Alternative Dispute Resolution in Civil Procedure Law
Learning Objectives
By the end of this page, you should be able to:
- State the statutory basis of ADR under Section 89 CPC and explain how the Supreme Court in Afcons Infrastructure v. Cherian Varkey Construction clarified its scope.
- Distinguish arbitration, conciliation, mediation, Lok Adalat, and judicial settlement in terms of process and legal effect.
- Explain the binding nature and enforceability of an arbitral award, a mediated settlement, and a Lok Adalat award.
- Identify which ADR mode a court is likely to refer a given dispute to under Section 89 CPC.
- Spot common student errors that confuse ADR mechanisms with each other.
- Apply ADR concepts to fact patterns typically asked in civil procedure exams.
Quick Answer
Alternative Dispute Resolution (ADR) is the umbrella term for resolving civil disputes outside conventional litigation — through arbitration, conciliation, mediation, Lok Adalat, or judicial settlement. Section 89 of the Code of Civil Procedure, 1908 (inserted by the 1999/2002 amendments) obliges civil courts to identify cases with "elements of settlement" and refer parties to one of these modes before trial proceeds. ADR matters because litigation is slow and adversarial, while ADR is faster, often cheaper, and preserves relationships — critical in commercial, family, and matrimonial disputes. It matters legally too: an arbitral award is enforceable as a decree, a Lok Adalat award is final with no appeal, and a mediated settlement becomes binding only once recorded and decreed by the court. Understanding these differences is essential both for practice and for exams.
Core Concepts
1. Section 89 CPC Framework
Definition
Section 89 CPC empowers and directs a civil court, where it appears that elements of a settlement exist, to formulate the terms of a possible settlement and refer the parties to one of five ADR modes: (a) arbitration, (b) conciliation, (c) judicial settlement including Lok Adalat, (d) mediation, or Lok Adalat under the Legal Services Authorities Act, 1987.
Explanation
Section 89 was inserted based on the Malimath Committee's recommendation and came into force alongside Order X Rule 1A-1C (which requires courts, after recording admissions and denials, to give parties an option of choosing an ADR mode). The section itself is procedural: it does not create a new right, but channels pending suits away from full trial into consensual or quasi-consensual resolution. The court's role is limited to identifying the possibility of settlement and referring the matter — the actual resolution happens outside the court (except for judicial settlement, which happens through a judge or Lok Adalat).
A famous drafting anomaly is worth knowing: Section 89(2) mixes up "arbitration and conciliation" with "judicial settlement" and "mediation" in the definitions of these terms, apparently due to a drafting slip when the section was enacted. The Supreme Court in Salem Advocate Bar Association v. Union of India (2005) noted this defect and asked the Law Commission to review it, but rather than wait for amendment, the Court in Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (2010) read the section harmoniously so that it functions as originally intended.
Example
A civil suit for partition of ancestral property is filed. At the first hearing after pleadings are complete, the court, under Order X Rule 1A, asks both parties whether they would prefer mediation over a full trial. Both agree, and the court refers the case to a court-annexed mediation centre under Section 89(1).
Real-World Example
In commercial suits under the Commercial Courts Act, 2015, Section 12A now makes pre-institution mediation compulsory (except where urgent interim relief is sought) before a commercial suit can even be filed — an extension of the Section 89 philosophy to the pre-litigation stage.
Why It Matters
Section 89 is the gateway provision — every other ADR mechanism discussed on this page is triggered, in the litigation context, through this section. Exam questions frequently test whether students know that referral under Section 89 is for the court to make, not merely a suggestion parties can ignore, and that consent of parties is still required for arbitration and conciliation (since these are governed by their own consent-based statute).
Common Misunderstanding
Students often assume Section 89 lets a court force parties into binding arbitration without consent. It does not. In Afcons, the Supreme Court clarified that a court cannot refer parties to arbitration or conciliation under Section 89 without their mutual consent, because the Arbitration and Conciliation Act, 1996 is fundamentally consent-based. Only for Lok Adalat and judicial settlement can the court refer even without express consent, though in practice consent is still sought.
