Introduction
The backlog of legal cases in India is immense, with pending cases numbering in the lakhs. One of the primary reasons for this growing accumulation is the sharp rise in the number of new cases filed every year, which far exceeds the number of cases being resolved. This has resulted in an ever-increasing backlog. Although efforts from both the Government of India and the Indian Judiciary have led to some reduction in pending cases, the issue remains substantial. The government has implemented several proactive measures, such as establishing specialized courts, streamlining legal processes, and increasing the number of judges. However, one of the most significant steps taken was the amendment of Section 89 of the Code of Civil Procedure (CPC) in 1908. This section compels courts to resolve civil litigation disputes through Alternative Dispute Resolution (ADR) mechanisms. The CPC provides for various modes of ADR, including Arbitration, Mediation, Conciliation, and Lok Adalats.
It is important to note that ADR processes are non-judicial in nature and are applied to a wide range of disputes, including civil, commercial, partnership, intellectual property, family, personal injury, insurance, industrial, and product liability cases, among others. By utilizing ADR methods, litigants can bypass the complexities of the formal legal system and opt for a simpler resolution process.
Analysis of Section 89 and Its Framework
Section 89 was introduced into the CPC through the Code of Civil Procedure (Amendment) Act of 1999 and came into effect on July 1, 2002. The section is as follows:
Section 89 – Settlement of disputes outside the Court:
(1) The court shall draft the conditions of settlement and submit them to the parties for their input if it appears to the court that there are components of the settlement that would be acceptable to the parties. The court may reword the settlement terms and designate the case to one of the following after obtaining the parties’ observations:
a) Conciliation;
b) Arbitration;
c) Judiciary settlement, which may involve Lok Adalat settlement; or
(2) Following a referral of a dispute:
(a) The provisions of the 1996 Arbitration and Conciliation Act must apply to arbitration and conciliation procedures as though they had been started under that Act;
(b) To Lok Adalat, the court shall refer the case under Section 20(1) of the Legal Services Authorities Act, 1987, and all provisions of that Act shall apply to the case referred to Lok Adalat;
(c) For judicial settlement, the court shall refer the matter to an appropriate institution or individual, who will be considered a Lok Adalat for this purpose. All provisions of the Legal Services Authorities Act, 1987, will apply as if the matter was referred to Lok Adalat under that Act;
(d) For mediation, the court shall facilitate a compromise between the parties and follow the procedure prescribed.” [1]
The primary aim of Section 89 is to encourage courts to attempt an out-of-court settlement using one of the ADR processes before initiating a formal trial. This effort is further supported by the amendment to Order X, Rules 1A, 1B, and 1C of the CPC, which provide additional provisions to streamline the ADR process:
Court’s direction to choose one method of alternative dispute resolution
After recording admissions and denials, the court shall direct the parties involved to choose one mode of settlement outside the court as specified in Section 89(1). Once the parties have made their choice, the court will set a date for their appearance before the chosen forum or authority.”
Rule 1B states that when a suit is referred under Rule 1A, the parties involved must appear before a conciliatory forum or authority to attempt to resolve the dispute. Rule 1C clarifies that if the conciliatory body concludes that continuing the process would not serve the interests of justice, it must refer the case back to the court, directing the parties to appear on a specified date. These provisions create a mandatory obligation for civil courts to encourage dispute resolution by referring cases to an ADR (Alternative Dispute Resolution) process. Section 89 of the Code of Civil Procedure lists five ADR methods: (a) Arbitration, (b) Conciliation, (c) Judicial settlement, (d) Settlement via Lok Adalat, and (e) Mediation.
Arbitration and Conciliation are regulated by the Arbitration and Conciliation Act, 1996, which replaced the Arbitration Act of 1940. Unlike conciliation, arbitration is an adjudicatory process where a dispute, once referred, permanently leaves the court’s jurisdiction. Conciliation, on the other hand, is non-adjudicatory, and if no agreement is reached, the dispute returns to court for trial. The purpose of the amendment to Section 89 was to encourage a peaceful, mutual resolution of disputes without court intervention. In comparison to other countries, where over 90% of disputes are resolved outside of court, India mandates referring civil disputes to ADR mechanisms under Section 89 before continuing litigation.
