Judicial Settlement and Mediation under Section 89 CPC

Section 89 of the Code of Civil Procedure, 1908 allows courts to refer suitable civil disputes to alternative dispute resolution mechanisms when there appears to be a possibility of settlement. These mechanisms include arbitration, conciliation, judicial settlement, Lok Adalat and mediation. Judicial settlement and mediation under Section 89 CPC aim to resolve disputes faster, reduce litigation costs and promote mutually acceptable settlements without requiring a complete civil trial.

What is Section 89 CPC?

Section 89 of the Code of Civil Procedure, 1908 provides a statutory framework for referring civil disputes to alternative dispute resolution (ADR).

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The basic idea behind Section 89 CPC is that every civil dispute does not necessarily require a final judgment after lengthy pleadings, evidence and arguments. Some disputes may be resolved more effectively through negotiation and settlement.

Where a court finds that there are elements of a settlement which may be acceptable to the parties, it can consider referring the dispute to an appropriate ADR process.

The presently operative Section 89 recognises four broad methods:

• arbitration;
• conciliation;
• judicial settlement, including settlement through Lok Adalat; and
• mediation.

The provision must be read along with Order X Rules 1A, 1B and 1C of the CPC, which deal with the procedure for directing parties to choose an ADR method and their appearance before the relevant forum.

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Why Was Section 89 CPC Introduced?

Section 89 CPC was introduced to strengthen alternative methods of dispute resolution within the civil justice system.

Indian courts deal with a large number of pending civil cases. Many such disputes involve contractual, commercial, family, property or monetary issues where parties may eventually prefer settlement over continued litigation.

Section 89 seeks to achieve several purposes:

• reducing unnecessary court litigation;
• encouraging negotiated settlements;
• saving judicial time;
• reducing the financial burden of litigation;
• preserving commercial, family and personal relationships;
• providing flexible methods of resolving disputes; and
• allowing courts to concentrate on matters requiring authoritative adjudication.

The provision therefore forms an important link between traditional civil litigation and alternative dispute resolution mechanisms.

When Can a Court Refer a Matter under Section 89 CPC?

A court may consider reference under Section 89 where it appears that the dispute contains elements capable of settlement.

This does not mean that every civil case must automatically be referred to mediation or another ADR mechanism. The court has to consider the nature of the dispute, relationship between the parties, issues involved and possibility of settlement.

The Supreme Court has clarified that courts should identify cases that are suitable for ADR at an appropriate stage of proceedings.

Generally, disputes involving negotiable rights and personal or commercial interests are more suitable for settlement than cases requiring an authoritative declaration of law or determination of rights against persons who are not before the court.

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What is Judicial Settlement under Section 89 CPC?

Judicial settlement is a form of dispute resolution in which efforts are made to settle the dispute without proceeding to a full adjudication on merits.

Under the existing wording of Section 89 CPC, when a dispute is referred for judicial settlement, the person or institution to whom the matter is referred is deemed to be a Lok Adalat, and the provisions of the Legal Services Authorities Act, 1987 become applicable.

Judicial settlement is therefore intended to produce a consensual resolution rather than a decision imposed after a conventional trial.

The purpose is to bring the parties towards compromise wherever such compromise is legally permissible.

How Does Judicial Settlement Work?

The precise procedure depends upon the nature of the reference and the forum dealing with the settlement process.

Broadly, the process involves:

1. identifying whether the dispute contains elements capable of settlement;
2. referring the matter to an appropriate settlement forum;
3. allowing the parties to discuss possible settlement terms;
4. facilitating compromise through an independent process; and
5. recording the settlement if an agreement is reached.

Judicial settlement should not be confused with ordinary adjudication. In adjudication, a judge decides the rights and liabilities of the parties according to law. In settlement, the outcome primarily depends upon the parties reaching mutually acceptable terms.

What is Mediation under Section 89 CPC?

