ADR and Section 89 — Mediation, Conciliation, Lok Adalat, Arbitration Reference

Section 89 of the Code of Civil Procedure empowers a civil court, where it appears that there exist elements of a settlement which may be acceptable to the parties, to formulate the terms of settlement and refer the dispute to one of four alternative dispute resolution (ADR) processes: arbitration, conciliation, judicial settlement including settlement through Lok Adalat, or mediation. The provision was inserted by the Code of Civil Procedure (Amendment) Act, 1999 (with effect from 1 July 2002) and represents a structural shift in Indian civil procedure — from a model in which courts only adjudicated to a model in which courts also actively redirected disputes towards consensual resolution.

For a judiciary aspirant, Section 89 sits at the intersection of the Code, the Arbitration and Conciliation Act, 1996 and the Legal Services Authorities Act, 1987. The chapter is short on case law in its early years but has been clarified by two Supreme Court decisions — Salem Advocate Bar Association v Union of India (2003 and 2005) and Afcons Infrastructure v Cherian Varkey Construction Co (2010) — that are now the definitive authorities. The provision intersects with every stage of the suit from institution to final judgment: it postpones full trial in the hope of consensual resolution, but it does not displace the rest of the Code.

Statutory anchor

The provision is supplemented by Order X Rules 1A, 1B and 1C, inserted at the same time. Order X Rule 1A directs the court, after recording the admissions and denials, to give the parties an option to choose any of the four ADR modes. Order X Rule 1B requires the parties to appear before the chosen forum, and Order X Rule 1C provides for the matter to be referred back to the court if no settlement is reached. The reference is normally taken up at the same hearing at which issues are framed; this allows the court to view the controversy clearly before deciding whether settlement potential exists.

Object of Section 89 — three converging policies

The object of Section 89 reflects three converging policies in Indian civil-justice administration:

1. Reduction of pendency. Indian civil dockets are heavily backlogged. Section 89 redirects appropriate cases out of trial and into faster, cheaper, less adversarial processes.
2. Party autonomy. Where parties can agree, they should agree. The court's role is to identify settlement potential, formulate terms, and route the dispute to a forum where the parties' own choices can structure the outcome.
3. Preservation of relationships. Litigation hardens positions. ADR processes — particularly mediation and conciliation — preserve commercial and personal relationships that adjudication often destroys.

The Supreme Court in Salem Advocate Bar Association v Union of India (2005) 6 SCC 344 emphasised that the section is a step in the direction of decongesting courts and providing access to justice through cheaper and quicker means.

The four ADR modes

Arbitration

Arbitration is the adjudicative ADR mode: a neutral arbitrator hears the parties and renders an award binding under the Arbitration and Conciliation Act, 1996. Reference of a pending suit to arbitration under Section 89 is not the same as a pre-suit arbitration agreement. It requires the consent of both parties — without consent, the court cannot foist arbitration on a litigant. Once the reference is made, the proceedings are governed entirely by the Arbitration and Conciliation Act; the suit stands stayed and, on the making of the award, terminates.

Conciliation

Conciliation is the non-binding facilitative ADR mode: a conciliator helps the parties arrive at a settlement, but cannot impose one. The procedure is governed by Part III of the Arbitration and Conciliation Act, 1996. As with arbitration, conciliation requires party consent. A settlement agreement reached in conciliation has, under Section 74 of the Arbitration Act, the status of an arbitral award on agreed terms — a feature that makes conciliation a powerful enforcement tool. Compared with a settlement reached on the eve of trial, conciliation produces a result that is enforceable directly in execution proceedings without the need for a fresh decree.

Lok Adalat / judicial settlement

The Lok Adalat is the volume tool of Indian ADR. Constituted under the Legal Services Authorities Act, 1987, a Lok Adalat passes an award by consent that is final, binding, and not subject to appeal — under Section 21 of the Act. The award has the force of a decree of a civil court. Reference to a Lok Adalat under Section 89 does not require both parties' consent at the reference stage; the court refers the dispute and the Lok Adalat then attempts conciliation. If consent is not reached, the matter returns to court. Judicial settlement under clause (c) refers the matter to a suitable institution or person, who is deemed to be a Lok Adalat for that purpose.

