IN THE SUPREME COURT OF INDIA        Reportable  

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.6000  OF 2010 (Arising out of SLP (C) No.760 of 2007)

Afcons Infrastructure Ltd. & Anr. … Appellants Vs.

Cherian Varkey Construction Co. (P) Ltd. & Ors. … Respondents

J U D G M E N T

R.V.RAVEENDRAN, J.

Leave granted.  The general scope of Section 89 of the Code of Civil  

Procedure  (‘Code’  for  short)  and  the  question  whether  the  said  section  

empowers the court to refer the parties to a suit to arbitration without the  

consent of both parties, arise for consideration in this appeal.

2. The  second  respondent  (Cochin  Port  Trust)  entrusted  the  work  of  

construction  of  certain  bridges  and  roads  to  the  appellants  under  an  

agreement dated 20.4.2001. The appellants sub-contracted a part of the said  

work to the first respondent under an agreement dated 1.8.2001. It is not in  

dispute that the agreement between the appellants and the first respondent  

did not contain any provision for reference of the disputes to arbitration.

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3. The first respondent filed a suit against the appellants for recovery of  

Rs.210,70,881 from the appellants and their assets and/or the amounts due to  

the appellants from the employer, with interest at 18% per annum. In the  

said suit an order of attachment was made on 15.9.2004 in regard to a sum of  

Rs.2.25  crores.  Thereafter  in  March  2005,  the  first  respondent  filed  an  

application under section 89 of the Code before the trial court praying that  

the  court  may  formulate  the  terms  of  settlement  and refer  the  matter  to  

arbitration.  The  appellants  filed  a  counter  dated  24.10.2005  to  the  

application submitting that they were not agreeable for referring the matter  

to arbitration or any of the other ADR processes under section 89 of the  

Code. In the meanwhile, the High Court of Kerala by order dated 8.9.2005,  

allowed the appeal filed by the appellants against the order of attachment  

and  raised  the  attachment  granted  by  the  trial  court  subject  to  certain  

conditions. While doing so, the High Court also directed the trial court to  

consider and dispose of the application filed by the first respondent under  

section 89 of the Code.  

4. The trial court heard the said application under section 89. It recorded  

the  fact  that  first  respondent  (plaintiff)  was  agreeable  for  arbitration  and  

appellants (defendants 1 and 2) were not agreeable for arbitration. The trial  

court  allowed the  said  application  under  section  89  by  a  reasoned  order  

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dated 26.10.2005 and held that as the claim of the plaintiff in the suit related  

to a work contract, it was appropriate that the dispute should be settled by  

arbitration. It formulated sixteen issues and referred the matter to arbitration.  

The appellants filed a revision against the order of the trial court. The High  

Court  by  the  impugned  order  dated  11.10.2006  dismissed  the  revision  

petition holding that the apparent tenor of section 89 of the Code permitted  

the court, in appropriate cases, to refer even unwilling parties to arbitration.  

The  High  Court  also  held  that  the  concept  of  pre  existing  arbitration  

agreement  which  was  necessary  for  reference  to  arbitration  under  the  

provisions of the Arbitration & Conciliation Act, 1996  (‘AC Act’ for short)  

was inapplicable to references under section 89 of the Code, having regard  

to the decision in  Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya & Anr.  

[2003 (5) SCC 531]. The said order is challenged in this appeal.

5. On the contentions urged, two questions arise for consideration :  

(i) What  is  the  procedure  to  be  followed by a  court  in  implementing  section 89 and Order 10 Rule 1A of the Code?

(ii) Whether consent of all parties to the suit is necessary for reference to  arbitration under section 89 of the Code?  

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6. To find answers to the said questions, we have to analyse the object,  

purpose,  scope and tenor  of  the  said  provisions.  The  said  provisions  are  

extracted below :       

"89. Settlement of disputes outside the court. - (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 -  

(a) arbitration;  (b) conciliation; (c) judicial settlement including settlement through Lok Adalat; or  (d) mediation.  

(2) 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.”  

Order 10 Rule 1A.  Direction of the Court to opt for any one mode of   alternative  dispute  resolution.—After  recording  the  admissions  and  denials, the Court shall direct the parties to the suit to opt either mode of  the settlement outside the Court as specified in sub-section (1) of section  

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89. On the option of the parties, the Court shall fix the date of appearance  before such forum or authority as may be opted by the parties.

Order  10  Rule  1B.  Appearance  before  the  conciliatory  forum  or   authority.—Where a suit is referred under rule 1A, the parties shall appear  before such forum or authority for conciliation of the suit.

Order  10  Rule  1C.  Appearance  before  the  Court  consequent  to  the   failure of efforts of conciliation.—Where a suit is referred under rule 1A  and the presiding officer of conciliation forum or authority is satisfied that  it would not be proper in the interest of justice to proceed with the matter  further,  then, it  shall  refer the matter  again to the Court  and direct the  parties to appear before the Court on the date fixed by it.”  

7. If section 89 is to be read and required to be implemented in its literal  

sense, it will be a Trial Judge’s nightmare. It puts the cart before the horse  

and lays down an impractical, if not impossible, procedure in sub-section  

(1).  It  has  mixed  up the  definitions  in  sub-section  (2).  In  spite  of  these  

defects,  the  object  behind  section  89  is  laudable  and  sound.  Resort  to  

alternative disputes resolution (for short ‘ADR’) processes is necessary to  

give speedy and effective relief to the litigants and to reduce the pendency in  

and burden upon the courts. As ADR processes were not being resorted to  

with the desired frequency, Parliament thought it fit to introduce Section 89  

and Rules 1-A to 1-C in Order X in the Code, to ensure that ADR process  

was resorted to before the commencement of trial  in suits. In view of its  

laudable object, the validity of section 89, with all its imperfections,  was  

upheld in  Salem Advocate  Bar Association v.  Union of  India reported in  

[2003 (1) SCC 49 – for short, Salem Bar - (I)] but referred to a Committee,  

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as it was hoped that section 89 could be implemented by ironing the creases.  