Section 89 offers an alternative to formal judicial processes, encouraging parties to explore ADR mechanisms. Several reasons support the use of ADR methods:
1. ADR helps reduce the burden on courts. By opting for arbitration, mediation, or conciliation, parties contribute to lowering the number of cases pending in courts.
2. ADR offers realistic and mutually acceptable solutions to complicated civil disputes.
3. The costs involved in ADR are generally lower compared to traditional litigation, making it a cost-effective option.
4. While civil litigation follows a rigid, formal structure, ADR methods like mediation and conciliation are more flexible.
5. ADR processes promote peaceful and amicable settlements between disputing parties, as intended under Section 89.
ADR Mechanisms under Section 89 of the CPC
Arbitration
Arbitration is a formal, adjudicative method of resolving disputes through a private tribunal, governed by the Arbitration and Conciliation Act. If a pre-existing arbitration agreement is in place, disputes must be directed to arbitration under Sections 8 or 11 of the Act. Section 89 of the CPC presumes the absence of such an agreement. In appropriate cases, such as disputes concerning trade, commerce, contracts, or consumer grievances, the court may encourage parties to opt for arbitration, provided both parties consent. Once the parties agree, the case moves outside the court’s jurisdiction, and the proceedings are governed by the Arbitration and Conciliation Act. The court will issue an order that outlines the nature of the dispute, the consent of the parties, and the appointment of arbitrator(s), thus closing the court case.
Conciliation
Conciliation is a non-binding, non-adjudicatory process also governed by the Arbitration and Conciliation Act (Sections 61 to 81). When the court sees potential for settlement, it may refer the matter to conciliation if both parties agree to negotiate with the assistance of a conciliator. This process follows an agreement or an invitation process as laid out in Section 62 of the Act, and the appointment of the conciliator is governed by Section 64. Conciliation may sometimes have an advisory role. Any settlement reached under Section 74 has the same legal effect as an arbitral award under Section 30. If a dispute is resolved through conciliation, the court must confirm the settlement under the relevant legal framework. However, if no settlement is reached, the case returns to the court for further proceedings.
Lok Adalat
A referral to a Lok Adalat does not require party consent. If the court is satisfied that the dispute is simple and can be easily resolved without extensive adjudication, it may refer the case to the Lok Adalat. Lok Adalats are established under the Legal Services Authority Act, 1987, and their role is purely conciliatory. They help the parties reach a compromise and issue an award based on the settlement. If no settlement is achieved, the case is returned to the court. Lok Adalats have no authority to adjudicate disputes or hear the parties in a manner similar to courts.
Mediation
Mediation is a voluntary, structured process in which a neutral mediator helps the parties reach a mutually acceptable agreement. Unlike arbitration, the mediator does not issue a binding decision. The process is governed by state-specific mediation rules under Chapter X of the CPC, as directed by the Supreme Court in the Salem Advocate Bar Association cases. Mediation emphasizes cooperation over conflict, helping parties find a solution that promotes long-term benefits and preserves relationships. If a settlement is reached and accepted by the court, it becomes legally enforceable. Mediation allows parties to resolve their disputes without a purely adversarial approach, offering a solution that looks to the future.
Judicial Settlement
Under Section 89 and Order X Rules 1A, 1B, and 1C, the court may refer a case for judicial settlement if it identifies settlement potential. If judicial guidance is deemed appropriate, the case may be referred to another judge for resolution. The judicial officer attempts to settle the matter, and if successful, the settlement agreement is presented to the referring court for the issuance of a decree. If no settlement is reached, the case is returned to the referring court for trial. Arbitration and conciliation require party consent, but in judicial settlement, Lok Adalat, and mediation, the court can make a referral based on its discretion, even ex parte.
