PROVISION OF CPC AND ADRS

INTRODUCTION:

The philosop hy of Alternate Dispute Resolution was well-

stated by Abraham Lincoln: “Discourage litigation, persuade your
neighbors to compromise whenever you can”. In reality litigation
does not always lead to a satisfactory result. It is expensive in
terms of time, money and also inconvenient for parties and at times
may fail in terms of obtaining justice. The alternative dispute resolution
enables change in the mental approach of the parties as the main
object behind this system is to avoid multiplicity of litigation to
save valuable time, money and also permits parties to amicably
come to a settlement.

PROVISIONS RELATING ADR TO CPC Inserted by CPC Amendment

Act, 1999

The Code of Civil Procedure is a procedural law related to the

administration of civil proceedings in India. The Code has been
amended from time to time by various Acts of Central and State
Legislatures. In the Conference held in New Delhi, on 30th June and 1st
July, 1997, the working paper on the proposed amendments to the
Code of Civil Procedure, 1908 was discussed with a view to implement
the recommendations of Justice Malimath Committee, 129th
Report of the Law Commission of India in which it was proposed to
introduce a Bill for the amendments of Code of Civil Procedure, 1908
keeping in view, among others, that every effort should be made to
expedite the disposal of civil suits and proceedings so that justice
may not be delayed. After the discussion CPC (AMENDMENT) ACT,1999
was implemented
S.89 Settlement of disputes outside the Court:

S.89 – states that if a court finds that there are certain elements of
settlement in the dispute which may be acceptable to the
parties, then it can formulate the terms of settlement and give
them to the parties for their observations and after getting the
consent from the parties it can refer the dispute for (i) arbitration, (ii)
conciliation, (iii) judicial settlement (through Lok Adalat) or (iv)
mediation

Section 89 along-with rules 1A, 1B and 1C of Order X of First

schedule have been implemented by Section 7 and Section 20 of the
CPC Amendment Act and c over the ambit of law related to Alternate
Dispute resolution.

“1A. Direction of the Court to opt for any one mode of

alternative dispute resolution. —After recording the admissions and
denials, the court shall direct the parties to suit to opt for either
mode of the settlement outside the court as specified in sub-section
(1) of section 89. On the option of the parties, the court shall fix the
date of appearance before such forum or authority as may be opted
by the parties.”

“1B. Appearance before the conciliatory forum or authority. –

where a suit is referred under rule 1A, the parties shall appear before
such forum or authority for conciliation of the suit.”

“1C. Appearance before the Court consequent to the failure of

efforts of conciliation.- Where a suit is referred under rule 1A and
the forum or authority to whom the matter has been referred is
satisfied that it would not be proper in the interest of justice to proceed
with the matter further, then it shall refer the matter again to the
court and direct the parties to appear before the court on the
date fixed by it.”
The clauses under Order X are specified to ensure proper exercise of
jurisdiction by the court. Sec 89, Sub-Section (1) refers to the
different mediums for alternate resolution and sub-section (2) refers
to various Acts in relation to the mentioned alternate resolutions.

ADR MECHANISM AVAILABLE UNDER SEC 89

Denial of justice through delay kills the entire justice dispensation

system. Therefore, in 1996, the Indian Legislature accepted the fact
that in order to lessen the burden on the courts, there should be a
more efficient justice delivery system in the form of arbitration,
mediation and conciliation as an Alternative Dispute Resolution (ADR)
options in appropriate civil and commercial matters. Thus, Parliament
enacted Arbitration and Conciliation Act, 1996. Part 1 of this act
formalizes the process of arbitration and Part III formalizes the process
of conciliation. Part II is about enforcement of foreign awards under
New York and Geneva conventions

ARBITRATION:

Arbitration, a form of alternative dispute resolution (ADR), is a way to

resolve disputes outside the courts. The dispute will be decided by one
or more persons. Arbitration is often used for the resolution of
commercial disputes. Even prior to incorporation of Section 89 in the
Code of Civil Procedure, 1908. The parties to litigation, with mutual
consent, could take recourse to arbitration as a mode of resolution of
their dispute which was subjudice before a court of law in terms of
the Arbitration and Conciliation Act, 1996 itself. The Arbitration
and Conciliation Act, 1996 however, did not contemplate a situation
as in Section 89 CPC where the Court asks the parties to choose any
ADR mechanism.

