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Alternate Dispute Resolution under the Code of Civil Procedure

By Muizz Drabu & Aman Chandola, GNLU

Editor’s Note: Section 89 of the Code of Civil Procedure,  which
gives the Court the power to refer the dispute for settlement or
conciliation was introduced with a purpose of an amicable, peaceful
and mutual settlement between parties without the intervention of
the court. However, the issue is that even after more than a decade
of its implementation, the provision provided for ADR under Section
89 suffers from many anomalies. The constitutional validity of this
section was upheld but the frequency with which ADR is utilized for
resolution of disputes remains minute, which arises due to lack of
knowledge about the same or on account of the reluctance of the
parties. 
The Law Commission in its 129th  Report  advocated the need for
amicable settlement of disputes between parties and the Malimath
Committee  recommended to make it mandatory for courts to refer
disputes, after their issues having been framed by courts, for
resolution through alternate means rather than litigation/trials.  The
alternate forums accorded under Section 89 are economically more
viable as there are relatively lesser amount of transaction costs and
thus, there is a need to make people aware about the same.
However, the author believes that the provision under Section 89 is
right in its essence but its purpose is defeated due to legal
intricacies, draftsmen’s error and lack of awareness among
individuals.
INTRODUCTION

In every civilized society there are two sets of laws that govern the
lives of citizens– (i) substantive laws and (ii) procedural laws. While
the substantive laws determine the rights and obligations of
citizens, procedural laws provide for the framework for enforcement
of the same.[i] Despite the fact that substantive laws are
comparatively more important, but the efficacy of substantive laws
in contingent upon the qualitative deliverance of procedural laws.
[ii] The latter needs to be efficient, simple, expeditious and
inexpensive, lest the substantive provisions fail in fulfillment of their
purpose and object.
Throughout the history of civilized states, it has been determined
that for proper dispensation of justice the procedural and
substantive law have to work hand in hand. The same cannot be
held to contradict each other, as one provides the manner of
realization of the objective of the other. As such, both streams of
law work in consonance with each other, wherein neither exceeds
the scope, which is determined to be in the other’s field.

The Code of Civil Procedure, 1908 (hereinafter  the Code) is a

consolidated document that is the primary procedural law relating
to all civil disputes in India. The Code is a collection of all the laws
that relate to the procedure adopted by civil courts and parties
appearing thereunder. After three different formulations that
governed the British colony of India in the late 19 th century, the
Code in its present form was formally brought into force in 1908.

Over the years a number of amendments have been passed to

ensure the Code is more efficient and justice oriented but still a
judicial lag exists in India. The number of cases keep on rising day
by day while the adjudicators are limited. In light of the same, a
provision is provided under Section 89 of the Code which calls for
settlement of disputes outside courts.

The long drawn nature of litigation which ironically subverts the

ends of justice due to delay makes it viable for parties to resort to
alternate dispute resolution would indeed curb delays and the
limitations of the traditional system, such as limited number of
judges, the voluminous number of cases etc.[iii]
The provision under Section 89 is an attempt to bring about the
resolution of disputes between parties, minimize costs and reduce
the burden of the courts. It is provided for with the sole objective of
blending judicial and non-judicial dispute resolution mechanism and
bringing alternate dispute mechanism to the center of the Indian
Judicial System[iv]. The long drawn process of litigation, the costs
incurred by both parties for the same have and limited number of
adjudicators have made Alternate Dispute Resolution an important
aspect of the Judicial system to ensure swifter and speedier justice.
The Researchers in this research note make a humble attempt to
understand the provision for Settlement of Disputes outside Courts
as provided under Section 89 of the Civil Procedure Code. The same
shall be done by, firstly, briefly overviewing the history of the
section, the recommendations of various law commissions with
respect to the same, the relation of the section with other statutes
of India and the position of the provision as it stands today.