2. Arbitration under the Arbitration and Conciliation Act, 1996
Definition
Arbitration is a process in which parties refer their dispute to one or more neutral persons (arbitrators), whose decision (the "arbitral award") is final and binding, in place of a court judgment.
Explanation
Arbitration in India is governed by the Arbitration and Conciliation Act, 1996 (amended in 2015, 2019, and 2021), based on the UNCITRAL Model Law. It requires an arbitration agreement (Section 7) — usually a clause in a contract. Once a dispute arises, either party can invoke arbitration; courts have limited power to intervene (Section 5), mainly to appoint arbitrators (Section 11) when parties cannot agree, or to grant interim relief (Section 9) and assist in enforcement. The arbitral tribunal conducts proceedings similar to a mini-trial (pleadings, evidence, hearings) and delivers a reasoned award (Section 31). The award can be challenged only on narrow grounds under Section 34 (e.g., patent illegality, conflict with public policy) — courts cannot review it on merits.
Example
Two companies sign a supply contract containing a clause: "Any dispute arising from this agreement shall be referred to arbitration under the Arbitration and Conciliation Act, 1996." When a payment dispute arises, either party can issue a notice invoking arbitration instead of filing a civil suit.
Real-World Example
In Reliance Industries Ltd. v. Union of India, disputes over cost recovery under a production-sharing contract for the KG-D6 gas basin were resolved through international arbitration, illustrating how high-value commercial and government contracts routinely embed arbitration clauses to avoid protracted litigation.
Why It Matters
An arbitral award is enforceable as if it were a decree of a civil court (Section 36) — no separate suit is needed to enforce it, only limited execution proceedings. This makes arbitration attractive for commercial parties who want a final, court-like outcome without going through the ordinary court hierarchy.
Common Misunderstanding
Students often think an arbitral award can be freely appealed like a court judgment. It cannot. Section 34 permits only a challenge to set aside the award on limited statutory grounds (not a full appeal on facts or law), and a further appeal from a Section 34 order lies only under Section 37 in narrow circumstances. Courts cannot reappreciate evidence or substitute their own view of the merits.
3. Conciliation
Definition
Conciliation is a process where a conciliator actively assists parties in reaching a mutually acceptable settlement by suggesting possible terms, unlike an arbitrator who adjudicates.
Explanation
Conciliation is dealt with in Part III (Sections 61–81) of the Arbitration and Conciliation Act, 1996. It begins when one party invites the other to conciliate and the other accepts (Section 62). The conciliator (one or more, appointed by agreement) may communicate with parties jointly or separately, and may — unlike a mediator in the strict sense — put forward substantive settlement proposals (Section 67). Statements made during conciliation are confidential and cannot be used later as admissions in arbitration or litigation (Section 75), which encourages candour. If parties settle, the conciliator draws up a settlement agreement, which upon signature has the same status and effect as an arbitral award (Section 74) — meaning it is enforceable as a decree.
Example
A landlord and tenant dispute over unpaid rent is referred to a conciliator, who, after hearing both sides, proposes a staged repayment plan. Both parties agree and sign the settlement agreement, which is then treated as equivalent to an arbitral award.
Real-World Example
Public sector undertakings frequently use conciliation clauses in works contracts, since Section 89(1)(b) read with Part III allows disputes to be conciliated even after litigation has begun, provided both sides agree — avoiding the delay of a full arbitral or court proceeding.
Why It Matters
Conciliation is one of the few ADR routes where a neutral third party can proactively suggest solutions rather than merely facilitate — useful when parties are too entrenched to generate their own proposals. Its settlement agreement carries decree-like enforceability, giving it real teeth compared to a mediated understanding that still needs court recording.
