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CHAPTER VI

ALTERNATIVE DISPUTE RESOLUTION UNDER SECTION 89 OF THE CODE OF CIVIL PROCEDURE

1. SECTION 89 CPC – INTRODUCTION

Section 89 of the Code of Civil Procedure, 1908 embodies the

legislative mandate to the court to refer sub judice disputes to various ADR

mechanisms enunciated therein where it finds it appropriate to do so, in order

to enable the parties to finally resolve their pending cases through well

established dispute resolution methods other than litigation. Section 89 CPC

has therefore recognized the need and importance of ADR even at the post

litigation stage.

In order to understand the niceties of section 89 CPC it is essential to

refer to its text, which is as under:

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 re-formulate 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;

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(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 dispute were referred to a Lok Adalat 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.

Thus the court can refer the parties to arbitration, conciliation,

mediation, lok adalat or judicial settlement in terms of section 89 of the Code

of Civil Procedure, 1908 for resolution of their disputes at the post litigative

stage. In fact the Delhi High Court has gone one step forward and held that

there is no reason why Early Neutral Evaluation (ENE), which is a different

form of ADR though similar to mediation, cannot be resorted to towards the

object of a negotiated settlement in pursuance of Section 89 of the Code of

Civil Procedure, 1908 specially when the parties volunteer for the same.1

2. OBJECTIVE OF ENACTMENT OF SECTION 89 CPC

The Law Commission of India2 had recommended the introduction of

the conciliation court system and had underlined the importance of

conciliation/ mediation as a mode of ADR. The Malimath Committee3

1 Bawa Masala Co. v. Bawa Masala Co. Pvt. Ltd, AIR 2007 Delhi 284. 2 Law Commission of India, 129th Report, Urban Litigation : Mediation as Alternative to Litigation (1988). 3 The Malimath Committee submitted its report in August, 1990.

had also

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advocated the need of an amendment in law for introduction of ADR

mechanisms.4

On the recommendations

5 of the Law Commission of India and the

Malimath Committee the Code of Civil Procedure (Amendment) Bill was

initiated in 1997. The Statement of Objects and Reasons attached to the said

bill6

Resultantly Section 89 CPC as it stands today was introduced into the

statute book by the Code of Civil Procedure (Amendment) Act, 1999 with

effect from 01.07.2002. With the introduction of this provision, a mandatory

duty has been cast on the civil courts to make an endeavour for settlement of

disputes by relegating the parties to an ADR process.

read as under:

Statement of Objects and Reasons: “3. (d) with a view to implement the

129th

Report of the Law Commission of India and to make conciliation scheme

effective, it is proposed to make it obligatory for the court to refer the dispute

after the issues are framed for settlement either by way of arbitration,

conciliation, mediation, judicial settlement or through Lok Adalat. It is only

after the parties fail to get their disputes settled through any one of the

alternate dispute resolution methods that the suit shall proceed further in the

section in which it was filed.

7 It has now become

imperative that resort should be had to ADR mechanisms with a view to bring

an end to litigation between the parties at an early date.8

4 Sudipto Sarkar & V.R. Manohar (Eds.), Sarkar’s Code of Civil Procedure (Wadhwa and Company, Nagpur, 11th Edn., 2006). 5 A.R. Lakshmanan, “Settlement of Disputes Outside the Court under section 89(1) read with Order X Rules 1A, 1B and 1C of the Code of Civil Procedure, 1908”, Keynote address delivered at the Karnataka Judicial Academy, Bangalore on 14.07.2007, 5 MLJ 22 (2007). 6 The notes attached to the bill further stated that clause 7 seeks to insert a new section 89 in the Code in order to provide for alternative dispute resolution based on the recommendations made by the Law Commission of India and the Malimath Committee. 7 Law Commission of India, 238th Report, Amendment of Section 89 of the Code of Civil Procedure, 1908 and Allied Provisions (December, 2011); In fact mandatory ADR is accepted globally. See Paul Randolph, “Compulsory Mediation?”, 4 (2) The Indian Arbitrator 2 (February 2012). 8 Salem Advocate Bar Association v. Union of India, AIR 2003 SC 189.

Indeed this is the

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policy in the west also where court efforts to facilitate settlement in civil cases,

whether through judicial settlement conferences or court-connected mediation

and other ADR processes, have become commonplace.9

The Supreme Court has also stated that the intention of the legislature

behind enacting Section 89 CPC is that where it appears to the Court that

there exists elements of settlement which may be acceptable to the parties,

they, at the instance of the court, shall be made to apply their mind so as to

opt for one or the other of the five ADR methods mentioned in section 89 CPC

and if the parties do not agree, the court shall refer them to one or other of the

said modes.

10

3. FORMULATING AND REFORMULATING THE TERMS OF SETTLEMENT UNDER SECTION 89 CPC

Section 89 CPC provides that 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 re-formulate the terms of a possible settlement and refer the same for

any of ADR mechanisms as specified in the provision.

This shows that the sine qua non for referring the parties to an ADR

mechanism within the contemplation of section 89 CPC is the opinion

recorded by the judge concerned regarding the existence of elements of

settlement which may be acceptable to the parties followed by the formulation

of the terms of the settlement followed by re-formulation of the possible terms

of the settlement after taking observations of the parties.11

9 See Roselle L. Wissler, “Court-Connected Settlement Procedures: Mediation and Judicial Settlement Conferences”, 26 Ohio St. J. on Disp. Res. 271 (2011); Another advantage of court mandated ADR is that neither party fears having to initiate the ADR process. See Ari Davis, “Moving from Mandatory: Making ADR Voluntary in New York Commercial Division Cases”, 8 Cardozo J. Conflict Resol. 283 (2006). 10 Salem Advocate Bar Association v. Union of India (II), AIR 2005 SC 3353. 11 D.D.A v. Happy Himalaya Construction Co., 2009 (1) A.D. (Delhi) 383; Salem Advocate Bar Association v. Union of India (II), AIR 2005 SC 3353.