In Salem Advocate Bar Association v. Union of India [2005 (6) SCC 344 –  

for  short,  Salem  Bar-(II)],  this  Court  applied  the  principle  of  purposive  

construction in an attempt to make it workable.  

What is wrong with section 89 of the Code?

8. The first anomaly is the mixing up of the definitions of ‘mediation’  

and  ‘judicial  settlement’  under  clauses  (c)  and  (d)  of  sub-section  (2)  of  

section 89 of the Code. Clause (c) says that for “judicial settlement”, the  

court shall refer the same to a suitable institution or person who shall be  

deemed to be a Lok Adalat. Clause (d) provides that where the reference is  

to “mediation”, the court shall effect a compromise between the parties by  

following such procedure as may be prescribed. It makes no sense to call a  

compromise effected by a court, as “mediation”, as is done in clause (d). Nor  

does it make any sense to describe a reference made by a court to a suitable  

institution or person for arriving at a settlement as “judicial settlement”, as is  

done in clause (c). “Judicial settlement” is a term in vogue in USA referring  

to a settlement of a civil case with the help of a judge who is not assigned to  

adjudicate upon the dispute. “Mediation” is also a well known term and it  

refers to a method of non-binding dispute resolution with the assistance of a  

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neutral  third  party  who  tries  to  help  the  disputing  parties  to  arrive  at  a  

negotiated settlement. It is also synonym of the term ‘conciliation’. (See :  

Black’s Law Dictionary, 7th Edition, Pages 1377 and 996). When words are  

universally  understood  in  a  particular  sense,  and  assigned  a  particular  

meaning in common parlance, the definitions of those words in section 89  

with  interchanged  meanings  has  led  to  confusion,  complications  and  

difficulties  in  implementation.  The  mix-up  of  definitions  of  the  terms  

“judicial settlement” and “mediation” in Section 89 is apparently due to a  

clerical or typographical error in drafting, resulting in the two words being  

interchanged in clauses (c) and (d) of Section 89(2). If the word “mediation”  

in  clause  (d)  and  the  words  “judicial  settlement”  in  clause  (c)  are  

interchanged, we find that the said clauses make perfect sense.  

9. The second anomaly is that sub-section (1) of section 89 imports the  

final stage of conciliation referred to in section 73(1) of the AC Act into the  

pre-ADR reference stage under section 89 of the Code. Sub-section (1) of  

section 89 requires the court to formulate the terms of settlement and give  

them to the parties for their observation and then reformulate the terms of a  

possible  settlement  and  then  refer  the  same  for  any  one  of  the  ADR  

processes. If sub-section (1) of Section 89 is to be literally followed, every  

Trial  Judge  before  framing issues,  is  required  to  ascertain  whether  there  

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exists any elements of settlement which may be acceptable to the parties,  

formulate the terms of settlement, give them to parties for observations and  

then reformulate  the  terms of  a  possible  settlement  before referring it  to  

arbitration, conciliation, judicial settlement, Lok Adalat or mediation.  There  

is nothing that is left to be done by the alternative dispute resolution forum.  

If all these have to be done by the trial court before referring the parties to  

alternative dispute resolution processes, the court itself may as well proceed  

to record the settlement as nothing more is required to be done, as a Judge  

cannot do these unless he acts as a conciliator or mediator and holds detailed  

discussions and negotiations running into hours.   

10. Section 73 of AC Act shows that formulation and reformulation of  

terms of settlement is a process carried out at the final stage of a conciliation  

process, when the settlement is being arrived at. What is required to be done  

at the final stage of conciliation by a conciliator is borrowed lock, stock and  

barrel  into section 89 and the court  is  wrongly required to formulate  the  

terms of settlement and reformulate them at a stage prior to reference to an  

ADR process. This becomes evident by a comparison of the wording of the  

two provisions.  

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Section 73(1) of Arbitration and Conciliation  Act,  1996  relating  to  the  final  stage  of  settlement process in conciliation.  

Section  89(1)  of  Code  of  Civil  Procedure  relating  to  a  stage  before  reference  to  an  ADR process.  

When it appears to the conciliator that there  exist  elements  of a settlement  which may  be  acceptable  to  the  parties,  he  shall  formulate the terms of a possible settlement  and  submit  them  to  the  parties  for  their  observations.  After  receiving  the  observations of the parties, the conciliator  may  reformulate  the  terms  of  a  possible  settlement in the light of such observations.  

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 (a)  arbitration; (b)  conciliation;  (c)   judicial  settlement  including  settlement  through  Lok  Adalat;  or  (d)  mediation.  

Formulation  and  re-formulation  of  terms  of  settlement  by  the  court  is  

therefore wholly out of place at the stage of pre ADR reference.  It is not  

possible for courts to perform these acts at a preliminary hearing to decide  

whether a case should be referred to an ADR process and, if so, which ADR  

process.  

