HIMACHAL PRADESH NATIONAL LAW UNIVERSITY

ADR ASSIGNMENT
PROJECT ON ‘ADR UNDER CODE OF CIVIL
PROCEDURE 1908: AN ANALYSIS OF SECTION 89’

COURSE: - B.A.LLB
SEMESTER: - 9 th
ENROLLMENT NO. 1020171804
SUBMITTED BY: - VAISHALI PANCH
SUBMITTED TO: - DR. NUTAN KANWAR

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 ACKNOWLEDGEMENT

Every project big or small is successful largely due to the effort of a number of wonderful people
who have always given their valuable advice or lent a helping hand. I sincerely appreciate the
inspiration; support and guidance of all those people who have been instrumental in making this
project a success.

I, Vaishali Panch , the student of H.P National Law University (Shimla), I am extremely
grateful to H.P National Law University (Shimla) for the confidence bestowed in me and
entrusting my assignment. At this juncture I feel deeply honored in expressing my sincere thanks
to Vice Chancellor, Prof. Dr. Nishtha Jaswal, for making the resources available at right time
and providing valuable insights leading to the successful completion of my assignments.

I also extend my gratitude to my Project Guide, Dr. Nutan Kanwar, Teaching Associate who
assisted me in compiling the project. I would also like to thank all the faculty members of H.P.
National Law University, Shimla for their critical advice and guidance without which this project
would not have been possible. Last but not the least I place a deep sense of gratitude to my
family members and my friends who have been constant source of inspiration during the
preparation of this project work.

Vaishali Panch

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 TABLE OF CONTENT

S.NO PARTICULARS PAGE NO.

1 ABSTRACT 4
2 INTRODUCTION 4
DEVELOPMENT OF ADR IN THE CODE OF
CIVIL PROCEDURE 1908

3 ANALYSIS OF SECTION 89: WAYS OF

OUTSIDE SETTLEMENT

4 EXPLORING THE JUDICIAL PATHWAY:

IMPORTANT PRONOUNCEMENTS

5 THE PROBLEMS/WEAKNESSES FACING IN

INTRODUCING THE ADR IN THE CPC

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6 CONCLUDING REMARKS AND 11

RECOMMENDATIONS

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 ADR UNDER CODE OF CIVIL PROCEDURE 1908: AN
ANALYSIS OF SECTION 89
Vaishali Panch1

ABSTRACT

Alternative Dispute Resolution (“ADR”) refers to a variety of techniques resolving disputes by

means other than the litigation. Section 89 of the Code of Civil Procedure, 1908 which was
introduced by the Act of 1999 and came into effect from 01/07/2002, embodies the legislative
mandate to the court to refer civil disputes to various ADR mechanisms mentioned in the Section
where it finds it appropriate to do so. ADR system helps in providing parties with cheap, simple,
quick and accessible justice. The general principle behind all the matters is to reach to a
settlement, then why not opting for the ways which can be settled amicably by means of
compromise. These methods will also develop a culture of settlement amongst the parties and is
needed in today’s society. Inspite of such great objects the section is not effective due to several
flaws in the drafting and implementation of the section. Therefore this paper tries to analyse the
effectiveness of Section 89 of Code of Civil Procedure (“CPC”) and provide some solution for
making it more effective.

INTRODUCTION

The pendency of cases in India is in lakhs. The root cause behind such growing pendency of
cases is the rise in the number of fresh suits filed every year which has surpassed the number of
disposed of suits. Subsequently, this has led to an increase in the backlog of cases. The combined
efforts of the Government of India and the Indian Judiciary have somehow resulted In bringing
in a reduction in the number of pending cases. 2The proactive approach adopted by the
Government included initiatives such as the establishment of specialized courts, speeding up the

1
B.A.LLB, FIFTH YEAR, HIMACHAL PRADESH NATIONAL LAW UNIVERSITY, SHIMLA
2
Dr. Justice Dhananjaya Y. Chandrachud, Mediation – Realizing The Potential And Designing Implementation
Strategies, L. COMMISSION INDIA, http://lawcommissionofindia.nic.in/adr_conf/chandrachud3.pdf .