HISTORY AND BACKGROUND OF THE SECTION

Section 89 of the Code of Civil procedure was introduced with a

purpose of amicable, peaceful and mutual settlement between
parties without intervention of the court. In countries all of the
world, especially the developed few, most of the cases  (over 90 per
cent) are settled out of court.  The case/ dispute between parties
shall go to trial only when there is a failure  to reach a resolution.
Section 89 of the Code of Civil Procedure States that:

(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 give them to the parties for
their observations and after receiving the observation 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 had been referred-
(a) for arbitration or conciliation, the provisions of the Arbitration
and Conciliation Act, 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 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 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.]

Section 89 came into being in its current form on account of the

enforcement of the CPC (Amendment) Act, 1999 with effect from
1/7/2002. At the commencement of the Code, a provision was
provided for Alternate Dispute Resolution. However, the same was
repealed by the enactment of the Arbitration Act ( Act 10 of 1940)
under Section 49 and Sch. 10. The old provision had reference only
to arbitration and it procedure under the Second Schedule of the
Code. It was believed after the enactment of the Arbitration Act,
1940, the law had been consolidated and there was no need of Sec
89.

However, the Section was revived with new alternatives and not
only restricted to arbitration. A new Section 89 came to be
incorporated in the Code by Section 7 of the  CPC Amendment Act,
1999 to resolve disputes without going to trial and pursuant to the
recommendations of Law Commission of India and Malimath
Committee report.[v]
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 cover the ambit of law related to Alternate
Dispute resolution.  The clauses under Order X are specified to
ensure proper exercise of jurisdiction by the court. Sub-Section (1)
refers to the different mediums for alternate resolution and sub-
section (2) refers to varous Acts in relation to the mentioned
alternate resolutions.

The changes brought in by the CPC Amendment Act, 1999 have no

retrospective effect and shall not affect any suit in which issues
have been settled before commencement of Section 7 of CPC
Amendment Act, 1999 and shall be dealt as if Section 7 and 20 of
CPC Amendment Act never came into force.
The decision of the forums specified under Section 89 shall be as
effective, having same binding effect, as court orders/decrees and
arrived at a relatively cheaper cost and within a short span of time.
[vi]  The rules inserted under Order X provide for when court may
direct to take recourse to alternate means to resolve disputes, the
duty of parties to appear before such forums and the responsibility
of the presiding officer to act in interest of justice and return the
suit if better suited for the court.
MALIMATH COMMITTEE REPORT AND THE 129TH LAW
COMMISSION REPORT

The enormous arrears of cases, multiple appeals/revisions,

procedural shackles and the adversarial system, all result in
creating a judicial lag of sorts and an effective remedy against the
same is settlement through alternate forums. The same was brought
to light in the Malimath Committee and the 129 th Law Commission
report.
The Law Commission in its 129 th Report[vii] advocated the need for
amicable settlement of disputes between parties and the Malimath
Committee[viii] recommended to make it mandatory for courts to
refer disputes, after their issues having been framed by courts, for
resolution through alternate means rather than litigation/trials.
Malimath committee called for a “legal sanction to a machinery for
resolution of disputes and resort thereto is compulsory”[ix]  which
the sole objective of reducing he large influx of commercial
litigation in courts of civil nature, number of appeals to higher
courts lessened and the efficiency of courts revitalized by such
implementation.
The Law Commission recommended the establishment of
Conciliation Courts all over the country to with the authority to
initiate conciliation proceedings in all cases at all levels.  The aims
of both these committees were to further the cause of justice and
ensure efficient working of the judicial system.  The Commission
called for a replication of the Himachal Pradesh High Court’s
Conciliatory practices[x] before, during and post trial for litigants
which majorly covered issues related to partition, inheritance, wills
etc.
The positive results from the experiment in Himachal Pradesh paved
the way for revival of alternate forums. Furthermore, it may be
stated that it is the duty of the judges to assit parties in arriving at
settlements in certin suits, as has been elucidated under Rule 5-B of
Order XXVII and Rule XXIII-A of the Code of Civil Procedure. The
conciliation process casts a duty on judges to take appropriate
steps, where there is scope of settlement, to bring about
reconciliation in certain suits and to come up with a conclusive
resolution on an expeditious basis.
The aim and objective of reviving Section 89, as stated in the
Statement and Objects of the Bill  Code of Civil Procedure
(Amendment) Bill initiated in 1997, was to ensure effective
implementation of Conciliation schemes, following 
recommendations of the 129  Law Commission and make it
th

obligatory for courts to refer to disputes to alternate forums.

