Section 89 CPC Explained: How Courts Push for Settlement Outside Court: by Advocate Nedunuri Raghu

 Section 89 of the Code of Civil Procedure, 1908 (CPC) — one of the most debated provisions because it opened the gates for Alternative Dispute Resolution (ADR) in India. Let’s break it down in a way that’s exam-friendly for you as an advocate, and also easy for a layperson to understand.

 

Section 89 CPC – Settlement of disputes outside the Court

1. Simplified Original Text

• If the court feels there’s a chance of settlement between parties, it should:
• Draft possible settlement terms, share them with parties,
• Get their feedback, reformulate if needed,
• And then refer the dispute to one of the following ADR methods:
• Arbitration
• Conciliation
• Judicial settlement (including Lok Adalat)
• Mediation
• Depending on which forum is chosen:
• Arbitration/Conciliation → Arbitration and Conciliation Act, 1996 applies.
• Lok Adalat → Legal Services Authorities Act, 1987 applies.
• Judicial Settlement → Treated as Lok Adalat under the Legal Services Authorities Act.
• Mediation → Court conducts/facilitates compromise as per prescribed rules.

 

2. Explanation

This section says:
- Courts are not just for fighting cases till judgment.
- If the judge sees that parties might actually settle without a full trial, the court has a duty to push them towards settlement.
- Instead of dragging for years, the court can send the case to arbitration, conciliation, Lok Adalat, or mediation — whichever fits.

So, this section is about nudging parties out of litigation into quicker, cheaper, and friendlier settlements.

 

3. Example

• Case: Two businessmen fight over a contract.
• The judge sees both are open to compromise (they only differ on the amount payable).
• Instead of wasting 5–10 years in litigation, the judge says:
• “Let’s reformulate your settlement terms.”
• Refers the case to mediation.
• Within 3 sittings, they agree to a middle-ground amount.
• Court records settlement → Case closed within months.

 

4. Punishment/Effect

There is no punishment here since this is not a penal provision.
But the effect is binding:

• If referred to arbitration → award is enforceable like a decree.
• If Lok Adalat → award is final, binding, and non-appealable.
• If mediation → once signed and accepted, court can pass a decree on it.

 

5. Usefulness for an Advocate

• Strategy Tool: Helps you save your client from long trials (saves time, money, energy).
• Client Counselling: You can suggest mediation/conciliation early if chances of compromise exist.
• Advocacy Edge: In commercial matters, judges often ask: “Have you tried mediation under S.89?”. If you know the law, you can guide the case better.
• Practical Use: In family disputes, cheque bounce cases, commercial suits — ADR is often pushed by courts using this section.

 

In short:
Section 89 CPC makes ADR compulsory for courts to consider whenever there’s a chance of compromise. It connects CPC with Arbitration Act, Legal Services Authority Act, and Mediation Rules.