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However the anomalous position is that section 89 CPC introduces the

ultimate stage of conciliation referred to in section 73(1)12

One of the reasons for introducing section 89 CPC was that the trial

judge is not able to devote much time and attention to effect conciliation

between the parties and therefore the matter should be referred to some other

ADR fora for resolution. If sub-section (1) of Section 89 CPC is to be literally

followed, every trial judge before framing issues, is required to ascertain

whether there exists any elements of settlement which may be acceptable to

the parties, formulate the terms of settlement, give them to parties for

observations and then reformulate the terms of a possible settlement before

referring it to arbitration, conciliation, judicial settlement, Lok Adalat or

mediation. There is nothing that is left to be done by the ADR forum

thereafter. If all these have to be done by the trial court before referring the

parties to alternative dispute resolution processes, the court itself may as well

proceed to record the settlement as nothing more is required to be done

of the Arbitration

and Conciliation Act, 1996 into the pre-ADR reference stage under section 89

CPC. Section 89 CPC provides conciliation as one of the ADR processes to

which the matter can be referred to for settlement. But curiously enough, the

task of formulation and reformulation of the terms of settlement which a

conciliator has to perform at the concluding stage of conciliation has been

entrusted to the trial judge at the pre ADR reference stage.

13, as

a judge cannot do these unless he acts as a conciliator or mediator and holds

detailed discussions and negotiations running into hours.14

12 S. 73(1), Arbitration and Conciliation Act, 1996 reads as under: “When it appears to the conciliator that there exist elements of a settlement which may be acceptable to the parties, he shall formulate the terms of a possible settlement and submit them to the parties for their observations. After receiving the observations of the parties, the conciliator may reformulate the terms of a possible settlement in the light of such observations.” 13 D.M. Popat, “ADR and India: An Overview”, The Chartered Accountant (December 2004). 14 Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd., JT 2010 (7) SC 616.

This will not only

eat away precious judicial time but would also render the subsequent ADR

processes redundant. Thus formulation and reformulation of terms of

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settlement by the court is wholly out of place in the pre-reference stage of

ADR process.15

Moreover if the reference is to be made to arbitration, the terms of

settlement formulated by the court will be of no use. If the reference is to

conciliation/mediation/Lok Adalat, then drawing up the terms of the settlement

or reformulating them is the job of the conciliator or the mediator or the Lok

Adalat, after going through the entire process of conciliation/ mediation. Thus,

the terms of settlement drawn up by the court will be totally useless in any

subsequent ADR process. Therefore now the Supreme Court has

unequivocally held that it is not necessary for the court, before referring the

parties to an ADR process to formulate or reformulate the terms of a possible

settlement.

16

4. SECTION 89 CPC – IT’S MANDATORY NATURE

AND PROCEDURE FOR REFERRAL

Section 89 CPC makes it obligatory for the courts to explore the

possibility of resolution of the dispute by making reference to one of the

several ADR mechanisms provided therein.17

15 R.V. Raveendran,“Section 89 CPC: Need for an Urgent Relook” 4 SCC Journal 23 (2007). 16 Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd., JT 2010 (7) SC 616.

However the pre condition for

referring the matter is satisfaction of the court that there exist elements of

settlement. The court has to form an opinion that a case is one that is capable

of being referred to and settled through any of the ADR processes.

Simultaneously Order X Rule 1A CPC mandates that the court to 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 CPC and on the option of the parties,

the court has to fix the date of appearance before such forum or authority as

may be opted by the parties.

17 A.M. Khanwilkar, “Need to Revitalise ADR Mechanism”, available at: http:// bombayhigh court.nic.in/mediation/Mediation_ Concept_and_Articles/need to revitalis.pdf (last visited on 11.04.2012).

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The provisions18 when harmoniously construed indicate that the need

of the having a hearing after completion of pleadings, to consider recourse to

ADR process under section 89 CPC is mandatory. But actual reference to an

ADR process in all cases is not mandatory. Where the case is unsuited19 for

reference to any of the ADR process, the court will have to briefly record the

reasons for not resorting to any of the settlement procedures prescribed under

section 89 CPC. In other cases reference to ADR is mandatory. The court

need not elaborate the terms of the proposed settlement nor is there any

requirement to give detailed reasons for arriving at the conclusion regarding

the existence of elements of settlement and the court may describe very

briefly the nature of the dispute and the existence of the elements of

settlement in three or four lines. However, a duty is cast upon the court to

consider whether it is possible to refer the parties for a settlement.20

During the course of legal proceedings after recording the admissions

and denials, the court has to direct the parties to suit to opt either mode of the

settlement outside the court as specified in sub-section (1) of section 89 CPC

by mutual consent and on the option of the parties, the court has to fix the

date of appearance before such forum or authority as may be opted by the

parties.