11. If the reference is to be made to arbitration, the terms of settlement  

formulated by the court will be of no use, as what is referred to arbitration is  

the dispute and not the terms of settlement; and the Arbitrator will adjudicate  

upon the dispute and give his decision by way of award. If the reference is to  

conciliation/mediation/Lok  Adalat,  then  drawing  up  the  terms  of  the  

settlement or reformulating them is the job of the conciliator or the mediator  

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or the Lok Adalat,  after  going through the entire  process of conciliation/  

mediation.  Thus,  the  terms  of  settlement  drawn up  by  the  court  will  be  

totally useless in any subsequent ADR process. Why then the courts should  

be burdened with the onerous and virtually impossible, but redundant, task  

of formulating terms of settlement at pre-reference stage?

12. It  will  not  be  possible  for  a  court  to  formulate  the  terms  of  the  

settlement, unless the judge discusses the matter in detail with both parties.  

The  court  formulating  the  terms  of  settlement  merely  on  the  basis  of  

pleadings is  neither  feasible  nor  possible.  The requirement that  the  court  

should formulate the terms of settlement is therefore a great hindrance to  

courts in implementing section 89 of the Code. This Court therefore diluted  

this  anomaly  in  Salem  Bar  (II) by  equating  "terms  of  settlement"  to  a  

“summary of disputes” meaning thereby that the court is only required to  

formulate a ‘summary of disputes’ and not ‘terms of settlement’.  

How should section 89 be interpreted?  

13. The principles of statutory interpretation are well settled. Where the  

words of  the  statute  are  clear  and unambiguous,  the  provision should be  

given its plain and normal meaning, without adding or rejecting any words.  

Departure from the literal rule, by making structural changes or substituting  

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words in a clear statutory provision, under the guise of interpretation will  

pose a great risk as the changes may not be what the Legislature intended or  

desired. Legislative wisdom cannot be replaced by the Judge’s views. As  

observed by this Court in somewhat different context : “When a procedure is  

prescribed by the Legislature, it is not for the court to substitute a different  

one according to its notion of justice. When the Legislature has spoken, the  

Judges cannot afford to be wiser.” (See :  Shri Mandir Sita Ramji vs.  Lt.   

Governor of Delhi – (1975) 4 SCC 298). There is however an exception to  

this general rule. Where the words used in the statutory provision are vague  

and  ambiguous  or  where  the  plain  and  normal  meaning  of  its  words  or  

grammatical  construction  thereof  would  lead  to  confusion,  absurdity,  

repugnancy with other provisions, the courts may, instead of adopting the  

plain and grammatical construction, use the interpretative tools to set right  

the situation, by adding or omitting or substituting the words in the Statute.  

When faced with an apparently defective provision in a statute, courts prefer  

to  assume  that  the  draftsman  had  committed  a  mistake  rather  than  

concluding  that  the  Legislature  has  deliberately  introduced  an  absurd  or  

irrational  statutory provision.  Departure from the literal  rule of  plain and  

straight  reading  can  however  be  only  in  exceptional  cases,  where  the  

anomalies make the literal compliance of a provision impossible, or absurd  

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or so impractical as to defeat the very object of the provision. We may also  

mention purposive interpretation to avoid absurdity and irrationality is more  

readily and easily employed in relation to procedural provisions than with  

reference to substantive provisions.  

13.1) Maxwell on Interpretation of Statutes (12th Edn., page 228), under the  

caption ‘modification of the language to meet the intention’ in the chapter  

dealing with ‘Exceptional Construction’ states the position succinctly:

“Where the language of a statute, in its ordinary meaning and grammatical  construction, leads to a manifest contradiction of the apparent purpose of  the  enactment,  or  to  some  inconvenience  or  absurdity,  hardship  or  injustice, which can hardly have been intended, a construction may be put  upon it which modifies the meaning of the words, and even the structure  of the sentence. This may be done by departing from the rules of grammar,  by giving an unusual meaning to particular words, or by rejecting them  altogether,  on  the  ground  that  the  legislature  could  not  possibly  have  intended what its words signify, and that the modifications made are mere  corrections of careless language and really give the true meaning. Where  the main object and intention of a statute are clear, it must not be reduced  to a nullity by the draftman’s unskilfulness or ignorance of the law, except  in a case of necessity, or the absolute intractability of the language used.”

This Court in Tirath Singh v. Bachittar Singh [AIR 1955 SC 830] approved  

and adopted the said approach.   

13.2) In  Shamrao  V.Parulekar  v.  District  Magistrate,  Thana,  Bombay  

[AIR 1952 SC 324], this Court reiterated the principle from Maxwell:   

“…..if one construction will lead to an absurdity while another will give  effect  to  what  commonsense  would  show was  obviously  intended,  the  construction which would defeat the ends of the Act must be rejected even  

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if the same words used in the same section, and even the same sentence,  have to be construed differently. Indeed, the law goes so far as to require  the Courts sometimes even to modify the grammatical and ordinary sense  of the words if by doing so absurdity and inconsistency can be avoided.”

13.3) In Molar Mal vs.  Kay Iron Works (P) Ltd. – 2004 (4) SCC 285, this  

Court  while  reiterating  that  courts  will  have to  follow the rule  of  literal  

construction,  which  enjoins  the  court  to  take  the  words  as  used  by  the  

Legislature  and to give it  the meaning which naturally  implies,  held that  

there is an exception to that rule. This Court observed :  

“That exception comes into play when application of literal construction  of the words in the statute leads to absurdity, inconsistency or when it is  shown that the legal context in which the words are used or by reading the  statute as a whole, it requires a different meaning.”   

13.4) In Mangin v. Inland Revenue Commission [1971 (1) All.ER 179], the  

Privy Council held:  

“……The object of the construction of a statute, be it to ascertain the will  of the legislature, it may be presumed that neither injustice nor absurdity  was intended. If, therefore a literal interpretation would produce such a  result, and the language admits of an interpretation which would avoid it,  then such an interpretation may be adopted.”  

