Section 89 CPC and Lok Adalat Reference

Section 89 of the Code of Civil Procedure, 1908 is the statutory hinge on which the entire architecture of court-annexed alternative dispute resolution turns. Inserted by the CPC (Amendment) Act, 1999 and brought into force on 1 July 2002, it commands a civil court to look, at the threshold of every suit, for "elements of a settlement" and, where they exist, to divert the dispute away from a contested trial into one of four channels - arbitration, conciliation, judicial settlement including Lok Adalat, or mediation. The Lok Adalat channel is where Section 89 CPC marries the Legal Services Authorities Act, 1987: once a court refers a dispute to a Lok Adalat under Section 89, it does so through Section 20(1) of that Act, and every consequence that flows - the conciliatory procedure, the consent-based award, the deemed civil-court decree and the bar on appeal - is governed by the 1987 statute. This chapter traces that linkage from the bare text through the foundational rulings of the Supreme Court, and explains exactly how, when and on what conditions a court may send a pending case to a Lok Adalat.

The text of Section 89 and its scheme

Section 89(1) provides that 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; (c) judicial settlement including settlement through Lok Adalat; or (d) mediation. Section 89(2) then prescribes the consequence of each reference: arbitration and conciliation are governed by the Arbitration and Conciliation Act, 1996; a reference to Lok Adalat is to be made "in accordance with the provisions of sub-section (1) of section 20 of the Legal Services Authority Act, 1987" with all other provisions of that Act applying to the referred dispute; judicial settlement is to be effected by a person or institution that the court deems to be a Lok Adalat; and mediation follows the prescribed procedure.

The provision must be read alongside Order X Rules 1A, 1B and 1C, also inserted in 1999, which require the court, after recording admissions and denials, to direct the parties to opt for an ADR mode and to fix the date for appearance before the chosen forum. The two together convert what was once a purely adversarial track into a system in which settlement is considered before issues are framed. The legislative purpose, traceable to the 129th Report of the Law Commission and the Justice Malimath Committee, was to relieve the chronic docket congestion of the civil courts by institutionalising consensual resolution as a routine, early step rather than a last resort reached after years of trial. The drafting, however, was famously imperfect, and it fell to the Supreme Court to make Section 89 workable - a task taken up first in the Lok Adalat jurisprudence and then comprehensively in the Salem Advocate and Afcons decisions.

It is important at the outset to grasp that Section 89 does not create the ADR forums; it is a referral provision. Arbitration and conciliation pre-exist under the Arbitration and Conciliation Act, 1996, and Lok Adalats pre-exist under the Legal Services Authorities Act, 1987. What Section 89 supplies is the doorway from a pending civil suit into those existing mechanisms, together with the duty of the court to look for and act upon settlement potential. The Lok Adalat doorway is the one most heavily used in practice, and its operation is the central concern of this chapter.

Salem Advocate Bar Association (I): upholding the amendments

The 1999 amendments were challenged almost immediately. In Salem Advocate Bar Association, Tamil Nadu v. Union of India (2003) 1 SCC 49 ("Salem-I"), the Supreme Court declined to strike down the new Section 89 and the connected Order X provisions, holding that they were intended to reduce the burgeoning arrears of civil litigation by promoting consensual resolution. Recognising, however, that the bare provision left numerous practical questions unanswered - how terms of settlement were to be formulated, at what stage reference should be made, how court fees would be treated, and what model rules the High Courts should frame - the Court constituted a Committee headed by Justice M. Jagannadha Rao to prepare model rules for ADR and case management and to iron out the difficulties of implementation. Salem-I thus settled the validity of Section 89 and deferred the working-out of its mechanics to a follow-up hearing on the Committee's report. The Court was alive to the objection that compelling parties to consider settlement might amount to denial of access to adjudication; it answered that the section does not deny anyone a trial but merely interposes a stage at which settlement is explored, and that nothing in it forces a litigant to compromise against his will. That reasoning - mandatory consideration coupled with voluntary settlement - became the foundation of all subsequent interpretation.