Common Misunderstanding
Students frequently conflate conciliation with mediation, treating them as synonyms. While both are facilitative and non-adjudicatory, only conciliation is expressly regulated by a detailed statutory framework (Part III of the 1996 Act) that gives its settlement agreement automatic decree-like status; mediation in India (outside limited statutory contexts) has a lighter, less codified procedure and typically requires the court to record and decree the settlement under Order XXIII Rule 3 CPC.
4. Mediation
Definition
Mediation is a voluntary, facilitative process where a trained neutral mediator helps disputing parties communicate and negotiate their own settlement, without imposing a decision.
Explanation
Unlike a conciliator, a mediator generally does not propose solutions — the mediator's job is to improve communication, clarify interests, and help parties craft their own agreement. Court-annexed mediation in India developed after Salem Advocate Bar Association v. Union of India mandated the framing of mediation rules, and most High Courts now run mediation centres attached to district courts. The Mediation Act, 2023 has since given mediation (including pre-litigation mediation) a comprehensive statutory framework: it makes mediated settlement agreements enforceable as a judgment or decree (Section 27) once registered, without needing separate proceedings, and recognizes online mediation.
Example
In a matrimonial dispute, the family court refers the couple to its attached mediation centre. Over several sessions, the mediator helps them agree on custody and maintenance terms, which are then reduced to a written settlement.
Real-World Example
In Union of India v. Ansley Development India Ltd., the Delhi High Court upheld a mediated settlement and held that a court cannot go behind the terms of compromise arrived at through mediation unless there is a clear abuse of the process of law — reinforcing that courts should respect party autonomy in a genuinely mediated outcome.
Why It Matters
Mediation is especially suited to disputes where an ongoing relationship matters — family, matrimonial, partnership, and neighbourhood disputes — because it aims for a mutually crafted, face-saving outcome rather than a winner-takes-all result. Under the Commercial Courts Act, pre-institution mediation (Section 12A) is now compulsory for most commercial suits, making mediation literacy essential even for commercial litigators.
Common Misunderstanding
A common mistake is assuming a mediated settlement is automatically binding and enforceable the moment parties sign it. Under the CPC route, it must still be placed before the court and recorded as a compromise decree under Order XXIII Rule 3 (or, for the newer Mediation Act framework, registered under that Act) before it acquires decree-like enforceability. An unrecorded mediated agreement is, at best, an enforceable contract — not directly executable like a decree.
5. Lok Adalat under the Legal Services Authorities Act, 1987
Definition
A Lok Adalat ("people's court") is a forum where disputes pending in court, or even at a pre-litigation stage, are settled through conciliatory methods, organised under the Legal Services Authorities Act, 1987.
Explanation
Lok Adalats are constituted at various levels (National, State, District, Taluk) and are presided over by serving or retired judicial officers along with lay members. They have jurisdiction over cases pending before a court and pre-litigation disputes that the parties agree to bring before them, but only for compoundable civil matters and certain compoundable criminal matters — not for matters that are inherently non-compoundable or that require a full adjudication of contested legal rights. A Lok Adalat does not decide a case on merits; it only helps parties reach a compromise. Under Section 21 of the Act, every award of a Lok Adalat is deemed to be a decree of a civil court, is final, and — crucially — no appeal lies against it to any court.
Example
A motor accident compensation claim pending before the Motor Accident Claims Tribunal is listed before a Lok Adalat. The insurance company and claimant negotiate a lump-sum settlement figure with the Lok Adalat's assistance, and the agreed amount is recorded as a Lok Adalat award.
Real-World Example
In State of Maharashtra v. Bhagwan Singh (as widely referenced in this context), courts have recognised that a Lok Adalat order operates as a decree and is executable as such — meaning a party can go straight to execution proceedings without further adjudication.
Why It Matters
The finality of a Lok Adalat award — no appeal or revision lies against it — makes it uniquely efficient for high-volume, low-complexity disputes like motor accident claims, bank recovery matters, and utility bill disputes, helping clear enormous case backlogs. National Lok Adalats are held periodically across India specifically to dispose of large numbers of pending matters in a single day.