Mediation is a voluntary and confidential dispute resolution process in which a neutral third person, known as a mediator, assists the parties in reaching a mutually acceptable settlement.

The mediator does not normally decide who is legally right or wrong and does not impose a binding judgment.

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Instead, the mediator helps the parties:

• identify the real issues in dispute;
• understand each other’s concerns;
• communicate effectively;
• explore possible solutions; and
• negotiate settlement terms.

Where a civil dispute pending before a court is referred to mediation under Section 89 CPC, it is commonly known as court-referred or court-annexed mediation.

What is Court-Annexed Mediation?

Court-annexed mediation refers to mediation conducted after a court refers a pending dispute to a mediation centre, mediator or other recognised mediation forum.

Many High Courts and district courts in India have established mediation centres for this purpose. Court and tribunal referral to mediation provides an institutional mechanism through which pending disputes can be placed before a neutral mediator for an attempt at settlement.

The dispute remains connected with the court proceedings, but settlement discussions take place outside the normal adversarial trial process.

If the parties reach a settlement, the terms are placed before the court for appropriate orders. If mediation fails, the case ordinarily returns to the court and continues in accordance with law.

Failure of mediation does not itself determine the merits of the dispute.

What is the Role of a Mediator?

A mediator acts as a neutral facilitator.

The mediator does not function like a judge or arbitrator. The role and duties of a mediator primarily involve improving communication and helping parties examine possible solutions.

A mediator may:

• encourage each side to explain its concerns;
• identify common areas of agreement;
• clarify misunderstandings;
• assist in evaluating settlement options;
• conduct joint or separate discussions where appropriate;
• help parties negotiate practical terms; and
• assist in reducing agreed terms into a settlement.

A mediator must maintain neutrality and should not compel either party to accept a particular settlement.

Is Mediation under Section 89 CPC Voluntary?

Mediation is fundamentally based on consensual settlement.

A court may refer a suitable dispute to mediation in accordance with Section 89 and the applicable procedural framework. However, the actual settlement cannot ordinarily be forced upon the parties.

The essence of mediation lies in voluntary agreement. The distinction between voluntary and mandatory mediation is particularly important because participation may sometimes be required by law or judicial direction, while the ultimate decision to settle must remain consensual.

This is an important distinction between mediation and adjudication. A court can pass a binding judgment even if one party disagrees with it. A mediator cannot impose a settlement merely because the mediator considers it reasonable.

Is Mediation Confidential?

Confidentiality in mediation is one of the central principles of the process.

Settlement discussions are generally protected so that parties can negotiate openly without fear that every statement or concession will later be used against them in court.

This encourages meaningful negotiations.

Ordinarily, the court deciding the dispute does not examine the detailed discussions that took place during unsuccessful mediation. What matters is whether settlement was reached.

Where no settlement is reached, the original proceedings may continue without treating settlement proposals as admissions on the merits of the case.

Confidentiality is not necessarily absolute, and limited exceptions may apply in circumstances recognised by law.

What Happens When Mediation Succeeds?

When mediation results in settlement, the agreed terms are recorded in writing.

The settlement should clearly state the obligations accepted by each party. Depending upon the nature of the dispute, it may deal with payment, transfer of property, withdrawal of claims, future conduct, custody arrangements, performance of contractual obligations or other lawful terms.

The settlement is then placed before the court.

After satisfying itself about the settlement and its legality, the court may dispose of the proceedings in accordance with the compromise.

A successful mediation therefore converts an adversarial dispute into a consensual resolution. A mediated settlement must be distinguished from a mediation agreement, which is an agreement to submit disputes to mediation rather than the final settlement reached through the process.

What Happens If Mediation Fails?

Failure of mediation does not prevent the civil suit from continuing.

Where no settlement is reached, the matter is ordinarily returned to the referring court. The court then resumes proceedings from the appropriate stage.

