Section 89: The Withering Bridge to ADR in India
Shiladitya Mishra
To many it might not come as a surprise - court related delay. Litigation yet manages to come through as the most popular form of dispute resolution despite the colossal figure of 10 million cases listed as pending1. What raises eyebrows is, given the notoriety of such impediment and its familiarity, how ADR processes in India still have not managed to carve out a niche for itself?
Based on the above premise, S. 89 of the Code of Civil Procedure (hereafter ‘CPC’) was introduced to alleviate courts’ burden by rendering it power to refer cases to ADR but has now been condemned as the “trial judge’s nightmare”2. In brevity, the section provides for settlement of disputes outside the Court. The court while acting upon its discretion shall formulate the terms of settlement when it seems feasible and accordingly redirect the case to the five listed ADR options as per the parties’ consent. The section encourages ADR but the superfluous function of the trial judge to act as a connoisseur of settlement terms in a case which would advertently be transferred to ADR, appears to fuels this nightmare.
Whilst the constitutional validity of the amendment act3 ushering in S.89 was upheld in Salem Advocate Bar Association v. Union of India (I), the court held that "it is quite obvious that the reason why Section 89 has been inserted is to try and see that all the cases which are filed in court need not necessarily be decided by the court itself."4
Following the conformity of S.89 to constitutional standards, the apex court in Salem Advocate Bar Association v. Union of India (II) further observed that, "Section 89 uses both the word ‘shall’ and ‘may’ whereas Order X, Rule 1A uses the word ‘shall’ but on harmonious reading of these provisions it becomes clear that the use of the word ‘may’ in Section 89 only governs the aspect of reformulation of the terms of a possible settlement and its reference to one of ADR methods."5 Thus, re-affirming that the provision for formulating terms is to be exercised upon discretion of the trial judge.
Under the heading of "How Section 89 should be interpreted", the Afcon's case sought to lay the doubts to rest. The court utilized the purposive interpretation tool to harmoniously construct S. 89 and Order X Rule 1A, thus observing:
"Therefore, the only practical way of reading Section 89 and Order 10 Rule 1-A is that after the pleadings are complete and after seeking admissions/denials wherever required, and before framing issues, the Court will have recourse to Section 89 of the Code. Such recourse requires the court to consider and record the nature of the dispute, inform the parties about five options available and take note of their preferences and then refer them to one of the alternative dispute resolution processes."6
As observed in the above cases, it is not necessary for the court to indulge in settlement terms unless it appears a middle ground can be reached. If any opportunity for settlement exists, then searching of the best method for adjudication is the court’s subsequent task. The court may refer the case to arbitration only when there exists no pre-agreement for arbitration but cannot compel unwilling parties. In addition, once the reference to arbitration is done, it moves beyond the court’s jurisdiction and comes under the ambit of the Arbitration and Conciliation Act, 1996 (hereafter ‘AC Act’). Therefore unless S.34 of the AC act is invoked, the matter cannot be adjudicated before the court again.
Conciliation, a non-adjudicatory forum, does not remove the referenced case completely from the court’s jurisdiction and is returned to the court where efforts to reach a settlement have failed. Then again, reference to conciliation cannot be made to unwilling parties.
The other three ADR processes, Mediation, Lok Adalat and Judicial Settlement do not require the mutual consent of the parties. A case decided by simple application of legal principles is likely to be referred to Lok Adalats, whereas a complex case is preferred for mediation. The facet of judicial settlement depends whether the court feels that the guidance of a Judge would be appropriate according to subject matter7
With regard to the binding of the settlement terms, an arbitral award does not require a court decree even if the court has referred the case for arbitration. However, with regard to the four other ADR processes, a court decree is compulsory as per Order 23 Rule 3 CPC if the case has been referred to one of the other four ADR, because of being non-adjudicatory fora. Hence, delay persists despite the clarification regarding non-indulgence of courts in formulation of settlement terms.
The 238th Law commission report of India took cognizance of this and observed that S. 89 would serve its purpose even if a Lok Adalat or conciliation settlement did not get decreed by the referring court. S. 21 of the LSA (Legal Services Authority Act, 1987) and S.64 of the AC Act confers a statutory executable recognition on the Lok Adalat settlement and the Conciliation agreement respectively. District Judges/Secretaries, LSAs, the Chairman of the Commission upon enquiry revealed that existing practice involved the recording of factum ofsettlement before the parties and no such formal order or decree being passed8. On the flip side, Mediation being non-statutory would require the mediator to submit the settlement terms before the referring court and get a decree passed.
Section 89 possesses the potential to put ADR methods on a pedestal. Regardless, the provision is scantily used, adding to the already cumbersome burden of Indian courts. Legislative passivity in amending the section leaves only judicial legislation and law reports to adhere to. The baton of blame may pass among the lack of awareness of ADR or the avarice of claiming a lumpsum through litigation or even all-together on legislative blight; however so, it falls short of delivering on the promise of speedy justice by Article 21 of the Constitution.
1 National Judicial Data Grid, https://njdg.ecourts.gov.in/njdgnew/?p=main/pend_dashboard (last visited Nov.19, 2021)
2 Afcons Infrastructure and Ors. v. Cherian Verkay Construction and Ors, (2010) (8) SCC 24, p.7
3 Code of Civil Procedure (Amendment) Act, 1999
4 AIR 2003 SC 189, p.9
5 AIR 2005 SC 3353, p.59
6 Supra note 2, at p. 15
7 Id. p.28
8 Law Commission, Amendment of Section 89 of the Code of Civil Procedure, 1908 and Allied Provisions, Law Com No. 238, 19 (2011), https://lawcommissionofindia.nic.in/reports/report238.pdf