Settlement of Disputes Outside the Court

In one line

Where a court sees that a case could be settled, section 89 requires it to formulate the terms of a possible settlement and send the parties out to one of four forums to try.

Why the Code has this at all

Litigation is slow, expensive and adversarial, and a great many civil disputes are not really about principle. Two neighbours arguing about a wall, or a family about a partition, may be far better served by a settlement than by a decree that leaves them enemies.

Section 89 is the Code's attempt to build that into the process rather than leave it to chance. Notice its structure, because it is unusual: the court does not merely refer the parties out. It first formulates the terms of a possible settlement itself, gives them to the parties, takes their observations, and may then reformulate them. Only after that does it refer.

That design is deliberate. Parties who are told to go and settle often have no idea what a settlement would look like. Parties handed a draft by the judge have something to react to.

The provision

Section 89(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 those observations 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 (d) mediation

Those four are the whole list, and an answer that gives three of them is short. A useful way to hold them is that two are governed by the arbitration statute, one by the legal services statute, and one is now governed by its own Act.

Section 89(2) then routes each of the four:

(a) where the dispute is referred for arbitration or conciliation, the provisions of the Arbitration and Conciliation Act 1996 apply as if the proceedings were referred for settlement under that Act

(b) where it is referred to Lok Adalat, the Court shall refer it in accordance with section 20(1) of the Legal Services Authorities Act 1987, and all the other provisions of that Act apply

(c) where it is referred for judicial settlement, the Court shall refer it to a suitable institution or person, who shall be deemed to be a Lok Adalat, and all the provisions of the Legal Services Authorities Act apply as if the dispute had been referred to a Lok Adalat

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