1A, the parties shall appear before such forum or authority
for conciliation of the suit.
Order 10 Rule 1C.
Appearance before the Court consequent to the failure of efforts of conciliation.
Where a suit is referred under rule 1A and the presiding officer of conciliation forum or
authority is satisfied that it would not be proper in the interest of justice to proceed with the
matter further, then, it shall refer the matter again to the Court and direct the parties to appear
before the Court on the date fixed by it."

At the time of framing of CPC, section 89 was their providing for settlement of disputes by
way of arbitration. The supporting procedural provisions were laid down in second schedule
of CPC. Later on a comprehensive legislation dealing with domestic arbitration was passed
i.e. - The Arbitration Act 1940. In pursuant to the same section 89 and second schedule of
CPC were deleted. Further in order to give effect to the recommendations given by various
law commission reports and Justice Malimath Committee report, again Section 89 is
incorporated in CPC in its modified form by way of CPC Amendment Act, 1999.
A simple reading of the section suggests that the Court is not bound to decide each case itself,
but can refer the dispute to Arbitration, Conciliation, Mediation, Lok Adalats or Judicial
settlement mechanism, the failure of which would revert the case back to the Court for
normal adjudication proceedings. This could reduce the burden of the Court. But there have
been several doubts, even cases challenging the validity and the completeness of S.89, saying
that it does not provide much operational value in real time.
What is wrong with section 89 of the Code
In the latest case on the applicability of S.89 and Court annexed ADR, decided in 2010,
Afcons Infrastructure v. Cherian Varkey Construction1, the Court says that if this section is
literally read and implemented, then it would be put[ting] the cart before the horse, with an
impractical procedure in sub-section (1) and mixed up definitions in sub-section (2). The
Court refers to the anomalies addressed in the Salem Bar Association cases I 2 and II3,
whereupon the validity of S. 89 was upheld and the Court held that it could be implemented
1Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd., Civil
Appeal No.6000 Of 2010

by ironing out the creases and by applying purposive interpretation, respectively. The
anomalies addressed were:
1. The definitions of mediation and judicial settlement under S. 89(2)(c) and (d) have
been mixed up, with mediation being effected by court-resolved compromise and the
latter as reference made by the court to a suitable institution for settlement.
It makes no sense to call a compromise effected by a court, as "mediation", as is done
in clause (d). Nor does it make any sense to describe a reference made by a court to a
suitable institution or person for arriving at a settlement as "judicial settlement", as is
done in clause (c). "Judicial settlement" is a term in vogue in USA referring to a
settlement of a civil case with the help of a judge who is not assigned to adjudicate
upon the dispute. "Mediation" is also a well-known term and it refers to a method of
non-binding dispute resolution with the assistance of a neutral third party who tries to
help the disputing parties to arrive at a negotiated settlement. It is also synonym of the
term `conciliation'. (See: Black's Law Dictionary, 7th Edition, Pages 1377 and
996). When words are universally understood in a particular sense, and assigned a
particular meaning in common parlance, the definitions of those words in section 89
with interchanged meanings has led to confusion, complications and difficulties in
implementation. The mix-up of definitions of the terms "judicial settlement" and
"mediation" in Section 89 is apparently due to a clerical or typographical error in
drafting, resulting in the two words being interchanged in clauses (c) and (d) of
Section 89(2). If the word "mediation" in clause (d) and the words "judicial
settlement" in clause (c) are interchanged, we find that the said clauses make perfect
sense.
2. In sub-section (1), the final stage of conciliation, as stated in S. 73(1) of the
Arbitration and Conciliation Act, is brought into the pre-ADR stage under S.89. If the
Court is directed to list out the terms of settlement and refer the parties to anyone of
the ADR mechanisms, then what will be the work of the ADR forum? S. 89(1)
requires the formulation the terms of settlement and reformulatation of the terms after
the parties send their observations, regarding those terms, all at the pre-ADR stage. It
is not possible for the courts to perform all these actions at the preliminary hearing
stage only to decide whether the case should be referred to ADR, and if so, then which
ADR mechanism. If the trial court is to ascertain whether there exists any elements
of settlement, then why will it again refer it to ADR rather than solving the dispute
itself?
Moreover, if the dispute is referred to Arbitration, then all the terms listed out by the
Court will be useless, as the Arbitrator will hear the dispute and not to the already
enlisted terms, and his award will be based on his own adjudication over the matter. In
case of reference to LokAdalat, Conciliation, Mediation, the drawing up of terms is
the work of the LokAdalat, Conciliator or the Mediator as the case may be. Then, if at
all useless, what end will be achieved by the court formulating the terms of settlement
that too at a pre-ADR stage?

2Salem Advocate Bar Association v. Union of India, 2003 (1) SCC 49


3Salem Advocate Bar Association v. Union of India, 2005 (6) SCC 344

These Anomalies were addressed in Salem Bar II by equating the phrase terms of
settlement in S. 89(1) to a summary of disputes. Therefore the courts would only be
required to summarize the disputes which have arisen.
The Afcons case has reference to the Tirath Singh case 4 and Shamrao v Thane District
Magistrate case5, where the Court states that if a statute has words which, if interpreted
literally would give rise to anomalies, then, the judge may, instead of adopting the textual
construction, add, omit, or substitute certain words in the statute to redress the situation and
get rid of the anomalies.
Afcons suggest that S.89 has to be read along with Rule 1A of Order 10 to give it an
appropriate structure. The parties, thus have an option to opt for any of the 5 dispute
resolution mechanisms and refer the matter to their choice of ADR process. Rule 1A does not
require the Court to formulate terms of settlement or reformulate the terms after receiving the
observations of either party. Therefore, if Rule 1A of Order 10 is read along with S. 89, it
would be practically feasible, since the court would be enabled to inform the parties of the 5
ADR mechanisms and then refer them to opt the process of their choice. The court would
have to refer to S.89 before the framing of the issues, right after the pleadings of both the
parties have been heard.
For proper interpretation of S. 89, CPC, the court is required to remove itself from a plain and
literal construction and make two clear changes.
1. The court is not mandatorily required to formulate the terms of settlement before
referring the dispute to an ADR process, but can briefly describe the dispute and refer it to the
same.
2. The clauses (c) and (d) of S. 89(2), with the terms mediation and judicial settlement will
have to be interchanged, otherwise the sub-section makes no sense.
Since the opening words of the section are "where it appears to the court that there exist
elements of a settlement", this section need not be invoked if the Court forms an opinion that
the case is not suited for an ADR process.
The anomalies of S.89 have been addressed by the judiciary in various case laws, but the
section still remains unchanged by the legislature. It is a viable section which has the
potential to reduce the burden of the Indian judiciary and accomplish what every justice
system aims for, fair and speedy justice for all, since justice delayed is justice denied.
This section addresses the need of the hour that is the requirement to reduce the load of our
adversarial judicial system. ADR processes can be finally made an active part of the Justice
system through this section. But this section needs to be properly formed through a thorough
responsible debate by the law academicians and judicial authorities. This section needs to be
looked into again by the parliament to iron out the creases and make it an effective solution to
provide speedy, satisfactory justice, at an affordable cost.
4Tirath Singh v. Bachittar Singh, AIR 1955 SC 830, as read in Afcons Case
5ShamraoV.Parulekar v. District Magistrate, Thana, Bombay,[AIR 1952 SC 324,
read in Afcons Case