Common Misunderstanding
Students often assume a party dissatisfied with a Lok Adalat award can appeal it like an ordinary decree. They cannot — Section 21(2) of the Legal Services Authorities Act expressly bars appeal. The only limited recourse is a writ petition under Articles 226/227 in cases of fraud, coercion, or a Lok Adalat acting without genuine mutual consent, because an award without a real underlying compromise is not a valid Lok Adalat award at all.
6. Judicial Settlement
Definition
Judicial settlement is a process under Section 89(1)(c) CPC where the court refers the dispute to a suitable institution or person, including a sitting or retired judge, to attempt settlement — and if a settlement is reached, that person is deemed to be a Lok Adalat for that purpose.
Explanation
This mode blends judicial authority with conciliatory technique: a judge (often not the one hearing the suit) actively works to help parties settle, drawing on their legal experience and the persuasive weight of judicial office. Once settlement is reached, Section 89(1)(c) deems the forum a Lok Adalat, and Section 21 of the Legal Services Authorities Act (finality, decree status, no appeal) applies to the outcome.
Example
A complex commercial suit is referred by the trial judge to a retired High Court judge empanelled with the mediation/settlement centre, who conducts settlement conferences and helps the parties reach terms, which are then recorded and given decree status as a deemed Lok Adalat award.
Real-World Example
Many High Courts maintain panels of retired judges specifically for judicial settlement referrals in long-pending commercial and property suits, particularly where the parties want the gravitas of a judicial figure guiding the negotiation rather than a lay mediator.
Why It Matters
Judicial settlement is useful precisely where the parties' dispute is legally complex and they want someone with judicial experience assessing likely outcomes to nudge them toward a realistic settlement — a role neither a pure mediator (who avoids evaluating merits) nor a Lok Adalat panel is always equipped for.
Common Misunderstanding
Students sometimes think judicial settlement means the judge hearing the case decides it informally. It does not — the referral is typically to a different judge or institution, and the outcome is still consensual; the judge does not impose a binding decision the way a court judgment would.
Visual Learning
Key Terms
| Term | Definition | Context |
|---|---|---|
| Section 89 CPC | Provision directing courts to identify settlement potential and refer parties to ADR | Gateway to all court-referred ADR in civil suits |
| Arbitration agreement | A clause or separate agreement where parties agree to refer disputes to arbitration | Required under Section 7, Arbitration and Conciliation Act, 1996 |
| Arbitral award | The decision rendered by an arbitral tribunal | Enforceable as a decree under Section 36; challengeable only under Section 34 |
| Conciliator | Neutral third party who may actively propose settlement terms | Governed by Part III (Sections 61-81) of the 1996 Act |
| Mediator | Neutral third party who facilitates but does not propose solutions | Court-annexed mediation and Mediation Act, 2023 |
| Lok Adalat | Statutory forum for compromise settlement of pending or pre-litigation compoundable disputes | Legal Services Authorities Act, 1987, Section 19 onward |
| Lok Adalat award | Outcome of a Lok Adalat proceeding | Deemed a civil court decree; final; no appeal (Section 21) |
| Judicial settlement | Referral of a dispute to a judge or institution to negotiate a settlement | Section 89(1)(c) CPC; outcome deemed a Lok Adalat award |
| Order X Rule 1A-1C | CPC procedure requiring the court to give parties an ADR option after admissions/denials are recorded | Operational counterpart to Section 89 |
| Compromise decree | A decree recording a settlement reached by parties | Order XXIII Rule 3 CPC; used to formalise mediated settlements |
Common Mistakes
-
Misconception: Section 89 CPC allows a court to force parties into arbitration even without their consent. Why it's wrong: Arbitration is governed by a separate, consent-based statute (the Arbitration and Conciliation Act, 1996), which requires a valid arbitration agreement between the parties. Correct: The Supreme Court in Afcons Infrastructure v. Cherian Varkey Construction held that a court can refer parties to arbitration or conciliation under Section 89 only with their consent; only Lok Adalat and judicial settlement can be directed more readily by the court.