Mediation

Mediation is the facilitative ADR mode that has grown most rapidly in India since 2002. The growth has been driven by court-annexed mediation centres in metropolitan and district courts, and by a steady expansion of subject-matter — from family disputes through commercial disputes to intellectual-property and consumer cases. A trained mediator helps the parties communicate, identify interests, generate options, and reach a voluntary settlement. The mediator does not decide. Mediation is governed by court-annexed mediation rules framed by High Courts under Section 89 read with Order X. The settlement, if reached, is reduced to writing and presented to the court for incorporation into a decree.

The Salem Advocate cases

The Supreme Court considered Section 89 twice. In Salem Advocate Bar Association v Union of India (2003) 1 SCC 49, the Court upheld the constitutionality of the 1999 Amendment but recognised that several provisions required clarification through subordinate legislation. A committee chaired by Justice MJ Rao was set up to draft the necessary rules, including a model case-management schedule and ADR rules.

In Salem Advocate Bar Association v Union of India (2005) 6 SCC 344, the Court accepted the committee's recommendations and gave directions for High Courts to frame their own ADR rules. The Court emphasised that Section 89 was meant to operate at the post-issues stage, after the court had a clear view of the controversy, and that reference to ADR should not be a mechanical exercise.

Afcons Infrastructure — the operational guidelines

The most important judicial gloss on Section 89 came in Afcons Infrastructure Ltd v Cherian Varkey Construction Co (P) Ltd (2010) 8 SCC 24. R.V. Raveendran, J., speaking for the Court, addressed three structural difficulties in the text of Section 89:

1. The drafting confused arbitration and conciliation with mediation and judicial settlement. The Court held that the definitions in Section 89 should be read in their commonly understood sense, not by mechanical reference to the 1996 Act. Mediation under Section 89(d) is the facilitative process; conciliation under Section 89(b) is the process governed by Part III of the Arbitration Act.
2. The text required the court to formulate and reformulate terms of settlement. The Court held that a literal reading would defeat the purpose. The court need only identify the existence of settlement elements at a broad level; detailed formulation is for the ADR forum to handle. Otherwise, the trial court would be performing the very task that the ADR mode is supposed to perform.
3. The text gave the impression that reference to all four modes was equally appropriate in every case. The Court laid down categories of cases not suitable for ADR — for example, election disputes, criminal offences, public-interest disputes, and cases requiring authoritative declarations. For other cases, the suitability of each ADR mode depends on the nature of the dispute.

The Afcons categorisation is now part of the operational law of Section 89 and is followed by every High Court that has framed its mediation rules.

Procedure — when and how the reference is made

The procedural choreography of Section 89, as clarified in Afcons, runs as follows:

1. After the pleadings are complete and admissions/denials recorded under the examination-of-parties rules, the court considers reference. Section 89 does not operate before the issues are framed; the court needs a clear view of the controversy before it can decide whether settlement elements exist.
2. The court hears the parties on the suitability of ADR. The hearing is short and focused on whether one of the four modes is appropriate. The court considers the nature of the dispute, the relationship between the parties, and the prospects of settlement.
3. The court records its opinion that elements of settlement exist. The opinion need not be elaborate; a short order suffices.
4. The court refers the dispute to one of the four modes. For arbitration and conciliation, the consent of both parties is mandatory. For Lok Adalat, judicial settlement and mediation, no party consent is required at the reference stage — though consent is, of course, needed for any settlement that emerges.
5. If a settlement is reached, the court records it as a decree. A Lok Adalat award is itself a decree under Section 21 of the Legal Services Authorities Act. A mediation settlement is reduced to writing and presented to the court, which then disposes of the suit by a decree on agreed terms.
6. If no settlement is reached, the matter returns to the court for trial. The dispute is taken up at the stage at which it had been referred — no time is lost in repeating earlier procedural steps.

Section 89 vis-à-vis cognate provisions

Section 89 sits inside a network of related provisions:

1. Order X Rules 1A, 1B and 1C. Operationalise Section 89 — providing for the court to give parties the option of an ADR mode, for the parties to appear before the chosen forum, and for the matter to return to the court if no settlement is reached.
2. Order XXIII Rule 3 — recording of compromise. Where a settlement is reached, whether through ADR or directly between the parties, Order XXIII Rule 3 governs the recording of the compromise as a decree. The two provisions are complementary — Section 89 gets the parties to settlement, Order XXIII records it.
3. Arbitration and Conciliation Act, 1996. Where the reference under Section 89(2)(a) is to arbitration or conciliation, the entire procedure is governed by the 1996 Act, and the dispute exits the civil court for the duration.
4. Legal Services Authorities Act, 1987. Lok Adalats are creatures of this Act, and reference under Section 89(2)(b) brings the dispute under its umbrella. The award has the status of a civil court decree under Section 21 and is non-appealable.

