SCOPE OF SECTION 89, THE CIVIL PROCEDURE CODE, 1908

In India Section 89 of Civil Procedure Code, 1908 (CPC) provides for settlements outside the
court. This provision empowers courts to refer the cases to a suitable ADR mechanism
sighting possibility of settlements in such cases. This section has the potential to prevent
unnecessary litigation and reduce number of cases entering litigation. This was highlighted by
the Supreme Court in the case of Afcons Infrastructure Ltd. v. Cherian Varkey
Construction Co. Pvt. Ltd. Where the court observed that civil and commercial should be
sent to ADR to relieve the pressure on the courts.

The promotion of Alternate Dispute Resolution (ADR) has the potential to significantly
reduce the pendency in Indian courts by offering more efficient and amicable solution to the
old, time and resource consuming adversarial litigation. ADR includes:

 Arbitration.
 Conciliation.
 Mediation.
 Lok Adalats.

All these setups aim to settle dispute outside the conventional courtroom, thereby alleviating
the burden on the overburdened courts. One of the main reasons for increased importance of
ADR in India is the increasing number of backlog of cases pending in courts. India is poor
performer in terms of timely enforcement of contracts, it ranked 163 rd out of 190 countries
according to the World Bank Report, this is caused largely due to the high number of cases
already bogging down the judicial system. Thus, highlighting the need and necessity for other
mechanisms to enter the judicial system to expedite conflict resolution and prevent clogging
of cases. The constitutional validity of tribunals was upheld in the case of Union of India v.
Delhi High Court Bar Association where it was challenged that legislature can only make
tribunals for the areas specified in the Constitution, these contentions were denied by the
Apex Court, stating that tribunalisation is possible for the which aren’t explicitly mentioned
u/a 323B.
 LOOPHOLES OF SECTION 89, THE CIVIL PROCEDURE CODE, 1908

Section 89 of the Code of Civil Procedure (CPC), introduced as part of India’s effort to
incorporate Alternative Dispute Resolution (ADR) mechanisms into its justice system, aims
to promote out-of-court settlements through arbitration, conciliation, judicial settlement,
mediation, and Lok Adalat. The intention behind this provision was to expedite dispute
resolution and reduce the burden on traditional courts. However, despite its noble objectives,
Section 89 suffers from significant drafting errors, procedural ambiguities, and
implementation challenges that limit its effectiveness. Some of them are:

 Drafting Anomalies and Structural Challenges: A major loophole lies in the drafting of
Section 89. Sub-section (1) requires courts to "formulate the terms of settlement" and
"reformulate" them after receiving the parties' observations before referring the matter to
an ADR process. As the Supreme Court observed in Afcons Infrastructure Ltd. v.
Cherian Varkey Construction Co. Pvt. Ltd. (2010), this requirement is redundant and
impractical. The court clarified that determining settlement terms is a task for the ADR
mechanism, not the trial judge. This procedural redundancy creates confusion, delays the
referral process, and burdens an already overworked judiciary. Further confusion arises
from the interchanged definitions of “judicial settlement” and “mediation” under Section
89(2)(c) and (d). The Supreme Court rectified this error by clarifying that judicial
settlement involves negotiation facilitated by a judge, while mediation entails a neutral
third party helping disputants reach a consensus. However, the provision’s original text
continues to hinder consistent application across jurisdictions.

 Judicial Settlement: A Neglected Mode of ADR: Judicial settlement, as described in

Section 89(2)(c), has remained largely neglected due to the absence of clear procedural
rules. While Lok Adalats and mediation centers have developed structured frameworks,
judicial settlement suffers from a lack of operational clarity. The provision assumes that
courts can refer disputes to "suitable institutions" or "persons" deemed to be Lok Adalats,
yet it fails to specify the qualifications, processes, or oversight mechanisms for these
entities. The absence of detailed rules has rendered judicial settlement an underutilized
mechanism. In the Salem Advocate Bar Association v. Union of India case, the Supreme
Court directed the framing of model rules to implement Section 89 effectively. However,
 even the rules adopted by various High Courts did not address the specifics of judicial
settlement. This oversight has left judicial settlement as a "dead letter" provision, further
highlighted in the critique by Justice S.U. Khan
 General Implementation Flaws: The overarching issue with Section 89 is its lack of
clarity and operational consistency. Courts face difficulties determining which ADR
mechanism is best suited to a particular case, leading to inconsistent referrals.
Additionally, the absence of confidentiality in judicial proceedings discourages parties
from negotiating settlements openly, further limiting ADR’s effectiveness.

These are some of the major flaws in the provision, others include:

 Limitations of Lok Adalats

 Mediation’s Lack of a Statutory Framework and etc.