-
Misconception: A mediated settlement is immediately enforceable the moment the parties sign it. Why it's wrong: Mediation under the CPC framework is not self-executing; it needs to be brought before the court and turned into a decree. Correct: The settlement must be recorded and passed as a compromise decree under Order XXIII Rule 3 CPC (or registered under the Mediation Act, 2023) before it becomes directly enforceable like a court decree.
-
Misconception: A party who is unhappy with a Lok Adalat award can file a regular appeal against it. Why it's wrong: Section 21(2) of the Legal Services Authorities Act, 1987 expressly bars any appeal against a Lok Adalat award. Correct: The award is final and binding; the only remedy in exceptional circumstances (such as fraud or absence of genuine consent) is a writ petition under Articles 226/227 of the Constitution.
Comparison and Connections
| Feature | Arbitration | Mediation | Conciliation | Lok Adalat |
|---|---|---|---|---|
| Governing law | Arbitration and Conciliation Act, 1996 | Mediation Act, 2023 / court mediation rules | Arbitration and Conciliation Act, 1996 (Part III) | Legal Services Authorities Act, 1987 |
| Third party's role | Adjudicates and decides | Facilitates; does not propose solutions | Facilitates and may propose solutions | Facilitates compromise; does not adjudicate |
| Binding nature | Binding award, enforceable as a decree | Binding only once recorded/registered as a decree | Settlement agreement has same status as an arbitral award | Final decree; deemed civil court decree |
| Formality | High — hearings, evidence, reasoned award | Low — informal joint/private sessions | Moderate — structured but flexible | Low-moderate — summary compromise proceedings |
| Cost | Can be significant (tribunal fees, counsel) | Generally low; often free at court-annexed centres | Low to moderate | Very low; often no fee |
| Appealability | Very limited (Section 34/37 grounds only) | Not separately appealable once decreed (challenge only on decree grounds) | Not separately appealable once treated as award | No appeal lies (Section 21(2)) |
| Best suited for | Commercial/contractual disputes with an arbitration clause | Relationship-based disputes (family, partnership) | Disputes needing a proactive neutral suggestion | High-volume, low-complexity compoundable claims |
Practice Questions
Recall
- Which section of the CPC obliges courts to consider ADR referral, and when was it inserted? Answer guidance: Section 89 CPC, inserted by the CPC (Amendment) Act, 1999, effective 2002, following the Malimath Committee's recommendation.
- What is the effect of Section 21 of the Legal Services Authorities Act, 1987 on a Lok Adalat award? Answer guidance: It deems the award to be a decree of a civil court, makes it final, and bars any appeal against it.
Understanding
- Explain the difference between the role of a conciliator and the role of a mediator. Answer guidance: A conciliator may actively propose settlement terms (Section 67, 1996 Act); a mediator facilitates communication and helps parties craft their own solution without suggesting terms.
- Why did the Supreme Court in Afcons Infrastructure v. Cherian Varkey Construction hold that consent is required before referring parties to arbitration under Section 89? Answer guidance: Because arbitration is governed by a separate, consent-based statute (1996 Act) requiring a valid arbitration agreement; Section 89 cannot override that consent requirement.
Application
- A trial court, after recording admissions in a partition suit, wants to send the matter for ADR. The parties refuse arbitration but are open to a compromise. Which mode(s) should the court consider, and why? Answer guidance: Mediation, conciliation (if parties agree), judicial settlement, or Lok Adalat — since arbitration needs consent which is absent here, but the other modes can proceed with the court's referral and party cooperation.
- A claimant accepts a settlement figure before a Lok Adalat in a motor accident claim but later wants to challenge the amount as inadequate. Can they appeal? Answer guidance: No — Section 21(2) bars appeal against a Lok Adalat award; the only recourse would be a writ petition alleging fraud, coercion, or absence of genuine consent.