What kinds of cases are not suitable for ADR

The Afcons categorisation identifies cases not suitable for reference:

• Suits and proceedings involving election disputes.
• Cases involving prosecution of criminal offences.
• Suits for declaration of title to public property and other property questions involving public rights.
• Suits involving allegations of fraud, forgery, impersonation, coercion, etc.
• Suits seeking declarations of a status — such as legitimacy, citizenship, validity of a marriage where the contest is on the merits — as opposed to consensual divorces.
• Suits involving the interpretation of a will or trust where authoritative pronouncement is required.

Most other cases — particularly money suits, partition suits, family disputes susceptible to settlement, commercial disputes, landlord–tenant matters within the limits of the rent-control statutes, and motor accident claims — are suitable for one or another ADR mode. Even interim injunction disputes have been referred to mediation in appropriate cases, particularly where the underlying dispute is relational and the parties have an ongoing commercial connection. Family disputes, in particular, are now routinely routed through court-annexed mediation, with a high settlement rate. The mediation route is favoured because matrimonial litigation tends to inflict collateral damage on children, on extended families and on the parties' future relationships — collateral damage that the adjudicative process is poorly equipped to repair, and that consensual processes can often avoid altogether.

Effect of failure of ADR

Where the ADR process fails to produce a settlement, the matter returns to the civil court for trial. Two propositions deserve emphasis:

1. Confidentiality. Communications during a mediation or conciliation are confidential. They cannot be relied on by either party in the subsequent trial or in any other proceeding. Section 75 of the Arbitration and Conciliation Act, 1996 protects the confidentiality of conciliation proceedings; a similar privilege has been recognised for court-annexed mediations.
2. Continuation from the same stage. The suit resumes at the stage at which it was referred, not de novo. There is no need to re-frame issues or re-record evidence. The reference is treated as a parallel process, not a fresh start.

Distinguish — Section 89 from cognate ADR routes

Three distinctions must be guarded:

1. Section 89 reference vs Section 8 reference under the Arbitration Act. Section 8 of the 1996 Act compels a court to refer a dispute to arbitration where there is a pre-existing arbitration agreement. Section 89 is a discretionary in-suit reference where there is no pre-existing arbitration agreement. The procedural triggers and consequences are completely different.
2. Section 89 reference vs reference under the Legal Services Authorities Act. Parties can themselves apply to a Lok Adalat under Section 19 of the 1987 Act. Section 89 is the route taken by the court of its own motion or on suggestion. Both end up in a Lok Adalat, but the institutional path differs.
3. Section 89 reference vs withdrawal and adjustment of suits under Order XXIII. Withdrawal under Order XXIII Rule 1 is unilateral; adjustment under Order XXIII Rule 3 is bilateral. Section 89 is the upstream provision that often produces the Order XXIII Rule 3 compromise.

Leading authorities — at a glance

• Salem Advocate Bar Association v Union of India (I) (2003) 1 SCC 49 — constitutionality of Section 89 upheld; need for subordinate rules recognised.
• Salem Advocate Bar Association v Union of India (II) (2005) 6 SCC 344 — endorsement of the Justice Rao Committee report; directions for High Courts to frame ADR rules.
• Afcons Infrastructure Ltd v Cherian Varkey Construction Co (P) Ltd (2010) 8 SCC 24 — operational guidelines for Section 89; categorisation of cases not suitable for ADR; meaning of mediation and conciliation in their commonly understood sense.
• A 2014 Supreme Court ruling on confidentiality of mediation communications confirmed that matters disclosed in mediation cannot be used in subsequent litigation.
• State of Punjab v Jalour Singh (2008) 2 SCC 660 — a Lok Adalat award based on a settlement is final and binding; no appeal lies under Section 21 of the Legal Services Authorities Act, 1987.