AMENDEMENTS SUGGESTED IN SECTION 89

The suggested amendments for Section 89 of CPC are as follows:

 Clarifying the Role of Conciliation and Mediation: One of the key suggestions is to
streamline the process for cases referred to conciliation, mediation, or judicial settlement.
Currently, even when these methods fail, the dispute returns to the judicial system. While
this ensures that the case is ultimately heard by a court, it limits the potential of ADR to
reduce court backlogs. An amendment could require courts to more clearly define when
these methods are suitable and create a more structured process for evaluating their
success or failure. Additionally, it could be useful to introduce a timeline for the ADR
process, ensuring that cases do not linger in these forums indefinitely.
 Providing Stronger Incentives for Participation : Another important amendment could
involve providing stronger incentives for parties to engage in ADR processes. Currently,
while ADR mechanisms like mediation and conciliation are voluntary, it may be
beneficial to introduce certain procedural advantages for parties who agree to participate
in these processes. For example, the court could impose cost penalties or offer reduced
litigation costs for parties who attempt ADR before resorting to litigation. These
incentives would encourage parties to explore out-of-court settlement methods more
seriously.
 Improved Procedures for Arbitration: Arbitration under Section 89 already involves
the application of the Arbitration and Conciliation Act, 1996, which removes the matter
from the judicial system once the parties agree to arbitration. However, not all cases are
suitable for arbitration, especially those involving legal complexities or public interest
concerns. To improve the use of arbitration, the amendment could establish clearer
criteria for identifying which cases are appropriate for arbitration. This would help ensure
that the ADR method is chosen in a manner that optimally suits the nature of the dispute.
 Clear Guidelines for Judicial Settlement: Judicial settlement, particularly through Lok
Adalat, has been a useful tool in resolving disputes. However, its effectiveness is often
hampered by a lack of clear guidelines on how disputes should be settled. To address this,
amendments could introduce clearer criteria for judges to follow when referring cases to
Lok Adalat or judicial settlement, ensuring that these forums are used effectively and
consistently across jurisdictions.

PERMANENT LOK ADALAT AND LEGAL SERVICES AUTHORITIES ACT

 Statutory Framework and Purpose

The 1987 Act, enacted to provide free and competent legal services to weaker sections of
society, established Legal Services Authorities at national, state, and district levels. While the
Act initially focused on organizing Lok Adalats for conciliation-based dispute resolution, it
was amended in 2002 to introduce Chapter VI-A (Sections 22A to 22E), enabling the creation
of Permanent Lok Adalats. PLAs are designed to handle disputes involving public utility
services, defined under Section 22A(b). These include essential services like transport,
telecommunications, power supply, sanitation, and healthcare. The goal is to provide an
accessible forum for the resolution of disputes outside formal courtrooms, ensuring that the
justice system meets the needs of ordinary citizens efficiently and without undue financial
burden. Unlike traditional Lok Adalats, which rely solely on mutual compromise and have no
adjudicatory powers, PLAs combine conciliation and adjudication. This hybrid nature enables
them to resolve disputes when conciliation fails, granting them the authority to issue binding
decisions that are enforceable as decrees of civil courts.
  Procedural Innovations and Jurisdiction

Section 22B of the LSAA mandates the establishment of PLAs by the National Legal
Services Authority (NALSA) or respective State Legal Services Authorities (SLSAs). Each
PLA comprises a Chairperson, who must be a serving or retired judicial officer of the rank of
a District Judge, and two other members experienced in public utility services. Under Section
22C, any party to a dispute involving public utility services can approach a PLA before
initiating formal litigation. The PLA first attempts to resolve the matter through conciliation,
formulating terms of settlement if it identifies elements conducive to resolution. If the parties
fail to agree, the PLA is empowered to adjudicate the dispute, provided it does not pertain to
non-compoundable offences or exceed the monetary limit of ₹1 crore. The procedural
autonomy of PLAs allows them to operate flexibly, unburdened by the strictures of the Civil
Procedure Code or the Indian Evidence Act, while adhering to principles of natural justice
and fairness. Their awards are final and binding, with limited scope for appeal, enhancing the
efficiency and finality of the adjudication process.

 Relationship with Section 89 of the CPC

The introduction of PLAs complements the objectives of Section 89 of the Civil Procedure
Code (CPC), which promotes ADR methods, including arbitration, conciliation, mediation,
and judicial settlement. Courts often refer disputes to PLAs under this framework when
parties and the subject matter align with the provisions of the LSAA. However, PLAs differ
from other ADR methods by specifically focusing on pre-litigation disputes related to public
utility services, enabling parties to bypass traditional court proceedings entirely.

PROCESS OF REFERRING DISPUTES UNDER SECTION 89 TO PERMANENT

LOK ADALATS

Section 89 of the CPC empowers civil courts to refer cases to ADR methods when the court
finds that elements of settlement exist in the dispute. If the subject matter pertains to public
utility services, such as transportation, telecommunications, or healthcare, the case can be
directed to a PLA. Once referred, the PLA assumes jurisdiction and commences proceedings
with the objective of reaching an amicable resolution. The referral process is straightforward:
courts identify cases appropriate for ADR under Section 89 CPC and direct them to PLAs
where the matter involves pre-litigation disputes or arises within the framework of public
utility services. Importantly, PLAs are designed to handle cases even before they reach the
litigation stage, making them an effective preemptive mechanism for dispute resolution.
Upon referral, the PLA begins with conciliation proceedings. The disputing parties are
encouraged to settle through mutual dialogue facilitated by the PLA. If the conciliation fails,
the PLA has the authority to adjudicate the matter under Section 22C(8) of the LSAA,
provided the dispute does not pertain to non-compoundable offences or exceed the prescribed
monetary limit of ₹1 crore. This hybrid model ensures that the process does not collapse due
to lack of consensus, addressing a key limitation of traditional Lok Adalats.