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process, an increase in the number of judges, etc. However, among all the measures being taken,
the amendment of Section 89 of the Code of Civil procedure 1908 was the most significant.

Section 89 of the Code of Civil Procedure mandated the courts to resolve the disputes of civil
litigation through the mechanism of Alternative Dispute Resolution. Arbitration, Mediation,
Conciliation, or LokAdalat are the modes of Alternative Dispute Resolution provided in the
Code of Civil Procedure. It is pertinent to mention that the mechanisms of Alternative Dispute
Resolution are extra-judicial in nature and are applicable to various matters of civil, commercial,
partnership, intellectual property, personal injury, family, insurance, industrial, and product
liability including other commercial disputes3. Thus, to overcome the complexities of the modern
legal system, the civil litigants resorted to adopting the less challenging technique, namely,
Alternative Dispute Resolution.

DEVELOPMENT OF ADR IN THE CODE OF CIVIL PROCEDURE 1908

In our country many civil suits are filed in the regular court but according to the proportion of the
of the filing suit very small amount of suits are dismissed by the court as a result the court
becomes the overloaded place with the suits. The suits which are decided by the courts again go
to the appellate court if the other party is not satisfied. Besides this the aggrieved party has the
right to apply for review and revision. It takes a lot time to dismiss a suit finally; apparently
20/30 years 4.To recover from this situation, historical step is taken to introduce ADR in the code
of civil procedure 2003 by inserting the section 89A and 89B. In 2003 section 89A and 89B
empowers the trial court to settle the dispute by ADR. Again in 2006 a new amendment is
brought to provide this power to the Appellate court by section 89C.

ANALYSIS OF SECTION 89: WAYS OF OUTSIDE SETTLEMENT

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

3
Mediation Training Manual of India, The Mediation and Conciliation Project Committee, Supreme Court of India,
Chapter I, at 3-4.
4
MdAkhtaruzzaman, concept and law of on alternative dispute resolution and legal aid 2nded, shabdaokoli printers
p.104

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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;

(c) judicial settlement including settlement through Lok Adalat: or

(d) mediation.

(2) Were 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 prescribed5.

Arbitration

Arbitration is referred to as a mechanism of ADR wherein the disputing parties submit their
dispute to the arbitrators. The arbitrator is an independent and impartial third party. The decision
by the arbitrator is referred to as an arbitral award. The decision taken by the arbitrator is final
and binding upon the disputing parties. In case if a matter is submitted to Arbitration by the court
under section 89 of the Code of Civil procedure, then, the Arbitration and Conciliation Act, 1966
will be applicable from the stage after reference. However, when the dispute is referred under

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Section 89 of Code of Civil Procedure 1908

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section 89, the consent of the parties is crucial. As soon as the case is referred to arbitration, it
permanently moves out of the domain of court. Thus, the arbitration award is then treated as a
decree.

Conciliation

Conciliation is referred to as a process whereby a neutral third party namely a conciliator assists
the conflicting parties in resolving their disputes. The Conciliator expresses his opinion about the
merits of a dispute. His motive is to make the parties reach a mutual understanding and
settlement. Conciliation is governed by the Arbitration and Conciliation Act, 1966. This
mechanism of ADR is less formal in nature. The decision given by the conciliator is non-
binding. Thus, Section 89 of Code of Civil Procedure, 1908, provides for Conciliation,
Arbitration, Mediation, or Lok Adalat as alternative dispute resolution mechanisms in cases
when it appears to the court that the dispute can be resolved without its intervention.

Meditation

Mediation is defined as a process of resolving conflicts with the assistance of a neutral third
party called a mediator. The goal of the mediator is to make the disputing parties reach a
negotiated resolution. The mediator resolves the disputes amicably. He advises the conflicting
parties with his proposed solutions. A mediator aims to make the parties reach a common
agreement. However, this mechanism is entirely controlled by the parties.6 The mediator takes
into account the problems/ issues of both parties and advises accordingly. Mediation results in
immediate control of the parties on both the on-going conflict and its resolution. Moreover, it is
mandated by law and encouraged by the courts. Thus, the decision of the mediator is non-
binding as his role is only limited to express his views and not impose or direct on the parties.