MCQ angle — recurring distinctions

1. Four ADR modes under Section 89. Arbitration, conciliation, judicial settlement (including Lok Adalat), and mediation. Examiners often test the precise list — the standard trick is to substitute one of the four with a non-statutory term.
2. When consent is required. Arbitration and conciliation under Section 89 require party consent. Mediation, Lok Adalat reference, and judicial settlement do not require consent at the reference stage.
3. Stage of reference. After completion of pleadings and recording of admissions/denials under Order X — not before. The court needs a clear view of the controversy before it can decide whether settlement elements exist.
4. Nature of Lok Adalat award. Final, binding, non-appealable, with the force of a decree under Section 21 of the Legal Services Authorities Act, 1987.
5. Status of conciliation settlement. Has the status of an arbitral award on agreed terms under Section 74 of the Arbitration and Conciliation Act, 1996. Enforceable as if it were a court decree.
6. Confidentiality. Communications in mediation and conciliation are confidential; they cannot be relied on in subsequent trial.

A further point worth flagging is that Section 89 does not displace the court's inherent power to encourage settlement at any other stage of the proceeding — at the stage of written statement, during interlocutory hearings, or in first appeal. Section 89 is the structured route, not the only route. The Supreme Court has consistently encouraged courts at every level to explore settlement opportunities throughout the life of the proceeding. A typical mains question asks the student to advise a court on whether a particular suit is suitable for reference under Section 89, and if so, which mode. The expected answer applies the Afcons categorisation — checking first whether the case falls in the not-suitable list, then assessing the suitability of each mode given the nature of the dispute and the relationship between the parties. The chapter sits alongside Order XXIII on withdrawal and compromise; together, the two regimes channel cases out of trial and into faster, more consensual outcomes — and they make Section 89 a steady examiner favourite for both prelims and mains.

Frequently asked questions

What are the four ADR modes available under Section 89 CPC?

The four modes are: arbitration, conciliation, judicial settlement (including settlement through Lok Adalat), and mediation. The list is exhaustive — Section 89(1) does not contemplate any fifth mode. Arbitration and conciliation are governed by the Arbitration and Conciliation Act, 1996. Lok Adalat references are governed by the Legal Services Authorities Act, 1987. Mediation is governed by court-annexed mediation rules framed by the High Courts under Order X read with Section 89. The Supreme Court in Afcons Infrastructure clarified that mediation and conciliation under Section 89 must be read in their commonly understood sense — facilitative for the former, conciliative for the latter.

At what stage of the suit does the court refer a dispute under Section 89?

After the pleadings are complete and admissions and denials are recorded under Order X — not before. The Supreme Court in Salem Advocate Bar Association (II) (2005) and Afcons Infrastructure (2010) clarified that Section 89 does not operate at the institution of the suit. The court needs a clear view of the controversy before it can decide whether elements of settlement exist. In practice, the reference is considered along with the framing of issues; the court records a brief order identifying the settlement potential and refers the dispute to the chosen ADR mode.

Is the consent of both parties required for a Section 89 reference?

It depends on the mode. Arbitration and conciliation under Section 89(2)(a) require the consent of both parties — neither can be foisted on a litigant. Reference to Lok Adalat under Section 89(2)(b), to judicial settlement under Section 89(2)(c), and to mediation under Section 89(2)(d) does not require consent at the reference stage; the court refers the dispute and the chosen forum then attempts settlement. Of course, any settlement that ultimately emerges from any ADR mode requires the consent of both parties — the consent question at the reference stage is about the process, not the outcome.

What is the legal status of a Lok Adalat award under Section 89 reference?

A Lok Adalat award based on a settlement is final, binding on the parties and not subject to appeal under Section 21 of the Legal Services Authorities Act, 1987. It has the force of a decree of a civil court. The Supreme Court in State of Punjab v Jalour Singh (2008) 2 SCC 660 held that no appeal lies against a Lok Adalat award based on consent — the only route to challenge such an award is to show that the consent itself was vitiated by fraud, coercion, undue influence or misrepresentation. The award is enforceable in the same manner as a civil-court decree.

What happens if the ADR process fails to produce a settlement?

The dispute returns to the civil court for trial. The suit resumes at the stage at which it was referred — there is no need to re-frame issues or re-record evidence. Communications during mediation or conciliation are confidential and cannot be relied on by either party in the subsequent trial. Section 75 of the Arbitration and Conciliation Act, 1996 protects the confidentiality of conciliation proceedings; a similar privilege has been recognised for court-annexed mediations. The reference is treated as a parallel process, not a fresh start.