In Jagdish Chander v. Ramesh Chander, 2007 (6) SCC 719 it was

held that even though section 89 CPC mandates courts to refer pending
suits to any of the several ADR processes mentioned therein, there
cannot be a reference to arbitration even under section 89 CPC, unless
there is a mutual consent of all parties, for such reference.

The Supreme Court further observed that if there is a disputed

arbitration agreement between the parties then, section 8 (refer
parties to arbitration where there is already an arbitration agreement)
and 11( appointment of arbitrators) of Arbitration and Conciliation Act
might help the parties to go for arbitration and there is no requirement
of section 89 referral.

CONCILATION:

Conciliation is an alternative dispute resolution (ADR) process

whereby the parties to a dispute use a conciliator, who meets with the
parties both separately and together in an attempt to resolve their
differences. Section 89 states that if the dispute is been referred to
Conciliation then, the provisions relating to conciliation shall be
governed by the Arbitration and Conciliation Act. However, Supreme
Court has mandated that if the court decides to refer the dispute to
Conciliation then, the consent of the parties is necessary.

MEDIATION:

Mediation is another mode of alternate dispute resolution in which a

mediator, a neutral person or third party who is impartial to both the
parties, trained in the process of mediation, works with the parties to a
dispute, to bring them to a mutually acceptable agreement. In Salem
Advocate Bar Association Case, the apex court approved the
model mediation rules and asked the High Courts to frame such
rules for their respective jurisdiction. Law Commission of India in
its 238th report on the amendment of section 89 of CPC has
recommended a similar clause. However, Mediation is not
recommended, where there is a question of law or offences involving
moral turpitude and fraud, criminal in nature etc.

LOK ADALAT:

“While Arbitration and Conciliation Act, 1996 is a fairly standard

western approach towards ADR, the Lok Adalat system constituted
under National Legal Services Authority Act, 1987 is a uniquely Indian
approach”. It roughly means “People’s court”. India has had a long
history of resolving disputes through the mediation of village elders.
The system of Lok Adalat’s is an improvement on that. These are
usually presided by retired judge, social activists, or members of legal
profession. It does not have jurisdiction on matters related to non-
compoundable offences. There is no court fee and no rigid procedural
requirement which makes the process very fast. Parties can directly
interact with the judge, which is not possible in regular courts.

ANOMALIES OF SEC 89 of CPC:

Deliberation on Section 89, CPC was initiated in Salem Advocate Bar

Association, Tamil Nadu v. Union of India (2003)The
constitutional validity of the section 89 of CPC was upheld and
the intent behind its inclusion was lauded. Criticism was muted as
S. 89 was a recent insertion at the time. It was opined that the section
had not been very effective as its modalities or qualities were yet to be
determined. So, a committee was set up to draft model rules, and the
apex court recommended the adoption of these rules by the various
High Courts so as to give effect to section 89(2)(d), CPC. In the
subsequent decision of Salem Advocate Bar Association v. Union
of India(2005) the apex court purposively reinterpreted S. 89, CPC to
reduce anomalies. For instance, the words shall and may in S. 89, CPC
and Rules IA-IC, Order X, CPC were read harmoniously.
The subsequent decision in Afcons Infrastructure Ltd v. Cherian
Varkey Construction Co (P) Ltd [“Afcons case”]. is the most
recent landmark judgement on the issue.