13.5) A classic example of correcting an error committed by the draftsman  

in legislative drafting is the substitution of the words ‘defendant’s witnesses’  

by this Court for the words ‘plaintiff’s witnesses’ occurring in Order VII  

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Rule 14(4) of the Code, in  Salem Bar-II.   We extract below the relevant  

portion of the said decision :  

“Order VII relates to the production of documents by the plaintiff whereas  Order VIII relates to production of documents by the defendant.  Under  Order  VIII  Rule 1A(4)  a  document  not  produced by defendant  can be  confronted to the plaintiff's witness during cross-examination. Similarly,  the plaintiff  can also confront the defendant's  witness with a document  during cross-examination. By mistake, instead of 'defendant's witnesses',  the words 'plaintiff's witnesses' have been mentioned in Order VII Rule  (4). To avoid any confusion, we direct that till the legislature corrects the  mistake,  the  words  'plaintiff’s  witnesses,  would be read as  'defendant's  witnesses' in Order VII Rule 4. We, however, hope that the mistake would  be expeditiously corrected by the legislature.”

13.6) Justice G.P. Singh extracts four conditions that should be present to  

justify  departure  from  the  plain  words  of  the  Statute,  in  his  treatise  

“Principles  of  Statutory Interpretation” (12th Edn.  – 2010, Lexis  Nexis  -  

page 144) from the decision of the House of Lords in Stock v. Frank Jones  

(Tipton) Ltd., [1978 (1) All ER 948] :  

“……a court would only be justified in departing from the plain words of  the statute when it is satisfied that (1) there is clear and gross balance of  anomaly; (2) Parliament, the legislative promoters and the draftsman could  not have envisaged such anomaly and could not have been prepared to  accept  it  in  the  interest  of  a  supervening  legislative  objective;  (3)  the  anomaly can be obviated without detriment to such a legislative objective;  and  (4)  the  language  of  the  statute  is  susceptible  of  the  modification  required to obviate the anomaly.”

14. All the aforesaid four conditions justifying departure from the literal  

rule, exist with reference to section 89 of the Code. Therefore, in Salem Bar  

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–II, by judicial interpretation the entire process of formulating the terms of  

settlement, giving them to the parties for their observation and reformulating  

the terms of possible settlement after receiving the observations, contained  

in sub-section (1) of section 89, is excluded or done away with by stating  

that the said provision merely requires formulating a summary of disputes.  

Further,  this  Court  in  Salem Bar-II,  adopted  the  following  definition  of  

‘mediation’ suggested in the model mediation rules, in spite of a different  

definition in section 89(2)(d) :  

“Settlement  by  ‘mediation’  means  the  process  by  which  a  mediator  appointed by parties or by the Court,  as the case may be, mediates the  dispute between the parties to the suit by the application of the provisions  of the Mediation Rules, 2003 in Part II, and in particular, by facilitating  discussion between parties directly or by communicating with each other  through the mediator, by assisting parties in identifying issues, reducing  misunderstandings,  clarifying  priorities,  exploring areas of compromise,  generating options in an attempt to solve the dispute and emphasizing that  it  is  the  parties’  own  responsibility  for  making  decisions  which  affect  them.”

All over the country the courts have been referring cases under section 89 to  

mediation  by assuming and understanding ‘mediation’  to mean a  dispute  

resolution process by negotiated settlement with the assistance of a neutral  

third party. Judicial settlement is understood as referring to a compromise  

entered  by  the  parties  with  the  assistance  of  the  court  adjudicating  the  

matter, or another Judge to whom the court had referred the dispute.  

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15. Section 89 has to be read with Rule 1-A of Order 10 which requires  

the court to direct the parties to opt for any of the five modes of alternative  

dispute resolution processes and on their option refer the matter. The said  

rule does not require the court to either formulate the terms of settlement or  

make available such terms of settlement  to the parties  to reformulate  the  

terms of possible settlement after receiving the observations of the parties.  

Therefore the only practical way of reading Section 89 and Order 10, Rule  

1-A  is  that  after  the  pleadings  are  complete  and  after  seeking  

admission/denials wherever required, and before framing issues, the court  

will  have recourse to section 89 of the Code. Such recourse requires the  

court  to consider and record the nature of the dispute, inform the parties  

about the five options available and take note of their preferences and then  

refer them to one of the alternative dispute resolution processes.  

16. In  view  of  the  foregoing,  it  has  to  be  concluded  that  proper  

interpretation of section 89 of the Code requires two changes from a plain  

and literal reading of the section.  Firstly, it is not necessary for the court,  

before referring the parties to an ADR process to formulate or re-formulate  

the  terms  of  a  possible  settlement.  It  is  sufficient  if  the  court  merely  

describes  the  nature  of  dispute  (in  a  sentence  or  two)  and  makes  the  

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reference.  Secondly, the definitions of ‘judicial settlement’ and ‘mediation’  

in  clauses  (c)  and  (d)  of  section  89(2)  shall  have  to  be  interchanged  to  

correct  the draftsman’s  error.  Clauses (c)  and (d)  of  section 89(2)  of the  

Code will read as under when the two terms are interchanged:

(c) for “mediation”, 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 “judicial settlement”, the court shall effect a compromise between  the parties and shall follow such procedure as may be prescribed.

The above changes made by interpretative process shall remain in force till  

the  legislature  corrects  the  mistakes,  so  that  section  89  is  not  rendered  

meaningless and infructuous.  

Whether the reference to ADR Process is mandatory?

