Alternate Dispute Resolution (ADR) refers to the settlement of legal disputes outside the court.
This ADR referral under section 89 is to ensure amicable and quick resolution of disputes between the parties and reduce the pendency of suits before the courts.
Prior to CPC section 89, there was no provision which insisted the mandatory referral of the pending dispute to any form of ADR in India. Legal Services Authorities Act has given the powers to the parties to approach Lok Adalat for the disposal of the dispute. However, it does not give the mandatory referral option to the trial court which is hearing that case. Based on the parties’ request, the trial court can refer to the pending dispute to Lok Adalat.
With more ADR mechanisms like arbitration, mediation & conciliation in Sec 89 of CPC was notified in CPC amendment act 2002, which came into force from 1st July 2002.
Section 89 of CPC states that “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.
Where a dispute has been referred--
a.for arbitration or conciliation, the provisions of the Arbitration and Conciliation Act, 1996 (26 of 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 (39 of 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 (39 of 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.
Cases which can’t be referred to ADRs:
1.Demonstrative suits under Order 1 Rule 8 CPC which involve public interest or interest of numerous persons who are not parties before the court. (In fact, even a compromise in such a suit is a difficult process requiring notice to the persons interested in the suit, before its acceptance).
2.Disputes relating to election to public offices (as contrasted from disputes between two groups trying to get control over the management of societies, clubs, association, etc.).
3.Cases involving the grant of authority by the court after inquiry, as for example, suits for grant of probate or letters of administration.
4.Cases involving serious and specific allegations of fraud, fabrication of documents, forgery, impersonation, coercion, etc.
5.Cases requiring protection of courts, as for example, claims against minors, deities and mentally challenged and suits for declaration of title against the government.
6.Cases involving prosecution for criminal offences.
Cases which can be referred to ADRs:
1. All cases relating to trade, commerce, and contracts, including - disputes arising out of contracts (including all money claims);
a. Disputes relating to specific performance;
b. Disputes between suppliers and customers;
c. Disputes between bankers and customers;
d. Disputes between developers/builders and customers; - disputes between landlords and tenants/licensor and licensees;
e. Disputes between the insurer and insured;
2. All cases arising from strained or soured relationships, including a. Disputes relating to matrimonial causes, maintenance, custody of children; b. Disputes relating to partition/division among family members/coparceners/co-owners; and c. Disputes relating to a partnership among partners.
3. All cases where there is a need for continuation of the pre-existing relationship in spite of the disputes, including
a.Disputes between neighbours (relating to elementary rights, encroachments, nuisance, etc.);
b. disputes between employers and employees;
c.disputes among members of societies / associations / Apartment owners Associations;
4. All cases relating to tortious liability including - claims for compensation in motor accidents/other accidents; and
5. All consumer disputes including disputes where a trader/ supplier/ manufacturer/ service provider is very keen on maintaining his business/professional reputation and credibility or 'product popularity.