Salem Advocate Bar Association v. Union of India
The constitutional validity of Section 89 of the CPC was upheld in Salem Advocate Bar Association v. Union of India[2]. The intent behind Section 89, introduced to reduce the burden on courts, was appreciated, though it was noted that the section had not yet achieved its full potential due to a lack of clarity. A committee was formed to draft model rules to implement Section 89 more effectively, which were later adopted by several high courts, including those in West Bengal, Maharashtra, Bihar, and Uttar Pradesh.
In the subsequent Salem ABA case[3], the Supreme Court reinterpreted Section 89 to address its ambiguities. The court clarified that the section mandates the reformulation of settlement terms by ADR forums rather than courts. The court acknowledged that expecting judges to draft settlements at the pleadings stage was impractical and that this responsibility should lie with the ADR forums themselves.
Conclusion
Section 89 of the Code of Civil Procedure (CPC) represents a significant advancement in the pursuit of alternative dispute resolution (ADR) mechanisms in India. Its intention to alleviate the burden on the judiciary by providing parties with more efficient and effective means of resolving disputes is commendable. The various ADR processes outlined in this section—namely arbitration, conciliation, Lok Adalat, mediation, and judicial settlement—offer distinct avenues for conflict resolution that can cater to the unique needs of parties involved in civil disputes.
Despite its positive intent and framework, the effectiveness of Section 89 is hindered by several factors. The initial lack of clarity in the provision, along with ambiguities in its application, has resulted in varied interpretations by courts. Although the Supreme Court’s rulings in Salem Advocate Bar Association v. Union of India have clarified certain aspects, such as the roles of judges and ADR forums, challenges remain. For instance, the expectation that judges should facilitate settlement terms at the pleadings stage is impractical and misaligns the functions of the judicial system and ADR processes.
Furthermore, the limited awareness and understanding of ADR options among the general public contribute to the underutilization of these mechanisms. Many individuals are often unfamiliar with how ADR works or perceive litigation as a more robust avenue for dispute resolution, even when it may not be the most efficient or cost-effective. This misconception is compounded by a legal culture that often emphasizes adversarial approaches rather than collaborative solutions.
Addressing these shortcomings requires a multi-faceted approach. First, enhancing public awareness through educational initiatives about the benefits and processes of ADR can empower individuals to consider these options as viable alternatives to litigation. Workshops, community outreach programs, and informational campaigns can help demystify ADR processes and encourage individuals to opt for them in appropriate cases.
Second, further legislative amendments and the establishment of comprehensive guidelines can streamline the application of Section 89, ensuring that the intent behind its introduction is fully realized. The 238th Law Commission report highlights critical areas for reform, and implementing its recommendations could significantly improve the functionality of ADR in India. Simplifying procedural requirements, providing training for judges and legal practitioners, and standardizing ADR practices across jurisdictions can enhance the effectiveness of these processes.
Moreover, fostering a culture that values negotiation, mediation, and other collaborative methods of dispute resolution will be essential in shifting public perception. Encouraging stakeholders—including legal professionals, businesses, and educational institutions—to adopt and advocate for ADR can lead to a more harmonious approach to conflict resolution, ultimately reducing the strain on the judicial system.
In conclusion, while Section 89 of the CPC is a commendable effort to promote alternative dispute resolution in India, its full potential remains untapped due to various practical and systemic challenges. By addressing these issues through education, legislative reforms, and cultural shifts, the legal framework can be strengthened to facilitate greater acceptance and utilization of ADR mechanisms. This, in turn, would not only enhance access to justice but also contribute to a more efficient and responsive legal system capable of meeting the needs of a diverse and dynamic society. The journey towards a more effective implementation of Section 89 is ongoing, and it requires the collective efforts of lawmakers, legal practitioners, and the public to realize its vision of a more accessible and efficient justice system.
Author: Srijan Singh, University School Of Law And Legal Studies
[1] The Code of Civil Procedure, 1908 (Act No. 5 of 1908), s. 89
[2] AIR 2003 SC 189
[3] AIR 2005 SC 3353