Initiation of suits in courts shall be the last resort of parties if all
other alternatives fail.. The resuscitated Section 89 incorporated
Conciliation, Judicial Settlement including Lok Adalats and
Mediation in addition to Arbitration.
ANALYSIS OF SECTION 89

Delay, one of the major inadequacies present in our legal system, is

said to have been overcome by ADR. ADR was formulated with a
purpose of reducing the burden of the burdened system and render
expeditious justice.[xi] Section 89 was introduced to empower
different forums and was more practically applicable than any other
option of reducing judicial lag, such as increasing number of judges
or infrastructure.
The language of the Section clearly states that there are 4 alternate
resolution forums, including arbitration and all the 4 forums are
treated identically and as such there is no distinction mentioned in
the Section. In arbitration, the decision binding on parties is taking
by a private judge (Arbitrator) while in the other 3 mediums party
autonomy in final decision is still maintained. Amongst the five
specified alternate forums, ( arbitration, conciliation,  judicial
settlement, Lok Adalatas and mediation), the most sought after is
arbitration while at the all five are at the same footing in the eyes of
the law.  Arbitration is  a process only available at the consent of
the parties.

Arbitration or conciliation can only be on account of the consent of

parties to a dispute and it is not within the powers of the court to
refer disputes for arbitration in absence of consent of parties .
[xii]  Moreover, notwithstanding the fact that a government is one of
the parties to arbitration agreement, a court functions in
accordance with the jurisdiction conferred in on them.[xiii] Judicial
settlement, as under Sec 89(1)(c) and Sec 89 (2) (c),  could only be
in terms of Legal Services Authority Act.
Lok Adalats derive power from the aforementioned Act and the
power to issue an award by court is only on account of consent of
parties towards the same. The Lok Adalats lacks authority to
adjudicate on any aspect and its awards are not binding, as
mentioned under Section 19 of LSLA.

To proceed towards alternate means of resolution, the court must

identify that there exist scope of resolution/ settlement and  the
same may be acceptable to parties.  Court is given powers to
surpass the decision of litigants under Section 89 but the same
must be invoked only in those cases where there is scope for
settlement and the parties to the dispute are open to the idea of
settlement. The incorporation of the word ‘ may be acceptable to
parties”   in the Section is with a purpose to take all
essentials/stakeholders into consideration.
The term “may”   in Section 89 governs aspect of reformulation of
the terms of a possible settlement and its reference to one of AR
methods.[xiv]The court must also consider the eccentric and
peculiar nature of the dispute and nature of the parties  to the
dispute before proceeding towards alternate means of resolution. 
The Court must guide the litigants towards which course or means
to resolve a dispute, taking into consideration the legal acumen and
knowledge  of the judges and the appropriate forum for the dispute,
only after the above stated element are taken into consideration.
A senseless recourse to Section 89 may turn out to be counter
productive and add to further delays in implementation of justice in
the legal system. Courts, may take a recourse to ADR as a statutory
duty, in case of a number of cases arising out of matrimonial
dispute[xv] or in a suit for partition within the family, to separate
issues to be dealt by ADR’s and those adjudicated upon by Courts.
[xvi]
The legal position with regard to ADR practices was cleared in the
case of Afcons Infrastructure Ltd.  v. Cherian Varkey Consturction
Co. (P) Ltd.[xvii] Arbitration was referred to as a means of ADR is
undertaken on account  a prior agreement between parties to
resolve disputes by arbitration or by filing an application/joint memo
before the court, the latter occurs in the case of no arbitration
agreement before hand. The award of the Arbitrator, the presiding
officer, is binding as a decree of the court[xviii] or any settlement
arrived at by parties during arbitration proceedings shall also have
the same effect.[xix]
In cases of Arbitration, the cases is moved out of the court 
(Arbitration and Conciliation Act, 1996 will be applicable) but
resorting to conciliation or judicial settlement or mediation won’t
result in the same as courts retain control/jurisdiction over such
matters as the settlement agreement in conciliation or the Lok
Adalat award will have to be placed before the court recording it
and disposal in its terms[xx].When matter is settled through
conciliation[xxi] or Lok Adalats[xxii], both are as effective as a
decree of a court as has been specified in the relevant statutes.