The court may proceed with:

• framing or consideration of issues;
• evidence;
• interim applications;
• arguments; and
• final judgment.

The unsuccessful mediation itself should not prejudice either party’s legal position.

Difference Between Judicial Settlement and Mediation

Although both mechanisms aim at consensual resolution, judicial settlement and mediation are conceptually different.

Nature of the Process

Judicial settlement is a broader settlement mechanism connected with the statutory framework under Section 89.

Mediation is a structured facilitative process conducted with the assistance of a neutral mediator.

Role of the Neutral Person

In mediation, the mediator facilitates communication and negotiations but does not impose a decision.

Judicial settlement may involve a settlement forum or authority working towards compromise within the framework recognised by Section 89.

Settlement Focus

Both processes focus on settlement rather than adjudication.

However, mediation generally involves a more defined procedure built around confidentiality, neutrality, party autonomy and facilitated negotiation.

Difference Between Mediation and Arbitration

Mediation and arbitration are fundamentally different ADR mechanisms.

In arbitration, an arbitrator hears the dispute and gives a decision known as an arbitral award. The process is adjudicatory in nature.

In mediation, the mediator does not decide the dispute. The final result depends upon agreement between the parties.

Another important distinction concerns consent. Arbitration generally requires an arbitration agreement between the parties. A court cannot ordinarily force parties into arbitration in the absence of the necessary agreement merely by relying on Section 89 CPC.

Difference Between Mediation and Conciliation

Mediation and conciliation both involve consensual settlement through a neutral third party.

Historically, Indian procedural law treated them as separate mechanisms under Section 89 CPC.

Conciliation was governed substantially by the Arbitration and Conciliation Act, 1996, while mediation developed significantly through court-annexed mediation rules and judicial practice.

The difference between arbitration, conciliation and mediation principally concerns the nature of the process, role of the neutral third party and legal effect of the outcome.

The Mediation Act, 2023 seeks to create a more comprehensive statutory framework for mediation, although several important provisions of the Act have not yet been brought into force.

Difference Between Mediation and Lok Adalat

Lok Adalat is an institutional settlement forum recognised under the Legal Services Authorities Act, 1987.

A Lok Adalat attempts to facilitate compromise between parties. When settlement is reached, an award may be passed in terms of the compromise.

Mediation, by contrast, generally involves a mediator facilitating negotiations in a confidential process.

Both mechanisms are settlement-oriented, but their legal structure and institutional framework differ.

Which Cases Are Suitable for Mediation under Section 89 CPC?

Many civil disputes are particularly suitable for mediation because the parties have continuing relationships or considerable flexibility in negotiating outcomes.

Examples include:

• matrimonial and family disputes;
• partnership disputes;
• contractual disputes;
• commercial disputes;
• disputes between employers and employees;
• landlord-tenant disputes;
• neighbourhood disputes;
• property disputes capable of compromise;
• monetary claims;
• consumer-related disputes; and
• disputes involving continuing business relationships.

Mediation can be especially useful where preserving the relationship between parties is commercially or personally important.

Which Cases May Not Be Suitable for Mediation?

Certain disputes may require formal adjudication because of their nature.

The Supreme Court in Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd. discussed categories of matters that may ordinarily be unsuitable for ADR.

These may include:

• representative suits involving numerous persons;
• disputes concerning election to public offices;
• cases involving serious and specific allegations of fraud;
• matters requiring protection of persons under legal disability;
• certain probate or testamentary proceedings;
• disputes requiring authoritative adjudication of public rights; and
• criminal prosecution matters that cannot lawfully be compromised.

Suitability ultimately depends upon the facts and legal character of each dispute.

Salem Advocate Bar Association Case and Section 89 CPC

The Supreme Court decision in Salem Advocate Bar Association v. Union of India played an important role in making Section 89 workable.

Questions had arisen regarding implementation of the amendments introduced into the CPC, including Section 89.