21 If the parties are not able to opt for a particular mode of ADR

provided in section 89 CPC then the court has to refer the matter itself to a

suitable ADR mechanism in terms of section 89 CPC except for arbitration

and conciliation which require express consent of the parties.22

18 S. 89(1) and Order X Rules 1A, 1B and 1C, Code of Civil Procedure, 1908. 19 Cases which are normally considered to be not suitable for ADR process are representative suits under Order 1 Rule 8 CPC, disputes relating to election to public offices, cases involving grant of authority by the court after enquiry, for example, suits for grant of probate or letters of administration, cases involving serious and specific allegations of fraud, fabrication of documents, forgery, impersonation, coercion etc., cases requiring protection of courts, for example, claims against minors, deities and mentally challenged and suits for declaration of title against government and cases involving prosecution for criminal offences. See Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd., JT 2010 (7) SC 616. 20 Basheer v. Kerala State Housing Board, AIR 2005 Kerala 64. 21 Order X Rule 1A of the Code of Civil Procedure, 1908. 22 Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd., JT 2010 (7) SC 616.

In this respect

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section 89 CPC has introduced the concept of mandatory ADR.23 Thereafter

the parties are supposed to appear before such forum or authority for

settlement of the case.24 However if the matter is not settled the matter is

again referred back to the court.25

If the matter is settled the settlement is recorded by the court and the

matter is disposed of.

26 Where the court refers the parties to the suit to

anyone of the mode of settlement of dispute referred to in section 89 CPC and

the matter is settled and disposed of the plaintiff is entitled for refund of court

fees.27 Even if the matter is settled in appeal the appellant is entitled to refund

of court fees.28

5. THE ROLE OF REFERRAL JUDGES

This is an added incentive for taking recourse to the provisions

of section 89 CPC.

Section 89 CPC is an important step towards popularizing the

employment of ADR methods for settlement of cases pending before courts.

The reference to ADR mechanisms is mandatory in cases which are found to

possess elements of settlement. The responsibility of deciding whether a case

possesses elements of settlement has been put on the shoulders of the trial

judge who is also referred to as the referral judge since it his on his orders

that a case is referred to any one of the ADR mechanisms enunciated in

section 89 CPC. It is the referral judge who determines that which case is

suitable for being referred to ADR in terms of section 89 CPC. The key to

23 However such mandatory court referred/ court annexed ADR should be complemented by education and other steps to increase the general awareness regarding the ADR processes and their benefits. See Dorcas Quek, “Mandatory Mediation: An Oxymoron? Examining the Feasibility of a Court Mandated Mediation Program”, 11 Cardozo J. Conflict Resol. 479 (2010). 24 Order X Rule 1B, Code of Civil Procedure, 1908. 25 Order X Rule 1C, Code of Civil Procedure, 1908. 26 Except in case of arbitration where an arbitral award on merits is passed by the arbitral tribunal. 27 S. 16, Court Fees Act, 1870 (again inserted by Act 46 of 1999, s. 34). 28 Vallabh Das Gupta v. Geeta Bai, 2004(4) R.C.R.(Civil) 85.

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success depends on judges referring appropriate cases and conversely,

failure is dependent on referring inappropriate cases.29

The second responsibility upon a referral judge is to refer the dispute to

the most appropriate ADR process

30 in terms of section 89 CPC where the

parties are not able to arrive at a consensus.31 If the case is simple which may

be completed in a single sitting, or cases relating to a matter where the legal

principles are clearly settled and there is no personal animosity between the

parties (as in the case of motor accident claims), the court may refer the

matter to Lok Adalat. In case where the questions are complicated or cases

which may require several rounds of negotiations, the court may refer the

matter to mediation. Where the facility of mediation is not available or where

the parties opt for the guidance of a judge to arrive at a settlement, the court

may refer the matter to another judge for attempting settlement.32

After all reference of a case is the first important stage in the entire

dispute resolution process on which the success of section 89 CPC depends.

In order to discover as to which case is apposite for being referred to

any one of the ADR mechanisms enunciated under section 89 CPC, when the

pleadings are complete the referral judge should sift through pleadings of the

parties and should hold a preliminary hearing with the parties. The court

should accustom itself with the facts of the case and the substance of the

dispute between the parties in order to discharge its duty in a fair and

efficacious manner.

29 Guidelines for referral judges at http://www.delhimediationcentre.gov.in/ (last visited on 11.04.2012). However these need to be reworked in light of the Afcons judgment. 30 One of the most challenging problems in the field of alternative methods of dispute resolution (ADR) is deciding which process or processes are most appropriate for a particular dispute. See Frank E. A. Sander, Lukasz Rozdeiczer, “Matching Cases and Dispute Resolution Procedures: Detailed Analysis Leading to a Mediation Centered Approach”, 11 Harv. Negot. L. Rev. 1 (Spring 2006). 31 However for referring the matter to arbitration or conciliation, the consent of both the parties is required. 32 Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd., JT 2010 (7) SC 616.

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In that regard, necessarily intense training33 must be imparted to the referral

judges so as to enable them to identify the cases which may be considered fit

for referral to any of the ADR mechanisms.34 The message and philosophy of

Section 89 CPC, if rightly appreciated and purposefully utilized, would shift the

judge from back seat to the driving seat holding the steering from day one.35

6. ADR MECHANISMS AVAILABLE UNDER SECTION 89 CPC

6.1 ARBITRATION

Arbitration is one of the modes of ADR prescribed by section 89 CPC.

Even prior to incorporation of Section 89 in the Code of Civil Procedure, 1908

the parties to litigation, with mutual consent, could take recourse to arbitration

as a mode of resolution of their dispute which was sub judice before a court of

law in terms of the Arbitration and Conciliation Act, 1996 itself. 36

Section 89 CPC now provides for reference of a dispute in a sub judice

matter to Arbitration. The statute

The

Arbitration and Conciliation Act, 1996 however, did not contemplate a

situation as in Section 89 CPC where the Court asks the parties to choose

any ADR mechanism and the parties choose arbitration as their option.