17. Section 89 starts with the words “where it appears to the court that   

there exist elements of a settlement”. This clearly shows that cases which are  

not suited for ADR process should not be referred under section 89 of the  

Code. The court has to form an opinion that a case is one that is capable of  

being referred to and settled through ADR process.  Having regard to the  

tenor of the provisions of Rule 1A of Order 10 of the Code, the civil court  

17

should  invariably refer cases to ADR process. Only in certain recognized  

excluded categories of cases, it may choose not to refer to an ADR process.  

Where the case is unsuited for reference to any of the ADR process,  the  

court will have to briefly record the reasons for not resorting to any of the  

settlement procedures prescribed under section 89 of the Code. Therefore,  

having a hearing after completion of pleadings, to consider recourse to ADR  

process under section 89 of the Code, is mandatory. But actual reference to  

an ADR process in all cases is not mandatory. Where the case falls under an  

excluded category there need not be reference to ADR process. In all other  

case reference to ADR process is a must.  

18. The following categories of cases are normally considered to be not  

suitable for ADR process having regard to their nature :  

(i) Representative 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).  

(ii) 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.).  

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(iii) Cases involving grant of authority by the court after enquiry, as for  

example, suits for grant of probate or letters of administration.

(iv) Cases involving serious and specific allegations of fraud, fabrication  

of documents, forgery, impersonation, coercion etc.  

(v) Cases requiring protection of courts, as for example, claims against  

minors,  deities  and mentally  challenged  and  suits  for  declaration  of  title  

against government.  

(vi) Cases involving prosecution for criminal offences.  

19. All  other suits and cases of civil  nature in particular  the following  

categories  of  cases  (whether  pending  in  civil  courts  or  other  special  

Tribunals/Forums) are normally suitable for ADR processes :  

(i) All cases relating to trade, commerce and contracts, including   

- disputes arising out of contracts (including all money claims); - disputes relating to specific performance; - disputes between suppliers and customers; - disputes between bankers and customers; - disputes between developers/builders and customers; - disputes between landlords and tenants/licensor and licensees;  - disputes between insurer and insured;

(ii) All cases arising from strained or soured relationships, including  

- disputes relating to matrimonial causes, maintenance, custody of  children;

- disputes relating to partition/division among family members/co- parceners/co-owners; and

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- disputes relating to partnership among partners.  

(iii) All  cases  where there  is  a  need for  continuation  of  the  pre-existing  relationship in spite of the disputes, including  

- disputes  between  neighbours  (relating  to  easementary  rights,   encroachments, nuisance etc.);  

- disputes between employers and employees; - disputes  among  members  of  societies/associations/Apartment   

owners Associations;  

(iv) All cases relating to tortious liability including  

- claims for compensation in motor accidents/other accidents; and

(v) All consumer disputes including  

- disputes where a trader/supplier/manufacturer/service provider is  keen  to  maintain  his  business/professional  reputation  and  credibility or ‘product popularity.  

The above enumeration of ‘suitable’ and ‘unsuitable’ categorization of cases  

is not intended to be exhaustive or rigid. They are illustrative, which can be  

subjected to just exceptions or additions by the court/Tribunal exercising its  

jurisdiction/discretion in referring a dispute/case to an ADR process.  

How to decide the appropriate ADR process under section 89?

20. Section 89 refers to five types of ADR procedures, made up of one  

adjudicatory  process  (arbitration)  and four  negotiatory  (non adjudicatory)  

processes  -  conciliation,  mediation,  judicial  settlement  and  Lok  Adalat  

20

settlement. The object of section 89 of the Code is that settlement should be  

attempted by adopting an appropriate ADR process before the case proceeds  

to trial. Neither section 89 nor Rule 1A of Order 10 of the Code is intended  

to supersede or modify the provisions of the Arbitration and Conciliation  

Act, 1996 or the Legal Services Authorities Act, 1987. On the other hand,  

section  89  of  the  Code makes  it  clear  that  two of  the  ADR processes  -  

Arbitration and Conciliation, will be governed by the provisions of the AC  

Act and two other ADR Processes - Lok Adalat Settlement and Mediation  

(See : amended definition in para 18 above),  will be governed by the Legal  

Services Authorities Act. As for the last of the ADR processes – judicial  

settlement (See : amended definition in para 18 above), section 89 makes it  

clear that it is not governed by any enactment and the court will follow such  

procedure as may be prescribed (by appropriate rules).  

21. Rule  1A of  Order  10  requires  the  court  to  give  the  option  to  the  

parties,  to  choose  any  of  the  ADR  processes.  This  does  not  mean  an  

individual option, but a joint option or consensus about the choice of the  

ADR process. On the other hand, section 89 vests the choice of reference to  

the court. There is of course no inconsistency. Section 89 of the Code gives  

the jurisdiction to refer to ADR process and Rules 1A to IC of Order 10 lay  

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down  the  manner  in  which  the  said  jurisdiction  is  to  be  exercised.  The  

scheme  is  that  the  court  explains  the  choices  available  regarding  ADR  

process to the parties, permits them to opt for a process by consensus, and if  

there is no consensus, proceeds to choose the process.  

22. Let  us  next  consider  which  of  the  ADR processes  require  mutual  

consent  of  the  parties  and  which  of  them do not  require  the  consent  of  

parties.  

