Section 89 — Settlement of disputes outside the Court
A civil court is not only to decide disputes — under Section 89 it must also try to settle them. Where a case shows the makings of a settlement, the court frames terms, takes the parties’ views, and refers the dispute to one of four out-of-court routes: arbitration, conciliation, judicial settlement (including Lok Adalat), or mediation.
How to read Section 89
Courts must try settlement
Where elements of a settlement appear, the court shall formulate terms, give them to the parties for observations, reformulate, and refer the dispute out of court.
Four routes
(a) arbitration · (b) conciliation · (c) judicial settlement (incl. Lok Adalat) · (d) mediation.
Each runs on its own law
Once referred, each route is governed by its statute — the Arbitration & Conciliation Act, 1996, or the Legal Services Authorities Act, 1987 (Lok Adalat / judicial settlement), or the prescribed mediation procedure.
The bare Act
1(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—
(2) Where a dispute has been referred—
1. The present § 89 was inserted by Act 46 of 1999, s. 7 (w.e.f. 1-7-2002). The original § 89 (on references to arbitration) had earlier been repealed by the Arbitration Act, 1940 (10 of 1940), s. 49 and the Third Schedule.
Key terms decoded
Signs in the case that a compromise acceptable to the parties is possible — the trigger for the court to act under § 89.
The court drafts settlement terms, takes the parties’ observations, then may revise them before referring the dispute out.
Reference to an arbitrator for a binding award — governed by the Arbitration & Conciliation Act, 1996.
A conciliator helps the parties reach an agreed settlement — also under the 1996 Act.
Reference to a Lok Adalat (or an institution/person deemed a Lok Adalat) — governed by the Legal Services Authorities Act, 1987.
A neutral mediator helps the parties settle; the court effects the compromise and follows such procedure as may be prescribed.
The statute that takes over once a dispute is referred to arbitration or conciliation under § 89(2)(a).
Governs Lok Adalats; § 89(2)(b)&(c) channel disputes to it — via s. 20(1) for Lok Adalat, and by a deeming for judicial settlement.
The picture — from court to a settlement route
Section 89 turns the court into a gateway to settlement: it shapes the terms, then routes the dispute to whichever forum fits — each plugged into its own governing Act.
Section 89, part by part
How the two sub-sections work as one body
Refer → then the right law takes over
The court spots a possible settlement, formulates and reformulates terms, and refers the dispute to one of four routes.
Each route then runs under its own statute — the 1996 Act (arbitration / conciliation) or the 1987 Act (Lok Adalat / judicial settlement), or prescribed mediation.
How § 89 came to be — a timeline
The original § 89 (on references to arbitration in a pending suit) was repealed by the Arbitration Act, 1940 (10 of 1940), s. 49 and the Third Schedule — arbitration moved into that Act, leaving § 89 empty.
A new § 89 was inserted — the modern ADR provision, channelling disputes to arbitration, conciliation, judicial settlement / Lok Adalat, or mediation.
Connected provisions
Section 89 opens Part V — Special Proceedings (§§ 89–93). It works with the Arbitration & Conciliation Act, 1996 and the Legal Services Authorities Act, 1987, and with Order X (the court’s power to direct parties to opt for an ADR mode). It follows interpleader (§ 88) and precedes the “special case” (§ 90).