 Disputes Suitable for PLA Intervention

PLAs specifically address disputes related to public utility services, as defined under Section
22A(b) of the LSAA. These include vital services such as:

 Transportation of goods and passengers by air, road, or water.

 Postal, telegraph, and telephone services.
 Supply of power, light, and water to the public.
 Sanitation and public conservancy systems.
 Services provided by hospitals and dispensaries.
 Insurance services.

These sectors have a direct impact on public welfare, making it essential to resolve disputes
swiftly and efficiently. For instance, disagreements over electricity supply interruptions or
insurance claim denials fall squarely within the jurisdiction of PLAs. In such cases, the PLA
offers a forum that is less adversarial and more geared toward practical solutions, thereby
addressing the immediate concerns of affected parties.

 Procedural Aspects: Pre-Litigation Conciliation and Binding Awards

The procedural framework of PLAs, as delineated in the LSAA, emphasizes pre-litigation

conciliation. This phase is central to the PLA’s operation, aiming to resolve disputes without
resorting to adjudication. Under Section 22C(4), the PLA facilitates discussions, guides the
parties toward settlement, and, if possible, formulates terms for agreement. This approach
minimizes delays and reduces the financial burden on parties. If conciliation efforts fail, the
PLA moves to adjudicate the dispute, making it distinct from ordinary Lok Adalats, which
lack such adjudicatory powers. The award issued by a PLA is binding on the parties and
enforceable as a decree of a civil court under Section 22E(1). Notably, the decision cannot be
challenged in any original suit or application, as specified in Section 22E(4). This finality
ensures that disputes are conclusively resolved, reducing the likelihood of prolonged
litigation. In adjudicating disputes, the PLA is guided by principles of natural justice,
objectivity, and equity, as outlined in Section 22D. While it does not strictly adhere to the
procedural norms of the Civil Procedure Code or the Indian Evidence Act, it maintains
fairness and transparency in its proceedings.

LOOPHOLES IN THE SYSTEM OF PERMANENT LOK ADALAT

The Permanent Lok Adalat (PLA) system was introduced under the Legal Services
Authorities Act, 1987, to address disputes efficiently and inexpensively, particularly in the
realm of public utility services. While it represents a significant advancement in alternative
dispute resolution (ADR), the PLA framework is not without its weaknesses. Several
structural and functional loopholes undermine its potential, necessitating reforms for broader
accessibility and greater effectiveness.

 Limited Jurisdiction and Restricted Scope

One of the most significant limitations of the PLA system is its jurisdictional confinement to
disputes concerning public utility services, as defined under Section 22A(b) of the LSAA.
This narrow scope excludes a wide range of legal disputes that could benefit from the PLA's
cost-effective and expeditious resolution mechanisms. Additionally, PLAs are restricted to
handling cases where the value of the property in dispute does not exceed ₹1 crore. These
constraints limit the broader application of PLAs, leaving many citizens unable to avail
themselves of this mechanism for resolving other categories of disputes.

 Challenges in Enforceability and Binding Nature of Awards

The binding nature of PLA awards, which are enforceable as decrees of civil courts, has
raised concerns about procedural fairness. Under Section 22C(8) of the LSAA, PLAs can
adjudicate disputes when conciliation fails, even without the consent of all parties. While this
provision enhances efficiency, it has been criticized for potentially coercing parties into
settlements. Moreover, the lack of a robust appellate mechanism against PLA awards, as per
Section 22E, restricts aggrieved parties from seeking recourse. Although judicial review
under Article 226 of the Constitution remains an option, this is not an accessible remedy for
most litigants, undermining confidence in the PLA system.

 Limited Public Awareness and Accessibility

The PLA system has not reached its full potential due to insufficient public awareness. Many
citizens remain unaware of the existence and advantages of PLAs, particularly in rural areas
where access to information and legal resources is limited. Furthermore, the uneven
distribution of PLAs across regions exacerbates accessibility issues, leaving many potential
beneficiaries without practical recourse to this ADR mechanism.

 Resource Constraints and Operational Limitations

The efficient functioning of PLAs is often hindered by resource constraints. Many PLAs face
a shortage of personnel and infrastructure, which delays the resolution of disputes and
compromises the quality of decisions. Additionally, concerns have been raised about the
qualifications and expertise of PLA members, particularly in handling technically complex
disputes related to public utility services. Although the Chairperson is required to have a
judicial background, the other two members are often generalists, which may lead to
suboptimal adjudication in specialized matters.