37

33 Some training programs are conducted by the Delhi Mediation Centre at various court complexes for referral judges on referral of cases for mediation and court management. See Delhi Mediation Centre, 4 (2) Mediation Newsletter (February 2010). These training programs, however need to be more comprehensive coupled with detailed refresher courses on ADR.

further provides that for arbitration the

provisions of the Arbitration and Conciliation Act, 1996 shall apply as if the

proceedings for arbitration were referred for settlement under the provisions of

that Act. However, if reference is made to arbitration under section 89 CPC,

34 S.B. Sinha, “ADR: Mechanism and Effective Implementation”, available at: http://bombay highcourt.nic.in/mediation/index_articles.htm (last visited on 11.04.2012); See also M.M. Kumar, “Relevance of Mediation to Justice Delivery in India”, a paper presented in the National Conference on Mediation, organised by the Mediation & Conciliation Project Committee, Supreme Court of India, held on July 10, 2010 at New Delhi, available at: http://highcourtchd.gov.in (last visited on 12.04.2012). 35 Justice R.C. Lahoti, Keynote address at the Valedictory Session of two days Conference on “ADR, Conciliation, Mediation and Case Management” organised by the Law Commission of India, available at: http://lawcommissionofindia.nic.in/adr_conf/Justice_ Lahoti_Address (last visited on 12.04.2012). 36 P. Anand Gajapathi Raju v. P.V.G. Raju, (2000) 4 SCC 539. 37 S. 89(2)(a), Code of Civil Procedure, 1908.

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the Arbitration and Conciliation Act, 1996 would apply only from the stage

after reference and not before the stage of reference when options under

section 89 CPC are given by the court and chosen by the parties.38

Even though section 89 CPC mandates courts to refer pending suits to

any of the several ADR processes mentioned therein, there cannot be a

reference to arbitration even under section 89 CPC, unless there is a mutual

consent of all parties, for such reference.

39

Section 89 CPC also provides for reference of a dispute in a sub judice

matter to conciliation. The statute

However once the matter is

referred to arbitration the matter permanently moves out of the realm of court

proceedings and the suit stands disposed of at that very stage and afterwards

the matter has to be resolved in terms of the Arbitration and Conciliation Act,

1996.

6.2 CONCILIATION

40

As in case of arbitration, the Arbitration and Conciliation Act, 1996 in

relation to conciliation would apply only after the stage of reference to

conciliation. Thus, for conciliation also rules can be made under Part X of the

Code of Civil Procedure, 1908 for the determining the procedure for opting for

'conciliation' and upto the stage of reference to conciliation.

further provides that for conciliation the

provisions of the Arbitration and Conciliation Act, 1996 shall apply as if the

proceedings for conciliation were referred for settlement under the provisions

of that Arbitration and Conciliation Act, 1996.

41

38 Salem Advocate Bar Association v. Union of India (II), AIR 2005 SC 3353. 39 Jagdish Chander v. Ramesh Chander, 2007 (6) SCC 719. 40 S. 89(2)(a), Code of Civil Procedure, 1908. 41 Salem Advocate Bar Association v. Union of India (II), AIR 2005 SC 3353.

Further as in the

case of arbitration, the court cannot refer the parties to conciliation under

section 89 CPC, in the absence of express consent of all parties. However

when a matter is referred to conciliation, the matter does not go out of the

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stream of court process permanently. If the parties are not able to arrive at a

final settlement during the conciliation the matter is returned back to the court.

6.3 LOK ADALATS

The Court may also refer a pending dispute to a Lok Adalat and for that

purpose the court has to take recourse to the provisions of sub-section (1) of

section 20 of the Legal Services Authority Act, 1987 and all other provisions of

the Legal Services Authority Act, 1987 apply in respect of the dispute so

referred to the Lok Adalat.42

The court may also refer a pending dispute to mediation in terms of the

provisions of section 89 CPC. The statute has undergone a sea change after

the judgment of the Supreme Court in Afcons case

The Lok Adalat thereafter effects a settlement in

terms of the Legal Services Authorities Act, 1987, passes the award and the

referral court thereafter disposes of the suit in terms of the settlement. The

reference to Lok Adalats in terms of section 89 CPC can be made even

without the consent of the parties.

6.4 MEDIATION

43 and after the Afcons

judgment, for mediation the dispute is to be referred to a suitable person or

institution 44

The expression Judicial Settlement suggests that it is some sort of a

judge mediated settlement of a dispute. Judicial Settlement is a term which is

in vogue in the west – particularly the United States of America. There we

which is to be deemed to be a Lok Adalat. The reference to

mediation in terms of section 89 CPC can also be made even without the

consent of the parties.

6.5 JUDICIAL SETTLEMENT

6.5.1 What is Judicial Settlement

42 S. 89(2)(b), Code of Civil Procedure, 1908. 43 Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd., JT 2010 (7) SC 616. 44 However the disputes are being only referred to the court annexed mediation centres where they are dealt by empanelled judicial or lawyer mediators.

