Code of Civil Procedure, 1908

Section 89 CPC: Settlement of Disputes Outside the Court

Section 89 of the Code of Civil Procedure, 1908 provides for court-assisted alternative dispute resolution (ADR). It identifies arbitration, conciliation, judicial settlement (including Lok Adalat) and mediation as routes for resolving suitable civil disputes without a full trial.

At a glance: A referral under Section 89 is not the same as a compulsory settlement. The court must assess whether the dispute is suitable for a particular process; arbitration is founded on consent, and mediation and conciliation depend on voluntary agreement to settle.

On this pageSection 89 text Meaning ADR methods Procedure Related laws FAQs

Section 89 CPC: Statutory provision

The following reproduces the two subsections of Section 89 from the source article, with obvious typographical errors corrected. For authoritative text and any subsequent changes, consult the official legislation.

(1) Where it appears to the Court that there exist elements of a settlement which may be acceptable to the parties, the Court shall formulate the terms of settlement and give them to the parties for their observations and after receiving the observations of the parties, the Court may reformulate the terms of a possible settlement and refer the same for:

(a) arbitration;

(b) conciliation;

(d) mediation.

(2) Where a dispute has been referred-

(a) for arbitration or conciliation, the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply as if the proceedings for arbitration or conciliation were referred for settlement under the provisions of that Act;

(b) to Lok Adalat, the Court shall refer the same to the Lok Adalat in accordance with the provisions of sub-section (1) of section 20 of the Legal Services Authority Act, 1987 (39 of 1987) and all other provisions of that Act shall apply in respect of the dispute so referred to the Lok Adalat;

(c) for judicial settlement, the Court shall refer the same to a suitable institution or person and such institution or person shall be deemed to be a Lok Adalat and all the provisions of the Legal Services Authority Act, 1987 (39 of 1987) shall apply as if the 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.

Meaning and purpose of Section 89 CPC

Section 89 encourages courts to explore a settlement where the circumstances suggest a realistic possibility of resolving the dispute. The provision is intended to reduce unnecessary litigation, save costs and preserve relationships where possible. It works alongside Order X Rules 1A to 1C CPC, which address the court's direction to opt for an ADR mode and appearance before the selected forum.

The expression alternative dispute resolution (ADR) refers to structured methods of dispute resolution outside a conventional contested judgment. An ADR referral does not automatically deprive a party of its legal rights or guarantee a settlement.

Four methods of settlement under Section 89

1. Arbitration

An independent arbitrator determines the dispute and ordinarily issues a binding award. Arbitration depends on a valid arbitration agreement or the necessary consent of the parties. The Arbitration and Conciliation Act, 1996 supplies the governing framework.

2. Conciliation

A neutral conciliator assists the parties in negotiating a mutually acceptable resolution. Unlike an arbitrator, a conciliator does not impose an adjudicated award. The applicable statutory framework should be checked in light of the commencement and transitional provisions of later mediation legislation.

3. Judicial settlement and Lok Adalat

Judicial settlement involves an appropriate institution or person facilitating settlement. A Lok Adalat operates under the Legal Services Authorities Act, 1987. A regular Lok Adalat generally facilitates compromise rather than deciding a contested case on its merits. An agreed Lok Adalat award has statutory finality under that Act.

4. Mediation

Mediation is a confidential, facilitated negotiation in which a neutral mediator helps parties explore settlement; the mediator does not impose a decision. The Mediation Act, 2023, its commencement notifications, applicable court rules and transitional provisions should be checked when identifying the operative procedure in a particular matter.

How a court may refer a civil dispute to ADR

Consider suitability: The court identifies whether the nature of the dispute permits meaningful settlement discussions.
Hear the parties: The court considers their positions and the appropriate mechanism; arbitration cannot simply be imposed without the required consent.
Select the forum: The parties are directed to the appropriate ADR process under the governing law and procedural rules.
Record the result: If settlement succeeds, the court or statutory forum records or gives effect to it as legally prescribed. If it fails, the case may return for ordinary adjudication.

When may ADR be unsuitable?

Not every civil dispute is appropriate for settlement referral. Cases requiring an authoritative public determination, involving certain non-compoundable or non-arbitrable issues, or affecting persons who cannot validly consent may call for adjudication. Suitability must be assessed under the applicable law and judicial guidance.

Related legal provisions and official sources

Section 89 CPC and Order X Rules 1A to 1C: Court-assisted ADR referral and procedural steps. India Code - official legislation database.
Arbitration and Conciliation Act, 1996: Arbitration and relevant statutory provisions. Legislative Department.
Legal Services Authorities Act, 1987: Lok Adalat and statutory awards. National Legal Services Authority (NALSA).
Mediation Act, 2023: Mediation legislation; confirm which provisions have been brought into force and any applicable rules. India Code.

Legislation and commencement notifications may change. The official sources above should be consulted for the operative text relevant to a specific proceeding.

Frequently asked questions

What is Section 89 of the CPC?

Section 89 provides a framework for courts to refer suitable civil disputes to alternative dispute resolution processes such as arbitration, conciliation, judicial settlement including Lok Adalat, and mediation.

Can a court refer every civil case to arbitration?

No. Arbitration generally requires the parties' agreement. A court should consider suitability, party consent where legally required, and the applicable statutory framework.

What is the role of Lok Adalat?

Lok Adalat seeks a consensual settlement under the Legal Services Authorities Act, 1987. It does not ordinarily adjudicate contested disputes on their merits in a regular Lok Adalat.

Does Section 89 replace the Mediation Act, 2023?

No. Section 89 and the mediation legislation must be read together with applicable commencement notifications, procedural rules and any amendments in force. The statutory regime may depend on the date and nature of the proceeding.