The terms “shall formulate the terms of settlement” specified

under Section 89 (1) of the Code, imposes a heavy and unnecessary
burden on the courts. The right manner of interpretation of the Section
89 would be the Court may only direct the parties to refer to
ADR forums and no need to formulate terms of settlement
arises.

CONCLUSION:

Section 89 is an important part of the Code of Civil Procedure and is an

effective method to resolve dispute between parties. The section is
right in its spirit as the objective has been to reduce the burden of the
court. However, the Section suffers from a few anomalies, which act as
a hindrance in delivering justice to the people. Apart from the legal
aspect of the inefficiency of the provision, another major reason for
section failing to fulfil its purpose is the lack of legal knowledge among
the people. Rather than going for Alternate means which are much
cheaper and less time consuming, citizens continue to go for trial
hoping to secure a larger award from the Court. To be more effective
the ADR in the Civil Procedure Code the mentioned loopholes should be
removed. Hence, the provision under Section 89 is right in its essence
but its purpose is defeated due to legal lack of awareness among
individuals.

Facts of the Case

In the Salem Bar Association ,Tamil Nadu v. UOI. AIR 2005 S.C. 3353 The
Honorable Judges presiding over the case were Y.K. Sabharwal, D.M. Dharmadhikari
and Tarun Chatterjee. There were certain amendments made to Code of Civil
Procedure, 1908 by the Amendment Acts of 1999 and 2002 were challenged in this
matter.

Issue in the Case

Whether the amendments made in the Code of Civil Procedure, 1908 by the
Amendment Act of 1999 and 2000 were constitutionally valid?

Judgement
The report is in three parts. Report 1 contains the consideration of the various
grievances relating to amendments to the Code and the recommendations of the
Committee. Report 2 contains the consideration of various points raised in
connection with draft rules for ADR and mediation as envisaged by section 89 of the
Code read with Order X Rule 1A, 1B and 1C. Report 3 contains a conceptual appraisal
of case management.

Report II
The amendment brought into the code related to the Alternative Dispute Resolution
Mechanism (Amendment 6) is provided in Report 2.
89. Settlement of disputes outside the Court --
(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 given 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.

(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.

1A. Direction of the court to opt for any one mode of alternative dispute resolution.--
After recording the admissions and denials, the Court shall direct the parties to the
suit to opt either mode of the settlement outside the Court as specified in Sub-
section (1) of section 89. On the option of the parties, the Court shall fix the date of
appearance before such forum or authority as may be opted by the parties.

1B. Appearance before the conciliatory forum or authority--Where a suit is referred

under Rule 1A, the parties shall appear before such forum or authority for
conciliation of the suit.

1C. Appearance before the Court consequent to the failure of efforts of conciliation--
Where a suit is referred under Rule 1A and the presiding officer of conciliation forum
or authority is satisfied that it would not be proper in the interest of justice to
proceed with the matter further, then, it shall refer the matter again to the Court and
direct the parties to appear before the Court on the date fixed by it."

USE OF WORD ‘MAY’ & ‘SHALL’

Some doubt as to a possible conflict has been expressed in view of use of the word
'may' in section 89 when it stipulates that 'the Court may reformulate the terms of a
possible settlement and refer the same and use of the word 'shall' in Order X, Rule
1A when it states that 'the Court shall direct the parties to the suit to opt either
mode of settlements outside the Court as specified in Sub-section (1) of section
89'.As can be seen from section 89, its first part uses the word 'shall' when it
stipulates that the 'court shall formulate terms of settlement. The use of the word
'may' in later part of section 89 only relates to the aspect of reformulating the terms
of a possible settlement.

The intention of the legislature behind enacting section 89 is that where it

appears to the Court that there exists element of a settlement which may be
acceptable to the parties, they, at the instance of the court, shall be made to apply
their mind so as to opt for one or the other of the four ADR methods mentioned in
the Section and if the parties do not agree, the court shall refer them to one or
other of the said modes.