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have what are known as judicial settlement conferences. A judicial settlement

conference is an informal process in which a judge45, trained in mediation and

settlement conference skills, actively facilitates a process whereby parties in

conflict may reach a mutually satisfactory resolution. 46 The term judicial

settlement therefore refers to a settlement of a civil case with the help of a

judge who, has not been not assigned the duty to adjudicate upon the

dispute.47

Thus judicial settlement conference is presided over by a judge who

uses fair settlement techniques to enable the parties to arrive at an amicable

settlement. The archetypal role of the settlement conference judge is to

roughly evaluate the case on the merits and to assist the bargaining of

settlement proposals. Some settlement judges also use mediation techniques

in the judicial settlement conferences to improve communication among the

parties, probe barriers to settlement, and help formulate resolutions.

48 A

settlement judge has however no power to force the parties to arrive at a

settlement. An important feature of judicial settlement conference is that the

judge who presides over the judicial settlement conference does not conduct

the trial of the case on merits.49 Either the case is marked to a different judge

for a settlement conference or the trial judge after conducting a settlement

conference does not proceed with the trial.50

45 In some jurisdictions we have sitting judges who are designated as judicial conference judges. In others like Virginia (USA) we have retired judges who conduct judicial settlement conferences. 46 See http://www.courts.state.va.us (last visited on 01.04.2012). 47 Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd., JT 2010 (7) SC 616.

The intent is that a judge who

48 Elizabeth Plapinger & Donna Stienstra, ADR and Settlement in the Federal District Courts: A Sourcebook for Judges and Lawyers, available at: http://www.fjc.gov (last visited on 01.04.2012). 49 Goldschmidt and Milford, Judicial Settlement Ethics (American Judicature Society, 1996), available at: http://www.judiciary.state.nj.us (last visited on 01.04.2012); See also Justice Sunil Ambwani, “Alternative Dispute Resolution: National Judicial Excellence Enhancement Programme (JEEP) First Visit”, Speech at National Judicial Academy, Bhopal on September 11th, 2011, available at: www.allahabadhighcourt.in/event/speech_on_ADR (last visited on 15.04.2012). 50 However there is another view that the rule should be that a judge should not make any decision in the case after conducting a settlement conference, without the consent of the parties. But it is not feasible to leave the issue as dependent on the will/ consent of the parties

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conducts trial is not prejudiced by the conduct of a party during judicial

settlement proceedings.51

As far as Indian Law is concerned the expression judicial settlement

was introduced in to the Code of Civil Procedure, 1908 through Section 89

CPC.

6.5.2 Judicial Settlement in India

52 Section 89 CPC provides judicial settlement as a mode of ADR. The

court can refer a dispute to judicial settlement in terms of section 89 CPC to a

suitable institution or person and such institution or person is to be deemed to

be a Lok Adalat and all the provisions of the Legal Services Authority Act,

1987 are applicable.53

To implement the objectives of section 89 CPC under the directions of

the Supreme Court in the 1st Salem Bar Association Case

54 a committee

headed by Justice M. Jagannadha Rao was formed and the committee placed

before the Supreme Court the Draft Civil Procedure - ADR and Mediation

Rules, 2003 which were considered by the Supreme Court in the 2nd Salem

Bar Association Case.55

or their lawyers and a uniform rule should be developed of judges not hearing the case on merits if they conduct a settlement conference therein. See Roselle L. Wissler, “Court-Connected Settlement Procedures: Mediation and Judicial Settlement Conferences”, 26 Ohio St. J. on Disp. Res. 271 (2011). 51 In B.P. Moideen Sevamandir v. A.M. Kutty Hassan, 2009 (2) S.C.C. 198 the Supreme Court held that when deciding a matter on merits of a case, if a court carries any prejudice against a party on account of his conduct before an ADR forum, it will violate the inviolable guarantee against prejudice or bias in the decision making process. 52 Inserted by the Code of Civil Procedure (Amendment) Act, 1999 with effect from 01.07.2002. 53 The relevant provision i.e. S. 89(2)(c), Code of Civil Procedure, 1908 reads as under: “...(2) Where a dispute has been referred: …...

(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 dispute were referred to a Lok Adalat under the provisions of that Act…….”. 54 Salem Advocate Bar Association v. Union of India, AIR 2003 SC 189. 55 Salem Advocate Bar Association v. Union of India (II), AIR 2005 SC 3353.

The Supreme Court thereafter directed the respective

High Courts to examine and finalise the said rules.

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Under the said draft Civil Procedure - ADR and Mediation Rules, 2003

Judicial settlement was defined as :

'Judicial settlement' means a final settlement by way of compromise entered

into before a suitable institution or person to which the Court has referred the

dispute and which institution or person are deemed to be the Lok Adalats

under the provisions of the Legal Service Authority Act, 1987 (39 of 1987) and

where after such reference, the provisions of the said Act apply as if the

dispute was referred to a Lok Adalat under the provisions of that Act.56

Where all the parties to the suit decide to exercise their option and to

agree for judicial settlement the court has to refer the matter to a suitable

institution or person which shall be deemed to be a Lok Adalat.

57

56 Rule 4, ADR and Mediation Rules, 2003 (Draft). 57 Rule 5, ADR and Mediation Rules, 2003 (Draft).

Thus for judicial settlement as provided under section 89 CPC the court

is supposed to refer the dispute to a suitable institution or person. However

there is no indication in the statute, that to which institution or person the

matter is to be referred to. That person may be a judge or may not be a judge.

He may be a person of legal background or may not be a person of legal

background. The dispute may also be referred to some external private

institution offering institutionalized conciliation or mediation services. There is

no indication as to what are the guidelines/ practice directions for referring the

matter. Thus section 89 CPC is silent on these aspects.

This renders judicial settlement a sui generis settlement procedure.