Arbitration  

23. Arbitration is an adjudicatory dispute resolution process by a private  

forum, governed by the provisions of the AC Act. The said Act makes it  

clear that there can be reference to arbitration only if there is an ‘arbitration  

agreement’  between  the  parties.  If  there  was  a  pre-existing  arbitration  

agreement  between  the  parties,  in  all  probability,  even  before  the  suit  

reaches the stage governed by Order 10 of the Code, the matter would have  

stood referred to arbitration either by invoking section 8 or section 11 of the  

AC Act, and there would be no need to have recourse to arbitration under  

section 89 of the Code. Section 89 therefore pre-supposes that there is no  

pre-existing  arbitration  agreement.  Even  if  there  was  no  pre-existing  

22

arbitration agreement, the parties to the suit can agree for arbitration when  

the choice of ADR processes is offered to them by the court under section 89  

of  the Code.  Such agreement can be by means  of a  joint  memo or joint  

application  or  a  joint  affidavit  before  the  court,  or  by  record  of  the  

agreement by the court in the ordersheet signed by the parties. Once there is  

such an agreement in writing signed by parties, the matter can be referred to  

arbitration  under  section  89  of  the  Code;  and  on  such  reference,  the  

provisions of AC Act will apply to the arbitration, and as noticed in Salem  

Bar-I, the case will go outside the stream of the court permanently and will  

not come back to the court.   

24. If  there  is  no  agreement  between  the  parties  for  reference  to  

arbitration, the court cannot refer the matter to arbitration under section 89  

of the Code. This is evident from the provisions of AC Act. A court has no  

power, authority or jurisdiction to refer unwilling parties to arbitration,  if  

there  is  no  arbitration  agreement.  This  Court  has  consistently  held  that  

though  section  89  of  the  Code  mandates  reference  to  ADR  processes,  

reference to arbitration under section 89 of the Code could only be with the  

consent of both sides and not otherwise.  

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24.1) In Salem Bar (I), this Court held :

“It is quite obvious that the reason why Section 89 has been inserted is to  try and see that all the cases which are filed in court need not necessarily  be decided by the court itself. Keeping in mind the law’s delays and the  limited  number  of  Judges  which  are  available,  it  has  now  become  imperative  that  resort  should  be  had  to  alternative  dispute  resolution  mechanism with a view to bring to an end litigation between the parties at  an  early  date.  The  alternative  dispute  resolution  (ADR)  mechanism as  contemplated  by  Section  89  is  arbitration  or  conciliation  or  judicial  settlement including settlement through Lok Adalat or mediation. x x x x x  If the parties agree to arbitration, then the provisions of the Arbitration  and Conciliation Act, 1996 will apply and that case will go outside the   stream of the court  but resorting to conciliation or judicial settlement or  mediation with a view to settle the dispute would not ipso facto take the  case outside the judicial system. All that this means is that effort has to be  made to bring  about  an  amicable  settlement  between the  parties  but  if  conciliation  or  mediation  or  judicial  settlement  is  not  possible,  despite  efforts being made, the case will ultimately go to trial.”    

(Emphasis supplied)

24.2) In Salem Bar - (II), this Court held :

“Some doubt as to a possible conflict has been expressed in view of used  of the word “may” in Section 89 when it stipulates that “the court may  reformulate the terms of  a possible settlement and refer the same for” and  use of the word “shall” in Order 10 Rule 1-A when it states that “the court   shall  direct the parties to the suit  to opt either mode of the settlement   outside the court as specified in sub-section (1) of Section 89”.

The intention of the legislature behind enacting Section 89 is that where it   appears to the court that there exists an element of a settlement which  may be acceptable to the parties, they, at the instance of the court, shall   be made to apply their mind so as to opt for one or the other of the four   ADR methods mentioned in the section and if the parties do not agree, the   court shall refer them to one or the other of the said modes. Section 89  uses both the words “shall” and “may” whereas Order 10 Rule 1-A uses  the word “shall” but on harmonious reading of these provisions it becomes  clear that the use of the word “may” in Section 89 only governs the aspect  of reformulation of the terms of a possible settlement and its reference to  one  of  ADR methods.  There  is  no  conflict.  It  is  evident  that  what  is  referred to one of the ADR modes is the dispute which is summarized in   the terms of settlement formulated or reformulated in terms of Section 89.

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One of the modes to which the dispute can be referred is “arbitration”.  Section  89(2)  provides  that  where  a  dispute  has  been  referred  for  arbitration  or  conciliation,  the  provisions  of  the  Arbitration  and  Conciliation Act,  1996 (for short  “the 1996 Act”)  shall  apply as if  the  proceedings  for  arbitration  or  conciliation  were  referred  for  settlement  under the provisions of the 1996 Act. Section 8 of the 1996 Act deals with  the  power  to  refer  parties  to  arbitration  where  there  is  arbitration  agreement. As held in P.Anand Gajapathi Raju v. P.V.G. Raju [2000 (4)  SCC 539] the 1996 Act governs a case where arbitration is agreed upon  before or pending a suit by all the parties. The 1996 Act, however, does  not contemplate a situation as in Section 89 of the Code where the court  asks the parties to choose one or other ADRs including arbitration and the  parties choose arbitration as their option.  Of course, the parties have to   agree for arbitration.”   

                                                  (Emphasis   

supplied)

24.3) The  position  was  reiterated  by  this  Court  in  Jagdish  Chander  v.   

Ramesh Chander [2007 (5) SCC 719] thus :

“It should not also be overlooked that even though Section 89 mandates  courts  to  refer  pending  suits  to  any  of  the  several  alternative  dispute  resolution processes mentioned therein,  there cannot be a reference to   arbitration even under Section 89 CPC, unless there is a mutual consent   of all parties, for such reference.”

  (Emphasis   supplied)

24.4) Therefore,  where  there  is  no  pre-existing  arbitration  agreement  

between  the  parties,  the  consent  of  all  the  parties  to  the  suit  will  be  

necessary,  for referring the subject  matter  of the suit  to arbitration under  

section 89 of the Code.

