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Scope and Procedure of Section 89 CPC: (M/S Afcons Infra. Ltd. Vs. M/S Cherian)

Scope and Procedure

of Section 89 CPC:

(M/S Afcons Infra. Ltd. Vs. M/S Cherian)


The ADR mechanism does not evolve a short time ago in India. It is practiced since the human kind believed in resolving disputes in India. However, the practice is still not immaterialized, it is still a most powerful and efficient tool in the hands of civil courts in the form of section 89 of the Code of Civil Procedure. The provision was enacted to enable courts to opt for ADR process for resolving disputes. Nonetheless, the language used by the legislators was ambiguous as to the scope and procedure of the provision. The apex shuttered the ambiguity and emancipated the issue in M/S Afcons Infra. Ltd. Vs. M/S Cherian.

Ambiguity in Section 89 of CPC

  • The first anomaly is the mixing of the definitions of ‘judicial settlement’ and ‘mediation’ under clauses (c) and (d) of section 89(2) respectively. The judicial compromise under clause (d) cannot be treated as a ‘mediation’ or a reference made under clause (c) cannot be described as ‘judicial settlement’. Therefore, if the terms ‘mediation’ and ‘judicial settlement’ are interchanged, then the said clauses will make perfect sense.
  • The second anomaly lies under section 89 clause 1. it requires courts to formulate the terms of settlement and then give them to the parties for observation and then reformulate the terms and refer the dispute to the ADR process. If formulating terms of settlement is given to the courts then it will defeat the purpose of section 89. The present court observed that, after the submission of pleadings and written statement, the courts will have recourse to section 89 and prepare only the summary of the case. The ‘terms of settlement’ may be equated as ‘summary of disputes’.

Whether reference to ADR process is mandatory

Section 89 starts with “where it appears to the court” shows that the court has to form an opinion. The courts invariably refer cases to ADR process except in certain recognized cases.

  • List of cases cannot be referred for ADR process
  • Representative suit under order 1 rule 8, CPC involving public interest.
  • Disputes relating to election to public offices.
  • Cases involving grant of authority by the courts.
  • Cases involving serious allegations of fraud, forgery, coercion, fabrication and impersonation.
  • Cases requiring protection of courts.
  • List of cases can be referred to ADR process
  • All cases relating to trade, commerce, contract, tortious liability and consumer disputes.
  • All cases arising from strained or soured relationships.
  • Cases where continuation of pre existing relationship is required in spite of disputes.

Which of the ADR process require mutual consent of the parties?

In the case of Arbitration, pre- existing arbitration agreement is necessary. However, if both the parties file a joint memo or application in the courts showing their consent then it can be considered equivalent to arbitration agreement. Nevertheless, if there is no such agreement the court has no power to refer because the award given by an arbitrator is binding on the parties. Similarly, in conciliation consent of parties is required. However, the court can refer to mediation, judicial settlement or Lok Adalat because the parties can again recourse to the court if settlement is not acceptable.

Is Settlement in ADR binding?

As discussed above, the arbitration is a adjudicatory process where the award becomes binding. However, the settlements in conciliation, mediation, Lok Adalat and Judicial settlements are non- adjudicatory and are different forms of negotiation. So, they are not binding on the parties and they can still recourse to the courts.

Procedure under Section 89 to be followed by the courts

  • After pleadings are complete, the court will acquaint itself with facts of the case
  • The court should first consider the category of the case, if it is not fit for ADR process, then court will record reasons in writing.
  • If case is fit for ADR process, the court shall explain the five ADR processes
  • It should be ascertained whether parties willing for arbitration or conciliation. The court will inform parties that the award by arbitrator is binding
  • If parties are agreeable on any other ADR process then court will refer them to any one of them.
  • If reference on ADR fails, then court will continue with the case.

By all counts, the top court has ascertained with all the perplexities of section 89 of CPC and made the sturdy tool functional to facilitate the courts

  • Scope of section 89 CPC
  • Procedure under Section 89 CPC
  • Recognition of cases for ADR process by courts

BY : Rakhi

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