This is because the term judicial settlement per se gives as indication that it is

a judge mediated settlement and this is also the plain meaning of judicial

settlement as is understood in the west. However in India by virtue of section

89 CPC any person or institution may conduct judicial settlement and such

institution or person is deemed to be a Lok Adalat and all the provisions of the

Legal Services Authority Act, 1987 apply to such proceedings as if the dispute

were referred to a Lok Adalat under the provisions of that Act.

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6.5.3 Judicial Settlement – Post Afcons Judgment

The legislative description ascribed to the term judicial settlement by

section 89 CPC is manifestly not in sync with the ordinary meaning of judicial

settlement as a settlement device as understood all over the world. This

anomaly was noticed by Justice R.V. Ravindran and he considered and

reviewed clauses (c) and (d) 58 of section 89 (2) CPC in his article 59

This issue was thereafter considered by the Supreme Court of India in

the famous Afcons judgment in the year 2010.

and

opined that there is a mixing up of the meanings of the terms judicial

settlement and mediation due to a clerical or typographical error in drafting,

resulting in the two words being interchanged in clauses (c) and (d) of sub

section (2) of section 89 CPC.

60

The Supreme Court has thus stepped into the picture to correct the

apparent error in the legislative provision. After the rectification effected by the

The Supreme Court also

acknowledged the fact that there is an error in the provision. It was held that a

proper interpretation of section 89 of the Code requires a change from a plain

and literal reading of the section and the definitions of `judicial settlement' and

`mediation' in clauses (c) and (d) of section 89(2) shall have to be

interchanged to correct the draftsman's error. The Supreme Court also

unequivocally directed that the above changes made by interpretative process

shall remain in force till the legislature corrects the mistakes, so that section

89 CPC is not rendered meaningless and infructuous.

If the two clauses are interchanged judicial settlement acquires an

altogether different meaning. Section 89 (2) (d) CPC would read:

(d) for "judicial settlement", the court shall effect a compromise between the

parties and shall follow such procedure as may be prescribed.

58 Section 89(2)(d), Code of Civil Procedure, 1908 provides that for mediation, the court shall effect a compromise between the parties and shall follow such procedure as may be prescribed. 59 Section 89 CPC: Need for an Urgent Relook, 4 SCC Journal 23 (2007). 60 Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd., JT 2010 (7) SC 616.

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Supreme Court both the terms i.e. mediation and judicial settlement, acquire

their natural meanings. Judicial settlement postulates a process where the

court has to effect a compromise between the parties and follow such

procedure as may be prescribed. This is in consonance with the natural

meaning of the expression judicial settlement and as it is understood in the

west.61

There is a severe lacuna in law as there is no procedure at all which

has been prescribed for judicial settlement. How the compromise is to be

effected is not expressly mentioned, but it gives an indication that the court is

to play a positive role in steering the disputant parties to arrive at a mutually

acceptable solution. The need for a detailed procedure is accepted by all, but

who will prescribe the procedure is also a perplexed question. Either the

procedure would have to be prescribed by the Supreme Court or the High

Courts on their judicial side. The procedure can also be prescribed by the

High Courts by framing rules under Part X of the Code of Civil Procedure.

6.5.4 Judicial Settlement – Need for Outlining Procedure

The expression judicial settlement, pursuant to the Afcons judgment is

to be understood in the modified form as enunciated by the Supreme Court

that in case of judicial settlement the court has to effect a compromise

between the parties and follow such procedure as may be prescribed.

62

The legislature may also step in to prescribe the procedure for judicial

settlement. Until and unless such a procedure is prescribed it would not be

possible for the judges and parties to take resort to judicial settlement as a

mode of dispute resolution in terms of section 89 CPC.

61 See http://www.courts.state.va.us/courtadmin/aoc/djs/programs/jsc/jsc_brochure(last visited on 01.04.2012). 62 In Delhi in case of applications for plea bargaining the case is referred by the magistrate to the ACMM who marks it to another magistrate for disposal of the plea bargaining application. A similar roster can be devised for judicial settlement also where the case is marked to the Incharge, Judicial Settlement who further assigns it to another judge for conducting judicial settlement proceedings. If the matter is settled a compromise decree can be passed straight away. In case the matter is not settled the same is sent back to the referral court.

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7. NEED FOR AMENDMENT OF SECTION 89 CPC

It is, therefore, seen that various shortcomings have been pointed out

by the Supreme Court in the text of section 89 CPC and therefore there is an

urgent need that section 89 CPC be amended to eliminate the anomalies.

The Supreme Court had in fact unequivocally directed that the changes made

by the Supreme Court in section 89 CPC by interpretative process shall

remain in force till the legislature corrects the mistakes, so that section 89 is

not rendered meaningless and infructuous. 63 There cannot be a more

unequivocal assertion of the fact that section 89 CPC needs to be amended.

In fact, instead of amending the provision we may have a separate

comprehensive legislation dealing with ADR in all respects.64

The judgment of the Supreme Court in Afcons case has been

considered by the Law Commission of India and the Law Commission

65 has

also opined that Section 89 CPC which provides for settlement of disputes

outside the court is inappropriately worded and the language adopted has

created difficulty in giving effect to the provision and therefore Section 89 CPC

should be recast.66

63 Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd., JT 2010 (7) SC 616. 64 Eg. The Alternative Dispute Resolution Act, 1998 in the United States of America deals with the use of ADR processes in district courts of the United States of America; The Alternative Dispute Resolution Act, 2004 of the Republic of Philippines comprehensively deals with ADR in all respects. 65 Law Commission of India, 238th Report, Amendment of Section 89 of the Code of Civil Procedure, 1908 and Allied Provisions (December, 2011). 66 89: Settlement of disputes outside the court –

1) Where it appears to the court, having regard to the nature of the dispute involved in the suit or other proceeding that the dispute is fit to be settled by one of the non-adjudicatory alternative dispute resolution processes, namely, conciliation, judicial-settlement, settlement through Lok Adalat or mediation the court shall, preferably before framing the issues, record its opinion and direct the parties to attempt the resolution of dispute through one of the said processes which the parties prefer or the court determines.