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Conciliation

25. Conciliation is  a  non-adjudicatory  ADR  process,  which  is  also  

governed by the provisions of AC Act. There can be a valid reference to  

conciliation only if  both parties  to the dispute agree to have negotiations  

with the help of a third party or third parties either by an agreement or by the  

process  of  invitation  and  acceptance  provided  in  section  62  of  AC  Act  

followed by appointment of conciliator/s as provided in section 64 of AC  

Act.   If  both  parties  do  not  agree  for  conciliation,  there  can  be  no  

‘conciliation’.  As  a  consequence,  as  in  the  case  of  arbitration,  the  court  

cannot refer the parties to conciliation under section 89, in the absence of  

consent  by  all  parties.  As  contrasted  from arbitration,  when  a  matter  is  

referred to conciliation, the matter does not go out of the stream of court  

process permanently. If there is no settlement, the matter is returned to the  

court for framing issues and proceeding with the trial.  

The other three ADR Processes  

26. If the parties are not agreeable for either arbitration or conciliation,  

both of which require consent of all parties, the court has to consider which  

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of  the  other  three  ADR  processes  (Lok  Adalat,  Mediation  and  Judicial  

Settlement)  which  do  not  require  the  consent  of  parties  for  reference,  is  

suitable  and  appropriate  and  refer  the  parties  to  such  ADR  process.  If  

mediation  process  is  not  available  (for  want  of  a  mediation  centre  or  

qualified  mediators),  necessarily  the  court  will  have  to  choose  between  

reference to Lok Adalat  or  judicial  settlement.  If  facility  of  mediation  is  

available,  then  the  choice  becomes  wider.  It  the  suit  is  complicated  or  

lengthy,  mediation  will  be  the  recognized  choice.  If  the  suit  is  not  

complicated  and  the  disputes  are  easily  sortable  or  could  be  settled  by  

applying clear cut legal principles, Lok Adalat will be the preferred choice.  

If  the  court  feels  that  a  suggestion  or  guidance  by  a  Judge  would  be  

appropriate, it can refer it to another Judge for dispute resolution. The court  

has used its discretion in choosing the ADR process judiciously, keeping in  

view the nature of disputes,  interests  of parties and expedition in dispute  

resolution.   

Whether the settlement in an ADR process is binding in itself ?

27. When the court refers the matter to arbitration under Section 89 of the  

Act,  as already noticed, the case goes out of the stream of the court and  

becomes an independent proceeding before the arbitral tribunal.  Arbitration  

27

being an adjudicatory process, it always ends in a decision. There is also no  

question of failure of ADR process or the matter being returned to the court  

with a failure report. The award of the arbitrators is binding on the parties  

and is  executable/enforceable  as  if  a  decree  of  a  court,  having regard  to  

Section 36 of the AC Act.  If any settlement  is reached in the arbitration  

proceedings,  then  the  award  passed  by  the  Arbitral  Tribunal  on  such  

settlement, will also be binding and executable/enforceable as if a decree of  

a court, under Section 30 of the AC Act.  

28. The other four ADR processes are non-adjudicatory and the case does  

not go out of the stream of the court when a reference is made to such a non-

adjudicatory ADR forum. The court retains its control and jurisdiction over  

the case, even when the matter is before the ADR forum.   When a matter is  

settled through conciliation, the Settlement Agreement is enforceable as if it  

is a decree of the court having regard to Section 74 read with Section 30 of  

the AC Act. Similarly, when a settlement takes place before the Lok Adalat,  

the Lok Adalat award is also deemed to be a decree of the civil court and  

executable as such under Section 21 of the Legal Services Authorities Act,  

1987.  Though the  settlement  agreement  in  a  conciliation  or  a  settlement  

award of a Lok Adalat may not require the seal of approval of the court for  

its enforcement when they are made in a direct reference by parties without  

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the intervention of court, the position will be different if they are made on a  

reference by a court in a pending suit/proceedings. As the court continues to  

retain control and jurisdiction over the cases which it refers to conciliations,  

or Lok Adalats, the settlement agreement in conciliation or the Lok Adalat  

award will have to be placed before the court for recording it and disposal in  

its  terms.  Where the  reference is  to a  neutral  third party  (‘mediation’  as  

defined above) on a court reference, though it will be deemed to be reference  

to Lok Adalat, as court retains its control and jurisdiction over the matter,  

the  mediation  settlement  will  have  to  be  placed  before  the  court  for  

recording  the  settlement  and  disposal.  Where  the  matter  is  referred  to  

another  Judge  and  settlement  is  arrived  at  before  him,  such  settlement  

agreement will also have to be placed before the court which referred the  

matter  and  that  court  will  make  a  decree  in  terms  of  it.  Whenever  such  

settlements  reached  before   non-adjudicatory  ADR Fora  are  placed  before  the  

court, the court should apply the principles of Order 23 Rule 3 of the Code and  

make a decree/order in terms of the settlement, in regard to the subject matter of  

the suit/proceeding. In regard to matters/disputes which are not the subject matter  

of the suit/proceedings, the court will have to direct that the settlement shall be  

governed  by  Section  74  of  AC Act  (in  respect  of  conciliation  settlements)  or  

Section 21 of the Legal Services Authorities Act, 1987 (in respect of settlements  

by a Lok Adalat or a Mediator). Only then such settlements will be effective.  