Salem Advocate Bar Association (II): the operative guidelines

The Committee's report came up for consideration in Salem Advocate Bar Association, Tamil Nadu v. Union of India (2005) 6 SCC 344 ("Salem-II"). The Court accepted the model rules and laid down the governing principles for the use of Section 89. It held that the object of the section is that where the court finds elements of a settlement, the parties must, at the instance of the court, apply their minds to opt for one of the four ADR modes; and where they do not themselves agree, the court shall refer them to one or the other of those modes. Crucially, the Court clarified that resort to Section 89 - the hearing to consider ADR - is itself obligatory, but that the parties cannot be compelled to settle: the mediator or conciliator persuades, never coerces.

Salem-II also addressed the financial disincentive to settlement. It recorded that on a reference and successful settlement under Section 89, the court fee paid by the plaintiff is to be refunded, the Central Court Fees Act having been amended in 1999 to provide for refund, and it called upon State Governments to amend their fee laws on the same lines. The refund of the full court fee on settlement under Section 89 - now reflected in Section 16 of the Court Fees Act, 1870 as amended - remains a powerful inducement to take a dispute to a Lok Adalat or other ADR forum rather than fight it to judgment. For the broader machinery that delivers these services, see the functions of the legal services authorities.

Afcons and the draftsman's error in Section 89(2)

The most authoritative exposition of Section 89 is Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd. (2010) 8 SCC 24. The Court, speaking through R.V. Raveendran J., first identified a glaring drafting error. Section 89(2)(c) speaks of "judicial settlement" and Section 89(2)(d) of "mediation", yet the definitions attached to those clauses were transposed: the clause labelled "judicial settlement" carried the description of mediation (reference to a Lok Adalat under the 1987 Act), while the clause labelled "mediation" carried the description of judicial settlement (the court effecting a compromise through the prescribed procedure). The Court held that to make the section workable the definitions in clauses (c) and (d) must be interchanged. After this judicial correction, a reference for "judicial settlement" properly means reference to a Lok Adalat or other deemed-Lok-Adalat institution under the Legal Services Authorities Act, while "mediation" means the court's own facilitated compromise process. This correction is indispensable to understanding precisely how a Lok Adalat reference is routed through Section 89.

Afcons on consent: arbitration is special

The dispute in Afcons itself concerned a sub-contract that contained no arbitration clause. The respondent applied under Section 89 asking the court to refer the matter to arbitration; the appellant resisted, having never agreed to arbitrate. The Supreme Court held that a civil court exercising power under Section 89 cannot refer a suit to arbitration unless all parties to the suit agree to such reference. Arbitration and conciliation, being consensual private mechanisms that oust the court's jurisdiction and culminate in a binding award, require the consent of all parties; the court cannot foist them on an unwilling litigant. By contrast, the other three modes - mediation, judicial settlement and reference to a Lok Adalat - do not require a pre-existing agreement, because the court can direct parties to attempt settlement through these non-adjudicatory processes, the outcome of which still depends on the parties voluntarily agreeing to terms. This distinction is the single most examined proposition arising from Section 89.

Afcons on procedure and the correct stage of reference

Afcons also simplified the cumbersome procedure that the literal text of Section 89(1) appeared to require. Read literally, the section seemed to demand that the court formulate the terms of settlement, give them to the parties, receive observations, and then reformulate the terms before reference - an exercise the Court found impractical at an early stage when the judge has not heard evidence. The Court held that the requirement of "formulating and reformulating terms of settlement" is not to be applied rigidly; it is enough that the court, after the pleadings are complete and before framing of issues, considers whether the dispute is fit for any ADR process, and if so, directs the parties to the chosen forum, leaving the actual formulation of settlement terms to that forum. The Court emphasised that having such a hearing to consider recourse to ADR is mandatory, even though actual reference is not mandatory in every case. Where the court declines to refer, it must briefly record its reasons.