2) Where the parties prefer conciliation, they shall furnish to the court the name or names of the conciliators and on obtaining his or their consent, the court may specify a time-limit for the completion of conciliation. Thereupon, the provisions of sections 65 to 81 of the Arbitration and Conciliation Act, 1996, as far as may be, shall apply and to this effect, the court shall inform the parties. A copy of the settlement agreement reached between the parties shall be sent to the court concerned. In the absence of a settlement, the conciliator shall send a brief report on the process of conciliation and the outcome thereof.

3) Where the dispute has been referred:-

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8. EFFICACY OF SECTION 89 CPC IN DELHI

Section 89 CPC makes it obligatory for the courts to explore the

possibility of resolution of the dispute by making reference to one of the

several ADR mechanisms provided therein.67

Despite the fact that various shortcomings have been pointed out by

the Supreme Court in the phraseology adopted by the Supreme Court yet

there can be no doubt that section 89 CPC has proved to be a system

changer.

However the pre condition for

referring the matter is satisfaction of the court that there exist elements of

settlement.

68

The Supreme Court has given detailed practical guidelines so that

section 89 CPC can be utilized so as to achieve the best results.

69

a) for judicial-settlement, the Judicial Officer shall endeavour to effect a compromise between the parties and shall follow such procedure as may be prescribed;

b) to Lok Adalat, the provisions of sub-sections (3) to (7) of section 20, sections 21 and 22 of the Legal Services Authorities Act, 1987 shall apply in respect of the dispute so referred and the Lok Adalat shall send a copy of the award to the court concerned and in case no award is passed, send a brief report on the proceedings held and the outcome thereof;

c) for mediation, the court shall refer the same to a suitable institution or person or persons with appropriate directions such as time-limit for completion of mediation and reporting to the court.

(4) On receipt of copy of the settlement agreement or the award of Lok Adalat, the court, if it finds any inadvertent mistakes or obvious errors, it shall draw the attention of the conciliator or the Lok Adalat who shall take necessary steps to rectify the agreement or award suitably with the consent of parties. (5) Without prejudice to section 8 and other allied provisions of the Arbitration and Conciliation Act, 1996, the court may also refer the parties to arbitration if both parties enter into an arbitration agreement or file applications seeking reference to arbitration during the pendency of a suit or other civil proceeding and in such an event, the arbitration shall be governed, as far as may be, by the provisions of the Arbitration and Conciliation Act, 1996. The suit or other proceeding shall be deemed to have been disposed of accordingly”.

What is

particularly laudable is that the Supreme Court has recommended sufficient

safeguards and checks to prevent ADR from being used by an unscrupulous

litigant as a tool for protracting the trial including, inter alia, recommending the

67 A.M. Khanwilkar, “Need to Revitalise ADR Mechanism”, available at: http:// bombayhigh court.nic.in/mediation/Mediation_ Concept_and_Articles/need to revitalis.pdf (last visited on 11.04.2012). 68 The importance of s. 89, Code of Civil procedure, 1908 has also been emphasized even by the Law Commission of India. See Law Commission of India, 222nd Report, Need for Justice-dispensation through ADR, etc., 2009. 69 Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd., JT 2010 (7) SC 616.

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stage and the duration for which non-adjudicatory ADR processes ought to be

resorted to while retaining control over the same by insisting on periodic

reports and further in laying down the manner in which agreements reached in

the ADR process are made binding upon parties.70

It was only to give effect to the mandate of section 89 CPC that

mediation centers were established under the aegis of the judiciary all over

the country. The contribution of these mediation centres in ameliorating the

overburdened judicial system cannot be overlooked. In Delhi more than

51,900 cases (excluding connected cases) in total have been settled on

account of mediation at courts.

However an empirical study reveals that arbitration and conciliation are

being rarely resorted to in terms of section 89 CPC in Delhi. The prime

reasons are that a state sponsored or state funded arbitration or conciliation

centre is lacking and the parties have to bear the cost of arbitration/

conciliation which acts as a deterrent. Secondly the matter moves out of the

court system permanently in arbitration and temporarily in conciliation thus the

public is not able to repose so much confidence as it is able to do in other

three processes where the case remains in a court annexed system.

As far as judicial settlement is concerned there are no rules in place for

reference of the matters to judicial settlement after the Afcons judgment and

hence judicial settlement is also not being employed at all as an ADR

mechanism in terms of section 89 CPC in Delhi. Resultantly mediation and

Lok Adalats are the most widely employed ADR mechanisms in terms of

section 89 CPC in Delhi.

71

70 Eastern Book Company, “Correcting the Printer’s Devil & Clearing the Air over Alternate Dispute Resolution: Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd., (2010) 8 SCC 24”, Practical Lawyer, available at: http://www.ebc-india.com (last visited on 08.04.2012).