Lok Adalat

Lok Adalat is commonly known as the People’s Court. The Lok Adalat is presided over by
chairman who can be retired judicial officers and two members which can be from the legal
fraternity, social activists. The Court may submit the case to LokAdalat under section (1) of the

6
Roselle L. Wissler, Court-Connected Settlement Procedures: Mediation and Judicial Settlement Conferences, 26
OHIO ST. J. DISP. RES. 271 (2011).

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Legal Services Authority Act, 1987. The National Legal Services Authority (NALSA) and other
legal institutions have contributed the most in expanding the functioning of Lok Adalat. Thus,
LokAdalat takes into account those cases which are:

1) Pending before any other court, or

2) Cases which have never been brought forth in any court.

The decision awarded by the LokAdalat is final and binding on the parties. It is non- appealable
in any court of law. This mechanism is beneficial for the civil litigants as no court fee is charged.
The procedure followed is quite simplified. The conflicting parties can utilize the benefit of
directly interacting with the judicial officers. This is, however, not possible In the case of civil
courts. In Afcons Infrastructure Ltd. vs. Cherian Varkey Construction Co. (P) LTD 7, the
Hon’ble Supreme Court has laid down detailed guidelines regarding the referral of the civil
dispute to each ADR mechanisms i.e. the kinds of civil disputes which can be referred under
Section 89 of the Code of Civil Procedure. It was held by the court, the consent of both parties is
necessary if the dispute is referred to arbitration or conciliation. However, if the dispute is
referred to as mediation or LokAdalat, then the consent of the parties is not mandatory

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-litigation 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.8

EXPLORING THE JUDICIAL PATHWAY: IMPORTANT PRONOUNCEMENTS

7
2010(8) SCC 24
8
Bawa Masala Co. v. Bawa Masala Co. Pvt. Ltd, AIR 2007 Delhi 284.

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Section 89 apparently was drafted in a hurry. It is not very happily worded. It is not very
practical. But the object behind Section 89 is sound. The issue raised before the courts was
whether the amendments made in the Code of Civil Procedure, 1908 by the Amendment Act of
1999 and 2000 were constitutionally valid?

The Judicial Approach

Its constitutional validity was upheld in Salem Advocate Bar Association v. Union of
India9 (I).[15] 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. Keeping in mind the law’s delays and the limited number of judges
which are available, it has now become imperative that resort should be had to alternative dispute
resolution mechanism with a view to bring to an end litigation between the parties at an early
date. If the parties agree to arbitration, then the provisions of the Arbitration and Conciliation
Act, 1996 will apply and that case will go outside the stream of the court but resorting to
conciliation or judicial settlement or mediation with a view to settle the dispute would not ipso
facto take the case outside the judicial system.[16] All that this means is that effort has to be
made to bring about an amicable settlement between the parties but if conciliation or mediation
or judicial settlement is not possible, despite efforts being made, the case will ultimately go to
trial.
.
Potting of the Ball: Guidelines for Stricter enforcement of the Provision

The Supreme Court in has discussed, in great detail the provisions of Section 89 of the Code of
Civil Procedure, 1908 which casts a duty on the courts to encourage parties for settlement of
their disputes by means of alternate dispute resolution. 10Even though upon an examination of
Section 89 of the Code along with the stipulations of Order X, the Supreme Court was of the
opinion that the provision is incorrectly worded and various faults in the legislative drafting to
that effect were pointed out, the Bench applied the rule of interpretation to make it workable. The

9
AIR 2003 SC 189
10
Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd., JT 2010 (7) SC 616

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Bench also, on its own, took up the task of identifying which all cases could be referred to
alternate forms of dispute resolution, given the nature of these disputes and also noted that
“Section 89 refers to five types of ADR procedures, made up of one adjudicatory process
(arbitration) and four negotiatory (non-adjudicatory) processes – conciliation, mediation, judicial
settlement and Lok Adalat settlement.”[19]

