Code of Civil Procedure, 1908:

 s. 89 - Object of - Held: Is to try for settlement between the parties by resorting to appropriate ADR process before the case proceeds to trial.

s. 89 - Anomalies in s. 89 and its correct interpretation - Held: The first anomaly is the mixing up of the definitions of 'mediation' and judicial settlement' under clauses (c) and (d) of sub-section (2) of s. 89 - The second anomaly is that subsection (1) of s. 89 imports the final stage of conciliation referred to in s. 73( 1) of the Arbitration and Conciliation Act, 1996 into the pre-ADR reference stage under s. 89 - The clauses (c) and (d) of sub-section (2) of s. 89 would make perfect sense by interchanging the word "mediation" in clause (d) with the words 'judicial settlement" in clause (c) - As regards second anomaly, it is not possible for the courts to formulate or re-formulate the terms of a possible settlement at a preliminary hearing to decide whether a case should be referred to an ADR process and, if so, which ADR process - This anomaly was diluted in Salem Bar-II by equating "terms of settlement" to a "summary of dispute" - Alternative disputes resolution (ADR) processes - Interpretation of statutes. 

s. 89 - Reference to ADR process under - Whether mandatory - Held: Having a hearing after completion of pleadings, to consider recourse to ADR process u/s. 89 is mandatory - But actual reference to an ADR process in all cases is not mandatory - Where the case falls under an excluded category. there need not be reference to ADR process - In all other case reference to ADR process is a must.

s. 89 - ADR process - Governing statutes - Held: s 89 8 makes it clear that two of the ADR processes, arbitration and conciliation, would be governed by the provisions of the Arbitration and Conciliation Act. 1996 and two other ADR processes, Lok Adalat Settlement and Mediation would be governed by the. Legal Services Authorities Act, 1987 - Judicial settlement is not governed by any enactment and the court has to follow such procedure as may be prescribed (by appropriate rules) - Arbitration and Conciliation Act, 1996 - Legal Services Authorities Act, 1987.

s.89, 0.10, r.1A - Procedure to be followed by courts in implementing s. 89 and Order 10, r. 1 A - Guidelines laid down.

 s. 89 and 0. 10, r. 1 A - Distinction between - Held: Rule 1 A of 0. 10 requires the court to give the option to the parties, to choose any of the ADR processes - This would mean a joint option or consensus about the choice of the ADR process - On the other hand, s. 89 vests the choice of reference to the court.

s. 89 - Consent of the parties for reference to ADR processes - Held. For referring matter to arbitration or to conciliation, consent of all the parties to the suit is required - Lok Adalat, Mediation and Judicial Settlement do not require consent of the parties.

Alternative disputes resolution (ADR) processes: Whether the settlement in an ADR process is binding in itself - Held: When the court refers the matter to arbitration under s. 89 of the Code, the case goes out of the stream of the court and becomes an independent proceeding before the arbitral tribunal - Arbitration award is binding on the parties and is executable/enforceable as if a decree of a court - The other four ADR processes are non-adjudicatory and the case does not go out of the stream of the court when a reference is made to such a non-adjudicatory ADR forum - As the court continues to retain control and jurisdiction over the cases which it refers to conciliations, or Lok Adalats, the settlement agreement in conciliation or the Lok Adalat award will have to be placed before the court for recording it and disposal in its terms - Whenever such settlements reached before non-adjudicatory ADR Fora are placed before the court, the court should apply the principles of Order 23 Rule 3, CPC and make a decree/order in terms of the settlement, in regard to the subject matter of the suit/proceeding - In regard to the matters/disputes which are not the subject matter of the suit! proceedings, the court will have to direct that the settlement shall be governed by s. 74 of AC Act (in respect of conciliation settlements) or s. 21 of the Legal Services Authorities Act, 1987 (in respect of settlements by a Lok Adalat or a Mediator) - Only then such settlements would be effective - Arbitration and Conciliation Act, 1996 - s.74 - Legal Services Authorities Act, 1987 - s.21.

The first respondent filed a recovery suit against the appellants. In the said suit, an order of attachment was made. Thereafter, the first respondent filed an application under Section 89, CPC praying that the court may formulate the terms of settlement and refer the matter to arbitration. The appellants filed a counter to the application contending that they were not agreeable for referring the matter to arbitration or any of the other ADR processes under Section 89, CPC. Meanwhile, the High Court allowed the appeal filed by the appellant against the order of attachment. Thereafter, the trial court allowed the application under Section 89 and formulated sixteen issues and referred the matter to arbitration. The High court dismissed the revision petition holding that the apparent tenor of Section 89, CPC permitted the Court, in appropriate cases to refer even the unwilling parties to arbitration and the concept of pre-existing arbitration agreement which was necessary for reference to arbitration under the Arbitration and Conciliation Act, 1996, was inapplicable to references under Section 89, CPC. The order of High Court was under challenge in the instant appeal.