Afcons: which cases are suitable for ADR

To guide trial courts, Afcons set out illustrative categories. Cases not normally suitable for ADR include representative suits under Order I Rule 8, election petitions, suits involving serious and specific allegations of fraud, fabrication of documents, forgery, impersonation or coercion, suits for grant of probate or letters of administration, and cases involving prosecution for criminal and quasi-criminal offences. Conversely, cases that are eminently suitable include disputes relating to trade, commerce and contracts; disputes between neighbours; disputes between employer and employee; family and matrimonial disputes; partnership disputes; tortious liability claims including motor accident claims; and consumer disputes. The Court observed that most categories of cases are, in fact, suitable for ADR, and that the rare exceptions are those requiring adjudication of complex contested facts or affecting third parties and the public. These categories continue to shape how judges decide whether to route a matter to a Lok Adalat or mediation. The underlying logic is that ADR is unsuitable wherever the dispute demands a binding judicial finding on seriously contested facts, affects persons not before the court, or carries a public or penal dimension that the parties cannot compromise away; everywhere else, the relational, commercial or compensatory nature of the dispute makes a negotiated outcome both feasible and desirable. The list is illustrative, not exhaustive, and the trial judge retains discretion to assess fitness case by case, recording reasons where reference is refused.

How a Section 89 reference reaches a Lok Adalat

When a court selects the Lok Adalat route, the reference operates through Section 20(1) of the Legal Services Authorities Act, 1987. Section 20 allows a Lok Adalat to take cognizance of a case either on the agreement of the parties, or on the application of one party with notice to the other where the court is prima facie satisfied that there are chances of settlement, or on the court's own motion where it is satisfied the matter is fit for the Lok Adalat. Once referred, the dispute is governed by the entire scheme of Sections 19 to 22 of the Act: the Lok Adalat's composition, its conciliatory jurisdiction, the consent-based award, and the bar on appeal. The court that made the reference effectively transfers the file to the Lok Adalat, which proceeds to attempt a compromise; if it succeeds, it passes an award, and if it fails, the record returns to the referring court for trial. Two features distinguish the Lok Adalat route from the others. First, no formal agreement to refer is needed - the court may send the matter on its own motion or on one party's application, subject to its prima facie satisfaction about the prospect of settlement, so an unwilling litigant cannot block the reference itself (though he can decline to settle once before the Lok Adalat). Second, the cost to the parties is negligible: there is no separate forum fee, and a successful settlement attracts a refund of the court fee already paid. The detailed mechanics of this forum are covered in Lok Adalats: constitution, powers and procedure.

The non-adjudicatory character of the Lok Adalat award

A reference under Section 89 does not transform the Lok Adalat into a court. In State of Punjab v. Jalour Singh (2008) 2 SCC 660, the Supreme Court held that a Lok Adalat has no power to "hear" parties and adjudicate a case as a court does; its function is to discuss the subject matter with the parties and persuade them to arrive at a just settlement. The Act's references to "determination" and "award" do not contemplate an adjudicatory judicial determination but a non-adjudicatory determination based on a compromise or settlement. The making of the award is merely an administrative act of recording, under the signature and seal of the Lok Adalat, the terms the parties have agreed to in its presence. On the facts, the Lok Adalat had unilaterally enhanced land-acquisition compensation without any settlement; the Court set this aside, reaffirming that where no compromise is reached the case record must be returned to the referring court and no award can be made. A Lok Adalat thus cannot impose, modify or adjudicate - it can only confirm consent.