Analysis
- Compare the enforceability of an arbitral award, a mediated settlement, and a Lok Adalat award, and explain which requires an additional court step before becoming executable. Answer guidance: Arbitral award and Lok Adalat award are directly enforceable as decrees; a mediated settlement (under the CPC route) requires an additional step — being recorded and passed as a compromise decree under Order XXIII Rule 3, or registered under the Mediation Act, 2023 — before it acquires the same enforceability.
- Critically evaluate why the drafting of Section 89(2) CPC created confusion, and how courts resolved it. Answer guidance: Section 89(2) swapped the definitions attached to "arbitration/conciliation" and "judicial settlement/mediation," a recognised drafting error noted in Salem Advocate Bar Association. In Afcons Infrastructure, the Supreme Court gave the section a purposive, harmonious interpretation so it operates as legislature intended, rather than waiting for a formal amendment.
FAQ
1. Is ADR compulsory in every civil suit? Not mandatory in the sense of forcing a particular outcome, but Section 89 CPC read with Order X Rule 1A makes it mandatory for the court to consider and offer an ADR option after pleadings are complete. For commercial suits, pre-institution mediation is compulsory under Section 12A of the Commercial Courts Act, 2015, subject to exceptions for urgent interim relief.
2. Can a court force parties into arbitration under Section 89? No. Following Afcons Infrastructure v. Cherian Varkey Construction, arbitration and conciliation require the mutual consent of the parties because they are governed by a separate consent-based statute; only Lok Adalat and judicial settlement can be initiated more readily by the court.
3. What happens if ADR fails? If arbitration, conciliation, or mediation does not result in a settlement, the matter returns to the referring civil court and the suit proceeds through the normal trial process from where it left off.
4. Is a Lok Adalat award really final with no appeal at all? Yes, under Section 21(2) of the Legal Services Authorities Act, 1987, no appeal lies against a Lok Adalat award. The narrow exception is a writ petition under Articles 226/227 where there is fraud, coercion, or no genuine underlying compromise.
5. What is the difference between conciliation's settlement agreement and a court-recorded mediation settlement? A conciliation settlement agreement automatically has the same status and effect as an arbitral award under Section 74 of the 1996 Act. A mediation settlement, by contrast, generally needs to be placed before the court and recorded as a compromise decree under Order XXIII Rule 3 CPC (or registered under the Mediation Act, 2023) before it becomes similarly enforceable.
Quick Revision
- Section 89 CPC directs courts to identify cases with settlement potential and refer them to ADR; inserted by the 1999 Amendment Act, effective 2002.
- Order X Rule 1A-1C operationalises Section 89 by requiring the court to give parties an ADR option after admissions/denials are recorded.
- Afcons Infrastructure v. Cherian Varkey Construction (2010) held that arbitration/conciliation referrals under Section 89 need party consent; Lok Adalat/judicial settlement do not strictly require it.
- Arbitration: governed by the Arbitration and Conciliation Act, 1996; needs an arbitration agreement; award enforceable as a decree (Section 36); challengeable only on narrow grounds under Section 34.
- Conciliation: Part III of the 1996 Act; conciliator can actively propose terms; settlement agreement equals an arbitral award in status (Section 74).
- Mediation: facilitative only, no proposed solutions by the mediator; needs court recording (Order XXIII Rule 3) or registration under the Mediation Act, 2023 to become enforceable.
- Lok Adalat: under the Legal Services Authorities Act, 1987; handles compoundable civil (and some criminal) matters; award is a deemed decree, final, and not appealable (Section 21).
- Judicial settlement: Section 89(1)(c); referral to a judge/institution; if settled, deemed a Lok Adalat award with the same finality.
- Commercial Courts Act, Section 12A: makes pre-institution mediation compulsory for most commercial suits (barring urgent interim relief).
- Only a writ petition (Articles 226/227) can challenge a Lok Adalat award, and only for fraud, coercion, or absence of genuine consent.
- Section 89(2) has a known drafting anomaly (swapped definitions) that courts have interpreted purposively rather than literally.
Related Topics
Prerequisites
Related
Next