THE PROBLEMS/WEAKNESSES FACING IN INTRODUCING THE ADR IN THE

CPC

The ADR in the Code of Civil Procedure 1908 is totally new initiative which leads a lot problem
in application of the ADR. The main problems are:

• In the CPC there is no general or specific guideline for the mediators regarding the
maintenance of equal participation and opportunity for the parties that may create serious
problem in case of power imbalance. There is also no explicit provision pertaining to
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reviewing the agreement arrived at upon conclusion of mediation under the CPC
• Further, the CPC incorporates mediation provisions at the pretrial and the appellate stage
but mediation mechanism upon conclusion of the trial before the pronouncement of
judgment has not been incorporated into the CPC. It is an established fact that the parties
usually are aware of the merits of their case just upon conclusion of the trial. Therefore
,post-trial mediation may prove to be more effective than that of the mediation at the
appellate stage.
• Section 89A as it stands after the amendment in 2012 requires the court to refer the suit
for compulsory mediation. If either or both the parties and their lawyers remain absent,
the court has no option but to postpone the stage to another date. Again, when the parties
are in attendance and the court has referred the suit to the parties for mediation, but the
parties or any of them does not appear before mediator, then the mediation is bound to
fail. In this backdrop, the section does not empower the court with the tools to enforce the

11
Rana P.Sattar,Existing ADR Framework and Practice in Bangladesh: A rapid Assessment, A Study reportprepared
for BangladeshLegal Reform Project (A Collaboration Project between Canadian International Development
Agency (CIDA) and The Ministry ofLaw, Justice and Parliamentary affairs, Bangladesh), 28 February, 2007

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 attendance of the parties. Thus the present provision adds to the existing practice of
delay.
• Quite often it happens that after the suit has been referred to mediation any of the party
does not want to compromise and withdraws from mediation without assigning any
reason in which case a mediator has no other option but to report the court about the
failure of the mediation. Under section 89A there is no penal provision for the party who
unreasonably withdraws from mediation. It is often alleged that lawyers discourage their
clients for resolving their disputes through ADR in fear of reduction of their income
level.

CONCLUDING REMARKS AND RECOMMENDATIONS

Although ADR programs can accomplish a great deal, however, no single program can
accomplish all these goals. They cannot replace formal judicial systems which are necessary to
establish a legal code, redress fundamental social injustice, provide governmental sanction, or
provide a court of last resort for disputes that cannot be resolved by voluntary, informal
systems12. Furthermore, even the best-designed ADR programs under ideal conditions are labor
intensive and require extensive management. In the development context, particular issues arise
in considering the potential impacts of the ADR. Firstly, some are concerned that ADR programs
will divert citizens from the traditional, community-based dispute resolution systems. To
modernize the ADR in the Civil Procedure Code the mentioned loopholes should be removed.
The legal framework of ADR has developed in Bangladesh over the last few years and acquired
a distinct position in the dispute resolutionprocess.ADR mechanisms can now be applied in
resolving a wide array of commercial disputes, family disputes and civil disputes, among others,
thus easing access to justice .However ,if we juxtapose the ADR provisions under different laws
of the country with their functional aspects, then it will be obvious that the court based ADR
mechanisms could not manage to yield satisfactory results it has been expected at the time of
their introduction. It is true that Court Based ADR under different laws can be transformed not
only to an aid to the earlier resolution of litigation but can also be used as a tool for case
management. It is in the public interest that the constitutional function of the judiciary should not

12
Law Commission of India, 238th Report, Amendment of Section 89 of the Code of Civil Procedure, 1908 and
Allied Provisions (Dec., 2011)

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compromised by blurring its boundary with non-judicial services. So long as the clarity of the
distinction is maintained and appropriate quality controls, including evaluative and cost-benefit
assessments under taken, then the ADR has much to offer in connection with the judicial
process. Alternatively, mandatory ADR requires careful oversight to ensure that it should not be
coercive and should not impose too much of a barrier to trial for those parties who want or need
judicial determination.

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