The controversy under Section 89 lies in the distinction between

mediation and conciliation. Many referring to the former as a case in
which the conciliator is a trained professional mediating the
dispute[xxiii] and the latter is a case in which a third party,
inexperienced and not trained, insists on parties to arrive at a
settlement[xxiv].  Such a distinction may be incorrect. However,
these are one of the few anomalies of this section which shall be
discussed later.  Judicial Settlement as defined under Black Law’s
Dictionary  is “the settlement of a civil case with the help of a Judge
who is not assigned to adjudicate the dispute.”[xxv] In India, it may
be deemed to a negotiated deal arrived at by the assistance of the
court overlooking the matter or by reference to another judge.
RELOOK AT SECTION 89- ANOMALIES [xxvi]
Even after more than a decade of its implementation, the provision
provided for ADR under Section 89 suffers from many anomalies.
The constitutional validity of this section was upheld but the
frequency with which ADR is utilized for resolution of disputes
remains minute, which arises due to lack of knowledge about the
same or on account of the reluctance of the parties.

The Section in itself suffers from many anomalies which need to be

looked at to ensure the objective of the Section is achieved and
there is swifter and speedier form of justice. The drafting of the
Section  89 was said to be done in a haphazard manner and the
interpretation of the Section was observed to be, in
the Afcons’  case, “ A trial judge’s nightmare.” The wording of the
Section 73(1) of the Arbitration and Conciliation Act is borrowed
under this section defeating the objective with which the the
section was revived as was observed by the Court in
the Afcons case.
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 formulation and reformulation of the
issues to be dealt with by the courts and specifying the method to
be adopted may leave the provision meaningless and out of place at
the pre-ADR stage.[xxvii]  Formulation of terms of settlement for
reference to ADR forums especially Arbitration would make the
appointment of the Arbitrator hollow as the entire dispute is meant
to be transferred to the Arbitrator and not the terms of settlement.
It is a redundant process which further burdens the court and
strikes at the foundation of the ADR system. The right manner of
interpretation of the Section 89 would be if it is read with Order X
Rule 1-A where the Court may only direct the parties to refer to ADR
forums and no need to formulate terms of settlement arises.

Another error in drafting as observed by the Court in

the  Afcons  case was intermingling of  definitions of ‘mediation’ and
‘judicial settlement’ . “Mediation” should  be replaced by “Judicial
settlement” in clause (c) of section 89 (2) and the latter replaced by
the former in clause (d).[xxviii] A agreement/ negotiated settlement
by court being termed as  Mediation is a misnomer and reference to
another forum to arrive at a compromise should not be termed as a
“judicial settlement”. The court observed these as a draftsmen’s
error and the changes with regard to the same shall be kept in place
till the legislature corrects the mistakes, so that Section 89 is not
rendered meaningless and infructuous.[xxix]
Justice R.V Raveendran holds the view that Section 89 of the Code
was drafted in a hurry. It is not happily worded.[xxx] Supreme Court
in Salem Advocate Bar Association, Tamil Nadu vs. Union of
India[xxxi] was of the view that there were some “creases” in
Section 89 but it did not refer to anomalies. It felt that the creases
could be ironed out by formulating appropriate rules and regulations
to implement the section. In his article, the Hon’ble Justice puts
forward some additional anomalies associated with Section 89.
Another anomaly occurs while making Mediation Rules under
Section 82(2)(d) of the Code. Making Mediation Rules under Section
82(2)(d) is clearly applicable to conciliation by a third party
(individual or institution),however  Section 89(2)(d) is aimed at
court-stimulated settlement.  This leads to another anomaly wherein
when mediator’s intervention leads to a settlement and such
settlement is also authenticated by the mediator, still it is not
regarded as a decree. Notwithstanding, when the same mediator is
called as a conciliator, the settlement reached through him is
regarded as a decree.

