Section 89 CPC: Settlement of Disputes Outside the Court

Section 89 of the Code of Civil Procedure, 1908 provides the statutory framework for referring suitable civil disputes to settlement mechanisms outside the ordinary trial process. The currently operative provision covers arbitration, conciliation, judicial settlement including Lok Adalat, and mediation.

Current central law: The existing Section 89 CPC continues to operate. It was inserted by the Code of Civil Procedure (Amendment) Act, 1999 and came into force on 1 July 2002.
Mediation Act, 2023 update: Section 59 read with the Fourth Schedule of the Mediation Act, 2023 enacts a substituted Section 89 CPC. However, Section 59 was not among the provisions brought into force by the 9 October 2023 commencement notification. Accordingly, the replacement Section 89 is not yet operative and the existing provision reproduced below remains the applicable central CPC text.

Section 89 CPC - 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 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.

(2) Where a dispute has 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 Section 20(1) of the Legal Services Authorities Act, 1987 and all other provisions of that Act shall apply in respect of the dispute so referred;

(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 the provisions of the Legal Services Authorities Act, 1987 shall apply as if the dispute were referred to a Lok Adalat under that Act;

(d) for mediation, the Court shall effect a compromise between the parties and shall follow such procedure as may be prescribed.

How Section 89 CPC works

  • The provision applies where the Court considers that elements of an acceptable settlement exist.
  • The Court may formulate and reformulate possible settlement terms after receiving the parties' observations.
  • The presently operative statutory modes are arbitration, conciliation, judicial settlement including Lok Adalat, and mediation.
  • Arbitration and conciliation are linked to the Arbitration and Conciliation Act, 1996.
  • Lok Adalat and deemed Lok Adalat settlement are linked to the Legal Services Authorities Act, 1987.
  • The section is intended to facilitate resolution without requiring every suitable dispute to proceed through a full civil trial.

Future Section 89 Under the Mediation Act, 2023

The Fourth Schedule to the Mediation Act, 2023 provides that, once Section 59 is commenced, Section 89 CPC will be substituted by a new provision under which the Court may refer the dispute to arbitration, refer the parties to mediation under the Mediation Act, 2023, refer the dispute to Lok Adalat, or effect a judicial settlement.

Until the Central Government brings Section 59 into force by notification, this enacted replacement should be treated as a future amendment rather than the operative text of Section 89 CPC.

Official Legal References

See the Code of Civil Procedure, 1908 on India Code and the Mediation Act, 2023 on India Code.