DR.

RAM MANOHAR LOHIYA NATIONAL

LAW UNIVERSITY

FINAL DRAFT
ANALYSIS OF SECTION 89 OF CIVIL PROCEDURE CODE

UNDER THE SUPERVISION OF: SUBMITTED BY:

Ms. Shakuntla Sangam Karan Rawat
Associate Professor (Law) B.A. LL.B. (Hons.)
DR. RMLNLU, LUCKNOW SECTION ‘A’ NO. 65

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ACKNOWLEDGEMENT

I would hereby extend a bouquet of thanks to my ADR teacher, Ms.Shakuntla Sangam

Lecturer in who encouraged me to make a project on such a comprehensive topic. This
was really a tedious job but speaking truth, this truly enlightened my mind and provided
me with great knowledge about the subject.

I would also like to extend my gratitude towards my friends and seniors who supported
me through thick and thin. They were always ready for any kind of help I needed in the
hardest times.
I also wish to acknowledge that this project couldn’t be completed without the help of my
university Library Dr. Madhu Limaye Library and ssthrough university’s internet.

Thanking all.

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TABLE OF CONTENTS

1. INTRODUCTION.................................................................................................0

2. OBJECTIVE OF ENACTMENT OF SECTION 89 CPC..................................06

3. STATEMENT OF OBJECT AND REASONS...................................................07

4. LACUNA'S IN SECTION 89 OF CPC ...............................................................07

5. MANDATORY NATURE OF SECTION 89.......................................................08

6. ADR MECHANISMS AVAILABLE UNDER SECTION 89 CPC.....................09

7. JUDICIAL SETTLEMENT POST AFCONS JUDGEMENT...........................11

8. CONCLUSION.....................................................................................................12

ANALYSIS OF SECTION 89 OF CIVIL PROCEDURE CODE

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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;
(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

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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.

(Corresponding Rules Being Order 10 Rules 1A, 1B & 1C)

Section 89 C.P.C. and the corresponding Rules were inserted by Act No. 46 of 199
(w.e.f.) (1.7.2002). However, the section contained some glaringly anomalous drafting
errors due to clerical or typographical mistakes. Supreme Court in Afcons Infrastructure
Limited v. Cherian Varkey Construction Company Private Limited1, hereinafter
referred to as Afcon under compulsion of circumstances rewrote the provision.

Part of Para 9 and paras 15 and 25 are quoted below:

“9. 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 subsection (1).
It has mixed up the definitions in subsection (2) ……...

15. If subsection (1) of Section 89 is to be literally followed, every trial Judge

before framing issues, is required to ascertain whether there exist any elements of a
settlement which may be acceptable to the parties, formulate the terms of settlement,
give them to the 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 alternative dispute resolution
forum. 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, as a Judge cannot do these unless

1
2010 (8) SCC 24

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he acts as a conciliator or mediator and holds detailed discussions and
negotiations running into hours.

25. In view of the foregoing, it has to be concluded that proper interpretation of Section
89 of the Code requires two changes from a plain and literal reading of the section.
Firstly, 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. It is sufficient if
the court merely describes the nature of dispute (in a sentence or two) and
makes the reference. Secondly, 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. Clauses (c) and (d) of Section 89(2) of
the Code will read as under when the two terms are interchanged:
(c) for 'mediation', 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, 1987 (39 of 1987) shall apply as if the
dispute were referred to a Lok Adalat under the provisions of that Act;

(d) for 'judicial settlement', the court shall effect a compromise between the
parties and shall follow such procedure as may be prescribed.

The above changes made by interpretative process shall remain in force till the
legislature corrects the mistakes, so that Section 89 is not rendered meaningless
and in fructuous.”2

2. OBJECTIVE OF ENACTMENT OF SECTION 89 CPC

The Law Commission of India3 had recommended the introduction of the conciliation
court system and had underlined the importance of conciliation/ mediation as a mode of

2
Afcons Infrastructure Limited v. Cherian Varkey Construction Company Private Limited
2010 (8) SCC 24
3
Law Commission of India, 129th Report, Urban Litigation : Mediation as Alternative to Litigation (1988).

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ADR. The Malimath Committee4 advocated the need of an amendment in law for
introduction of ADR mechanisms.5
On the recommendations of the Law Commission of India and the Malimath Committee
the Code of Civil Procedure (Amendment) Bill was initiated in 1997.

Statement of object 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.

In Salem Advocate Bar Association v. Union of India (II), The Supreme Court 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"6.

LACUNA'S IN SECTION 89 OF CPC

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 for a 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.
4
The Malimath Committee submitted its report in August, 1990.
5
Sudipto Sarkar & V.R. Manohar (Eds.), Sarkar’s Code of Civil Procedure (Wadhwa and Company,
Nagpur, 11th Edn., 2006).
6
AIR 2005 SC 3353

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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. 7, as a judge cannot do
these unless he acts as a conciliator or mediator and holds detailed discussions and
negotiations running into hours. 8This will not only eat away precious judicial time but
would also render the Subsequent ADR processes redundant.

Thus formulation and reformulation of terms of settlement by the court is wholly out of
place in the pre-reference stage of ADR process.9 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.10

MANDATORY NATURE OF SECTION 89

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
7
D.M. Popat, “ADR and India: An Overview”, The Chartered Accountant (December 2004).
8
Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd., JT 2010 (7) SC 616.
9
R.V. Raveendran,“Section 89 CPC: Need for an Urgent Relook” 4 SCC Journal 23 (2007)
10
Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd., JT 2010 (7) SC 616

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therein. 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.

The provisions11 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 unsuited12 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.13

ADR MECHANISMS AVAILABLE UNDER SECTION 89 CPC

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
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Conciliation Act, 1996 itself. Section 89 CPC now provides for reference of a dispute
in a sub judice matter to Arbitration. The statute The Arbitration and Conciliation Act,
11
S. 89(1) and Order X Rules 1A, 1B and 1C, Code of Civil Procedure, 1908.
12
Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd., JT 2010 (7) SC 616.
13
Basheer v. Kerala State Housing Board, AIR 2005 Kerala 64
14
P. Anand Gajapathi Raju v. P.V.G. Raju, (2000) 4 SCC 539.

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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.
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.15Section 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.

CONCILIATION
Section 89 CPC also provides for reference of a dispute in a sub judice matter to
conciliation. 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 conciliation16. 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 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.

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,
15
Jagdish Chander v. Ramesh Chander, 2007 (6) SCC 719.
16
Salem Advocate Bar Association v. Union of India (II), AIR 2005 SC 3353

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1987 apply in respect of the dispute so referred to the Lok Adalat. 17 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

MEDIATION
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 and after the Afcons judgment, for mediation the dispute is
to be referred to a suitable person or institution 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.

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 article59

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.

17
S. 89(2)(b), Code of Civil Procedure, 1908.

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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.

CONCLUSION
While concluding, it will be worthwhile to quote what the father of our Nation, Late
Mohandas Karamchand Gandhi said as regards a settlement being made between the
parties in any litigation, which is quoted as under:-
“My joy was boundless. I had learnt to find out the better side of human nature and to
enter men’s hearts. I realized that the true function of a lawyer was to unite parties
driven as under. The lesson was so indelibly burnt into me that a large part of my time
during the twenty years of my practice as a lawyer was occupied in bringing about
private compromises of hundreds of cases. I lost nothing thereby – not even money,
certainly not my soul.”
In the light of various shortcomings have been pointed out by the Supreme Court in the
stext of section 89 CPC and therefore there is an urgent need that section 89 CPC be
amended to eliminate the anomalies.

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