Converting mandatory requirement into a directory provision also

leads to an anomaly. Section 89(1) states that “where it appears to
the court that there exists elements of a settlement which may be
acceptable to parties”, this would necessarily mean that the Court
will refer the matter to ADR processes only when it finds elements
of settlement in the dispute and not otherwise. This however
converts what was expected to be an obligatory provision as a
discretionary provision.

Another such example of anomaly occurs while importing final

process of conciliation into pre-ADR reference. Section 89 of the
Civil Procedure Code necessitates the court to formulate the terms
of settlement and then provide them to parties to reflect upon the
same and then again reformulate the terms of a potential settlement
and then discuss the same for ADR processes. Many regard this as
unnecessary and the conciliator or the mediator or members of the
Lok Adalat should undertake such sort of a task when reference has
been made to them respectively. By making the Court do so, the
object of Section 89 is lost and it would most definitely obstruct a
freely negotiated settlement.

However, the most consequential anomaly is related to Court fees.

The Code of Civil Procedure (Amendment) Act, 1999 by which
Section 89 was amended into the Code also amended a new Section
16 in the Court Fees Act, 1870 which states the following:

Refund of fee: Where the court refers the parties to the suit to any
one of the mode of settlement of dispute referred to in Section 89 of
the Code of Civil Procedure, 1908 the plaintiff shall be entitled to a
certificate from the court authorizing him to receive back from the
Collector, the full amount of the fee paid in respect of such plaint.

However, this act is applied only in certain States. Other States

have their own Acts governing court fees. There may also be some
States who have yet not amended a corresponding provision for
refund of court fees.

The main problem arise that when a dispute could not be resolved
by ADR processes and is brought back to the same Court, and there
has already been refund of the Court fees before reference is made
to ADR. There is no provision in the said circumstance to impose
fresh Court fees and this creates a situation where the suit
becomes free which is not possible.

ARBITRATION AND CONCILIATION ACT, 1996 AND SECTION 89

There are various modes for the settlement of disputes in India. One
such mode is the Alternative Dispute Resolution modes which is
summarized and formulated in terms of Section 89 of the Civil
Procedure Code. Alternative Dispute Resolution in itself involves
Arbitration, Conciliation and mediation. Section 89(2) provides that
where a dispute has been referred for Arbitration or Conciliation, the
provisions of the Arbitration and Conciliation Act, 1996 would apply
and thus, it would imply that the proceedings of such a matter for
Arbitration and Conciliation took place under the provisions of the
1996 Act. The power of the Court to refer the parties to arbitration
is dealt by Section 8 of the 1996 Act. This however is subjected to
the presence of an arbitration agreement between the parties
involved.

A point of difference between the Arbitration and conciliation Act

and Section 89 of the code is that under the Act, the parties would
referred to arbitration whereas under the Code, the court actually
asks the parties to choose one or other ADRs including Arbitration
and parties may choose accordingly. Thus, Section 89 cannot be
resorted to for interpreting Section 8, Arbitration and Conciliation
Act, 1996 as it stand son a different footing and it would be
applicable even in case where there is arbitration agreement.[xxxii]
The High Court is empowered to make rules to all proceedings
before the Court under the provisions of the Arbitration and
Conciliation Act, 1996 under Section 82. These rules however have
to be consistent with the said Act. The same power is conferred
upon the Central Government under Section 84 of the Act. Contrary
to this, when parties agree to go for arbitration under section 89 of
the code, the option of the parties to choose arbitration and the
procedure for the same is not contemplated by the Arbitration and
Conciliation Act, 1996 and Section 82 and 84 has no application
under these circumstances.

Arbitration and Conciliation Act, 1996 would apply to proceedings

only after the stage of reference and not before the stage of
reference when options are given under Section 89 of the code, if
reference to arbitration is made by the parties under Section 89.
Drawing analogy on the same, it will be only after the stage of
reference to conciliation that the 1996 Act pertaining to conciliation
would apply.