Finality of the award: P.T. Thomas v Thomas Job

The consequence of a successful Lok Adalat settlement is decisive. Section 21 of the Legal Services Authorities Act provides that every award of a Lok Adalat shall be deemed to be a decree of a civil court, and Section 21(2) declares it final and binding on all parties, with no appeal lying to any court against the award. In P.T. Thomas v. Thomas Job (2005) 6 SCC 478, the Supreme Court explained the rationale: because the award rests on the consent of the parties, there is nothing for an appellate court to correct, and finality is essential to the very purpose of the Lok Adalat - speedy, conclusive disposal. An award is executable as a civil-court decree. The only avenue of challenge, the courts have held, lies under Articles 226 and 227 of the Constitution, and even then only on narrow grounds such as want of jurisdiction or where the award was obtained by fraud, misrepresentation or impersonation. This robust finality is the principal attraction of the Lok Adalat route over a contested trial, and it underlies the categories of persons entitled to free legal services who benefit most from quick closure. The corollary, emphasised in P.T. Thomas, is that courts should lean in favour of giving effect to a Lok Adalat award rather than defeating it on technical grounds; the entire purpose of the institution would be frustrated if awards could be reopened as a matter of course. At the same time, finality is not a licence for illegality: an award passed without jurisdiction, or procured by fraud, coercion or impersonation, is not insulated, and the supervisory jurisdiction of the High Court under Articles 226 and 227 remains available for such exceptional cases. The balance struck is one of strong but not absolute finality.

Section 89 and family disputes: Krishna Murthy and Srinivas Rao

The Supreme Court has repeatedly singled out family and matrimonial litigation as preeminently fit for the settlement modes of Section 89. In B.S. Krishna Murthy v. B.S. Nagaraj (2011) 15 SCC 464, a dispute between brothers, the Court referred the matter to the Bangalore Mediation Centre and observed that lawyers should advise their clients to try mediation in disputes involving family or business relationships, since otherwise litigation drags on for years and decades, often ruining both sides. In K. Srinivas Rao v. D.A. Deepa (2013) 5 SCC 226, the Court went further, holding that matrimonial disputes - particularly those relating to custody and maintenance - are eminently suited to mediation, and that even an offence under Section 498-A IPC, though non-compoundable, may in an appropriate case be referred by the criminal court to mediation where elements of a settlement exist. These decisions show that the spirit of Section 89 extends beyond the civil suit into the criminal and family-court spheres, reinforcing settlement as the preferred first resort.

Section 89 vis-a-vis arbitration and conciliation

Although Section 89 lists arbitration and conciliation among the four modes, their treatment differs sharply from the Lok Adalat route. A reference to arbitration under Section 89 takes the dispute entirely out of the civil court and into the regime of the Arbitration and Conciliation Act, 1996, ending in a binding arbitral award; this is why Afcons insisted on the consent of all parties. Conciliation similarly proceeds under Part III of the 1996 Act. By contrast, a Lok Adalat reference keeps the matter within the framework of the Legal Services Authorities Act, requires no separate agreement, and produces an award only if the parties voluntarily settle. For the aspirant, the examinable contrast is that arbitration is adjudicatory and consent-dependent, conciliation is facilitative and agreement-based, while the Lok Adalat is purely conciliatory and non-adjudicatory - yet its consent award enjoys the same finality as a decree. A specialised variant, the Permanent Lok Adalat, can even adjudicate on the merits in public-utility disputes when conciliation fails, as explained in Permanent Lok Adalats for public utility services.

Practical significance and continuing reform

Section 89 has converted ADR from an optional afterthought into a structural feature of Indian civil procedure. Its Lok Adalat limb, in particular, has enabled the disposal of enormous numbers of cases - especially motor-accident claims, bank-recovery matters, matrimonial disputes and pre-litigation compromises - at minimal cost and with the bonus of a court-fee refund. The Law Commission's 238th Report and successive judicial pronouncements have continued to refine the provision, recommending the removal of the transposed definitions and clearer drafting. For the student, the essential takeaways are four: the mandatory consideration of ADR at the threshold (Salem-II); the interchange of the clause (c) and (d) definitions and the consent requirement for arbitration (Afcons); the non-adjudicatory, consent-based nature of the Lok Adalat award (Jalour Singh); and the finality of that award with no appeal (P.T. Thomas). Together they explain why Section 89 is the doorway through which most court-referred disputes now pass on their way to a Lok Adalat. To place this within the wider statutory design, revisit the constitutional mandate and object of the Act.