Apart from this a total number of cases 3120

(including connected cases) were settled at the Delhi High Court Mediation

71 See http://www.delhimediationcentre.gov.in (last visited on 07.05.2012).

219

and Conciliation Centre from 2006 to 2010.72 Thus mediation has emerged as

the primary ADR process in Courts in Delhi.73

Further after the advent of section 89 of the Code of Civil Procedure

there has been a spurt in the cases being referred to the Lok Adalats also

thereby increasing the number of settlements also.

74 ADR under section 89

CPC has therefore proved to be an efficient mechanism for clearing docket

congestion whilst at the same time ensuring quality justice.75

9. EPILOGUE

Section 89 CPC embodies the legislative mandate to courts for

exploring the possibility of a resolution of a dispute de hors the litigative

process in matters pending for judicial determination and if found appropriate,

refer the dispute to any of the ADR processes provided therein namely

arbitration, conciliation, mediation, lok adalats and judicial settlement.

In case of arbitration and conciliation there can be no reference without

the consent of the parties and after reference the proceedings are to be

conducted in accordance with the provisions of the Arbitration and

Conciliation Act, 1996. If the matter is referred to arbitration it permanently

moves out of the realm of the court and the suit stands disposed of at that

very juncture. In case of reference to other ADR procedures the matter can be

72 See High Court of Delhi, Biennial Report (2008-2010); See also Interview of Sadhana Ramachandran, Organising Secretary of Samadhan, published in ‘Civil Society’ (June 2010) available at: http://www.civilsocietyonline.com (last visited on 05.04.2012). 73 The US experience also shows that mediation had emerged as the primary ADR process in the federal district courts in USA in the early stages. See Elizabeth Plapinger & Donna Stienstra, ADR and Settlement in the Federal District Courts: A Sourcebook for Judges and Lawyers, available at: http://www.fjc.gov (last visited on 01.04.2012). 74 Although cases were being referred to Lok Adalats earlier also in terms of section 20 of the Legal Services Authorities Act, 1987 yet the incorporation of section 89 CPC has served as a booster for the same. 75 Case studies reveal that in almost all the cases, with a few exceptions, referred to mediation or Lok Adalats the settlements were on the lines which could have been expected had there been a decision on merits. The fact that ADR outcomes are not significantly different from litigated outcomes indicates that the process is neutral and fair. See also Lisa Blomgren Bingham, Tina Nabtchi, Jeffrey M.Senger, Michael Scott Jackman, “Dispute Resolution and the Vanishing Trial: Comparing Federal Government Litigation and ADR Outcomes”, 24 (2) Ohio St. J. on Disp. Res. 225 (2009).

220

referred to ADR fora even without the consent of the parties if the court finds

the existence of elements of settlement. The proceedings before the court

remain pending and if the matter is settled in the ADR process the

proceedings before the court are disposed of in accordance with the

settlement.

The initiatives taken by the Supreme Court in Salem Advocate Bar

Association v. Union of India, AIR 2003 SC 189 and Salem Advocate Bar

Association v. Union of India (II), AIR 2005 SC 3353 gave the initial

momentum to use of ADR in courts pursuant to section 89 CPC. Thereafter in

Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd., JT

2010 (7) SC 616, which can be described as a comprehensive practical guide

for effective use of section 89 CPC, the Supreme Court has given detailed

practical guidelines so that section 89 CPC can be utilized so as to achieve

the best results. In Afcons Infrastructure Ltd. the Supreme Court has also

directed interchange of clauses (c) and (d) of section 89 (2) CPC by

interpretative process to correct the draftsman's error so that section 89 CPC

is not rendered meaningless and infructuous.

The Supreme Court has pointed out serious errors in section 89 CPC

which have also been acknowledged by the Law Commission of India thereby

underlining the need of an amendment of section 89 CPC. However despite

these flagrant errors section 89 CPC has been made workable by the

Supreme Court by laying down detailed guidelines for efficient utilization of

section 89 CPC.

Section 89 CPC is being efficiently utilized in Delhi. Mediation and Lok

Adalats are the most widely employed ADR mechanisms in terms of section

89 CPC in Delhi. Arbitration and conciliation are being rarely resorted to in

terms of section 89 CPC in Delhi and since there are no rules in place for

reference of the matters to judicial settlement after the Afcons judgment,

judicial settlement is also not being employed at all. The reference to Lok

Adalats in terms of section 89 CPC is also limited as majority of the matters

221

referred to Lok Adalats are criminal matters which are referred in terms of the

Legal Services Authorities Act, 1987.

But the case of mediation stands on an entirely different footing. The

mediation revolution which has stormed Delhi with the establishment of

numerous mediation centres is an upshot of section 89 CPC only. The overall

results peg mediation as the most efficient ADR mechanism under section 89

CPC both in terms of quality of disposal as well quantum of disposal and

therefore mediation has emerged as the primary ADR process in courts in

Delhi.

Be that as it may, even if the statistics are kept aside, section 89 CPC

has given a massive boost to the ADR revolution in Delhi and has helped in

developing a settlement culture which is the most important aspect to be

taken care of as has been highlighted by none other than the Chief Justice of

India.76 The concept of employing ADR has undergone a sea change with the

insertion of section 89 CPC77

76 Justice S.H. Kapadia, Chief Justice of India. See “Let litigation make way for settlement culture: Kapadia”, The Hindu, New Delhi, July 11 2010.

and it has resulted in a paradigm shift. The

journey so far has been good however there is still scope for improvement

and definitely a need for progress.

77 S.B. Sinha, “ADR: Mechanism and Effective Implementation”, available at: http://bombay highcourt.nic.in/mediation/index_articles.htm (last visited on 11.04.2012).