A similar analogy can be drawn  with respect to the Legal Services

Authority Act, 1987 or the rules formed by the State government
cannot act as impairment upon the High Court making rules under
Part X of the Code incorporating within itself the option that Lok
Adalats can also be made one the modes provided under Section 89.
Similar to the Arbitration and Conciliation Act, 1996, the Legal
services Authority Act, 1987 also does not provide to the parties the
option to choose one of the four ADR methods as mentioned in
Section 89.

Section  89 makes applicable 1996 Act and 1987 Act from the stage
after exercise of options and making of reference.[xxxiii] The power
under Section 89(1)(a) and 89(2)(a) to refer the parties for
arbitration would and must necessarily include, imply and inhere in
it the power and jurisdiction to appoint the Arbitrator also.
[xxxiv]When the Arbitration and Conciliation Act which is a special
law provides for a forum to adjudication, Section 89 Code of Civil
Procedure cannot be resorted to refer a dispute for arbitration
unless there is mutual consent of all parties or arbitration
agreement.[xxxv] It was also held by a SC judgement that Section 5
of the Act does not debar a revision being filed against the order
passed by a civil court in an appeal under Section 37 of the act.
[xxxvi]
As aforementioned, Section 89 of the Civil procedure Code cannot
be used to interpret and understand the provisions under Section 8
of the Arbitration and Conciliation Act,1996. Still, for this purpose,
the court has to apply its mind to the condition contemplated under
Section 89 of the Code and even if the application under Section 8 is
rejected, the Court is bound to follow the procedure as laid down
under the said section.[xxxvii]
NO COMPULSION UNDER SECTION 89

Section 89 of the Code of Civil Procedure does not create an

obligation for the Court to necessarily conduct arbitration, but
merely permits the Court to refer the dispute to arbitration or
conciliation etc., where it is satisfied with respect to a reference to
the dispute in a pending suit that there is a possibility of settlement
of the same by way of arbitration or conciliation.

However, The Government of India or any party can create a

compulsion or obligation on the Civil Court to necessarily arbitrate
the matter between the parties depending upon the nature of the
agreement entered by the parties. The fact that Government is one
of the parties to the arbitration agreement makes no difference.
[xxxviii] The mandate under Section 89 ought to be made to settle
the matter and every endeavor should be made for amicable
settlement.[xxxix]
It appears from Section 89(1) of the code of Civil Procedure that a
duty is cast upon the court to refer the dispute either by way of
arbitration, conciliation, judicial settlement including settlement
through Lok Adalats or mediation if it appears that there are
elements of the settlement.[xl] The constitutional validity of Section
89 of the Code was upheld by the Supreme Court of India in   Salem
Advocate Bar Association, Tamil Nadu  vs. Union of India.[xli] All
endeavours shall be made by the Court at the earliest point of time
to settle the dispute under Section 89 of the Code through any of
the mechanisms provided under it.[xlii] However, the Court cannot
compel a party to surrender to ADR if any of the part did not settle
for settlement.
Under the guise of this provision, a party cannot be allowed to
prolong the litigation when the trail is in progress and more
particularly when it is ready for disposal.[xliii] The Parliament has
not conferred the jurisdiction on any personal designate but on
regular Courts properly constituted which must be held or assumed
to be held by competent trained officials. When a reference has
been made for arbitration under Section 89(1) of the Code, it is to be
kept in mind that it would thus bring the suit to a termination before
that Court and such decision will certainly be amenable to
challenge in revision even under Section 115 of the Code.
[xliv] However, the above mentioned situation will occur only if
reasons are given and such reasons are considered by Superior
Courts discharging revisional and supervisory jurisdiction.[xlv]
APPLICABILITY OF PROVISIONS OF LOK ADALAT ACT

Section 89(2)(b) of the Code of Civil Procedure also provides that

where a dispute has been referred to the Lok Adalat, the Court shall
refer the same to the Lok Adalat in accordance with the provisions
of sub-section 20 of the Legal Services Authority Act, 1987 and all
other provisions of that Act shall apply in respect of the dispute so
referred to Lok Adalat.[xlvi] Parties are entitled to refunding of full
Court fee where the parties settled the matter without the
intervention of the Court.[xlvii]
The Lok Adalats while resolving the disputes are guided by the
principles of justice, equity and fair play,  and aim to settle the
dispute by explaining the pros and cons to the parties of their
respective claims.[xlviii]Similar to the amendments made by the
State Government in Central Court Fee Act by virtue of the
amendments to the code, the State Government can also consider
making similar amendments to State Court Fee Legislations.[xlix]
238TH LAW COMMISSION REPORT