The Supreme Court supported the development of procedural mechanisms for ADR and constituted a committee headed by Justice M. Jagannadha Rao to examine the practical implementation of mediation and other ADR processes.

The case contributed substantially to the growth of court-annexed mediation in India.

Afcons Infrastructure Case and Section 89 CPC

Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd. is one of the leading Supreme Court decisions on Section 89 CPC.

The Court recognised that the drafting of Section 89 created practical difficulties and clarified how courts should understand the provision.

The judgment explained:

• how suitable cases may be identified for ADR;
• the distinction between different ADR mechanisms;
• the importance of party consent in arbitration;
• categories of disputes generally suitable for ADR; and
• categories of disputes normally requiring adjudication.

The decision remains important for understanding the practical application of Section 89 CPC.

Does Section 89 CPC Make ADR Mandatory?

Section 89 encourages courts to actively examine the possibility of settlement, but it does not mean that every dispute must ultimately be settled.

Courts are expected to consider ADR where appropriate.

However, the feasibility of a particular ADR mechanism depends upon factors such as:

• nature of the dispute;
• legal issues involved;
• consent requirements;
• possibility of compromise; and
• suitability of the selected ADR process.

A settlement cannot be manufactured merely to avoid trial.

Section 89 CPC and Order X CPC

Section 89 should be read with Order X Rules 1A to 1C of the CPC.

Order X Rule 1A provides for the court to direct parties to opt for one of the modes of settlement contemplated under Section 89.

Rule 1B deals with appearance before the conciliatory forum or authority.

Rule 1C provides for appearance before the court after failure of efforts at settlement.

Together, these provisions create the procedural link between civil litigation and ADR.

Section 89 CPC and the Mediation Act, 2023

The Mediation Act, 2023 is intended to establish a comprehensive legal framework for mediation in India.

The Act also contains provisions proposing amendments to Section 89 CPC.

Under the proposed revised framework, the court may refer disputes to arbitration, mediation or Lok Adalat and may also itself attempt judicial settlement.

The proposed wording is clearer because it separately identifies judicial settlement, mediation and Lok Adalat instead of placing them within overlapping statutory language.

However, an important distinction must be maintained between an enacted amendment and an amendment that has actually commenced.

Has the Mediation Act Amendment to Section 89 CPC Come into Force?

As of August 2026, the amendment substituting Section 89 CPC under Section 59 of the Mediation Act, 2023 has not been brought into force.

The Central Government notified only specified provisions of the Mediation Act with effect from 9 October 2023.

Section 59, which deals with amendments to the Code of Civil Procedure through the Fourth Schedule, was not among the provisions brought into operation.

Therefore, the existing text of Section 89 CPC continues to remain relevant until the proposed amendment is formally commenced.

This distinction is important because describing the revised Section 89 as presently operative would not reflect the current statutory position.

Section 89 CPC and Pre-Institution Mediation

Court-referred mediation under Section 89 CPC must also be distinguished from pre-institution mediation under Section 12A of the Commercial Courts Act, 2015.

Section 12A applies to specified commercial suits that do not contemplate urgent interim relief.

In Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd., the Supreme Court held that the requirement of pre-institution mediation under Section 12A is mandatory in cases falling within its scope.

This mechanism operates before institution of the commercial suit, whereas Section 89 CPC generally concerns ADR referral after proceedings have reached the court.

Conclusion

Section 89 CPC provides an important statutory basis for alternative dispute resolution within civil litigation. Judicial settlement and mediation under Section 89 encourage parties to resolve suitable disputes through consensual methods rather than prolonged adjudication. Supreme Court decisions such as Salem Advocate Bar Association and Afcons Infrastructure have significantly shaped its operation.

The Mediation Act, 2023 proposes a clearer framework for Section 89, but the relevant amendment has not yet commenced. Consequently, the existing Section 89 CPC continues to govern the present legal position while mediation steadily develops as an important part of India’s civil justice system.