The 238th Law Commission Report advocated for the same changes
as were specified in Afcons  case and called for restructuring of the
Section on the contours set out by the Supreme Court with certain
reservations. The Commission stated it would be unsuitable to deem
a Lok Adalat as a mediator and treating the Lok Adalat award as a
mere agreement arrived at on account of the Mediato and stated
that an appropriate course would be for the Mediator to submit the
terms of settlement reached as a result of mediation to the court so
that the court, after due scrutiny, can pass a decree in accordance
with the compromise arrived at between the parties.[l]
The Report was deemed it be unwise to refer the award of Lok
Adalat arrived at through conciliation to be referred to a Court,
which would be empowered to pass a decree in consonance with
the compromise arrived at. Such sort of an implementation, as
prescribed under paragraph 38 of the Afcons case, would be in
contravention with Section 21 of the LSA Act and further review by
courts is considered unwarranted. Such sort of a recommendation
would even hamper the conciliatory practices and go against the
validity of settlement agreement as provided for under Section 76
and 30 of the Arbtration and Conciliation Act.  The objective of
Section 89 shall be served if the further step of passing a
decree with regard to Alternate forums is not undertaken.
The Report called for a revamp of the current section to incorporate
certain changes as had been highlighted in the Afcons  case such as
court shall record its opinion in favor of ADR before setting the
issues to be dealt with in order to reduce the burden of the court.
Copies of settlement agreement need be provided to the courts by
Conciliators to rectify any mistakes or errors in the same with the
consent of parties. (Recommendations 6.2)
The more important recommendation was with respect to rules
under Order X, as the committee recommended the removal of Rule
1B of Order X which calls for attendance of parties before alternate
forums. (Recommendation 6.3)

The Law Commission dealt with the problem of court fees as the
literal interpretation of Section 16 of the Court-fees Act may render
the trial of a suit free of cost. The said section, introduced along
with section 89 of the Code by the same Act, provides for court fees
to be refunded to the plaintiff when recourse to alternate forums is
avoided. The problem lies in the fact that, there may be no
settlement or resolution by alternate forums and the matter may be
reverted back to the court and the suit may move on to trial
proceedings without any fees or cost incurred by the  plaintiff.

Such a provision is also in conflict section 21 of the Legal Services

Authorities Act, 1987 as it provides for court fees being refunded
only when a settlement is arrived at between parties.  Thus, parties
while initiating proceedings, to avoid costs, could abuse the
provision under Section 16 and a need to make this section in
consonance with other such provisions such as Section 20 of the
LSLA act is paramount. The court fees must only be refunded when
the matter has been resolved outside court through alternate
forums prescribed under Section 89. It may be draftsmen’s error
which has caused such a anomaly to arise but there is a need to
alter the same.( Recommendation 6.4.3)[li]
CRITIQUE AND CONCLUSION

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

an effective method to resolve dispute between parties where there
is scope for the same. The section is right in its spirit as the
objective has been to reduce the burden of the court, ensure a
compromise is arrived at between parties and move towards
speedier/ effective method of administrating justice. Alternate
Dispute Resoltuion is a means of increasing access to justice
without decreasing the quality of justice.[lii]
However, as has been highlighted in the entire paper, the Section
suffers from many anomalies, which have reduced its efficiency and
act as a hindrance in delivering justice to the people. The
recommendations of the 238th Law Commission report strike at the
heart of the matter and there is a need for amendments specified by
the Report. 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 more
cheaper and les time consuming, citizens continue to go for trial
hoping to secure a larger award from the Court. The alternate
forums accorded under Section 89 are economically more viable as
there are relatively lesser amount of transaction costs and thus,
there is a need to make people aware about the same. Hence, the
provision under Section 89 is right in its essence but its purpose is
defeated due to legal intricacies, draftsmen’s error and lack of
awareness among individuals.