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Summation

29. Having  regard  to  the  provisions  of  Section  89  and  Rule  1-A  of  

Order 10, the stage at which the court should explore whether the matter  

should be referred to ADR processes, is after the pleadings are complete,  

and before framing the issues, when the matter is taken up for preliminary  

hearing for examination of parties under Order 10 of the Code. However, if  

for any reason, the court had missed the opportunity to consider and refer the  

matter to ADR processes under Section 89 before framing issues, nothing  

prevents the court from resorting to Section 89 even after framing issues.  

But once evidence is commenced,  the court  will  be reluctant  to refer the  

matter to the ADR processes lest it becomes a tool for protracting the trial.  

30. Though in civil suits, the appropriate stage for considering reference  

to ADR processes is after the completion of pleadings, in family disputes or  

matrimonial cases, the position can be slightly different. In those cases, the  

relationship  becomes hostile  on account  of  the  various  allegations  in  the  

petition against the spouse. The hostility will be further aggravated by the  

counter-allegations made by the respondent in his or her written statement or  

objections. Therefore, as far as Family Courts are concerned, the ideal stage  

30

for mediation will be immediately after service of respondent and before the  

respondent files objections/written statements. Be that as it may.  

31. We may summarize  the  procedure to be adopted by a  court  under  

section 89 of the Code as under :  

a) When the pleadings are complete, before framing issues, the court  

shall fix a preliminary hearing for appearance of parties. The court  

should acquaint itself with the facts of the case and the nature of  

the dispute between the parties.

b) The court should first consider whether the case falls under any of  

the category of the cases which are required to be tried by courts  

and not fit to be referred to any ADR processes. If it finds the case  

falls under any excluded category, it  should record a brief order  

referring to the nature of the case and why it is not fit for reference  

to ADR processes. It will then proceed with the framing of issues  

and trial.   

c) In  other  cases  (that  is,  in  cases  which  can be  referred to  ADR  

processes)  the  court  should  explain  the  choice  of  five  ADR  

processes to the parties to enable them to exercise their option.

d) The court should first ascertain whether the parties are willing for  

arbitration. The court should inform the parties that arbitration is  

an adjudicatory process by a chosen private forum and reference to  

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arbitration will permanently take the suit outside the ambit of the  

court.  The  parties  should  also  be  informed  that  the  cost  of  

arbitration  will  have  to  be borne by  them.  Only  if  both parties  

agree for arbitration, and also agree upon the arbitrator, the matter  

should be referred to arbitration.  

e) If  the  parties  are  not  agreeable  for  arbitration,  the  court  should  

ascertain  whether  the  parties  are  agreeble  for  reference  to  

conciliation which will be governed by the provisions of the AC  

Act. If all the parties agree for reference to conciliation and agree  

upon the conciliator/s, the court can refer the matter to conciliation  

in accordance with section 64 of the AC Act.  

f) If parties are not agreeable for arbitration and conciliation, which  

is likely to happen in most of the cases for want of consensus, the  

court should, keeping in view the preferences/options of parties,  

refer the matter to any one of the other three other ADR processes :  

(a) Lok Adalat; (b) mediation by a neutral third party facilitator or  

mediator; and (c) a judicial settlement, where a Judge assists the  

parties to arrive at a settlement.  

(g) If the case is simple which may be completed in a single sitting, or  

cases  relating  to  a  matter  where  the  legal  principles  are  clearly  

settled and there is no personal animosity between the parties (as in  

the case of motor accident claims), the court may refer the matter  

to  Lok  Adalat.  In  case  where  the  questions  are  complicated  or  

cases which may require several rounds of negotiations, the court  

32

may refer the matter to mediation. Where the facility of mediation  

is not available or where the parties opt for the guidance of a Judge  

to arrive at a settlement, the court may refer  the matter to another  

Judge for attempting settlement.

(h) If the reference to the ADR process fails, on receipt of the Report  

of the ADR Forum, the court shall proceed with hearing of the suit.  

If there is a settlement, the court shall examine the settlement and  

make a decree in terms of it, keeping the principles of Order 23  

Rule 3 of the Code in mind.  

(i) If the settlement includes disputes which are not the subject matter  

of the suit, the court may direct that the same will be governed by  

Section 74 of the AC Act (if  it  is a  Conciliation Settlement) or  

Section 21 of the Legal Services Authorities Act, 1987 (if it is a  

settlement by a Lok Adalat or by mediation which is a deemed Lok  

Adalat).  This  will  be  necessary  as  many  settlement  agreements  

deal with not only the disputes which are the subject matter of the  

suit or proceeding in which the reference is made, but also other  

disputes which are not the subject matter of the suit.  

(j) If any term of the settlement is ex facie illegal or unforceable, the  

court should draw the attention of parties thereto to avoid further  

litigations and disputes about executability.  

33

32. The  Court  should  also  bear  in  mind  the  following  consequential  

aspects, while giving effect to Section 89 of the Code :  

(i) If the reference is to arbitration or conciliation, the court has to record  

that the reference is by mutual consent. Nothing further need be stated in the  

order sheet.  

(ii) If the reference is to any other ADR process, the court should briefly  

record that having regard to the nature of dispute, the case deserves to be  

referred to Lok Adalat, or mediation or judicial settlement, as the case may  

be. There is no need for an elaborate order for making the reference.  

(iii) The requirement in Section 89(1) that the court should formulate or  

reformulate the terms of settlement would only mean that court has to briefly  

refer to the nature of dispute and decide upon the appropriate ADR process.   

(iv) If the Judge in charge of the case assists the parties and if settlement  

negotiations fail, he should not deal with the adjudication of the matter, to  

avoid apprehensions of bias and prejudice. It is therefore advisable to refer  

cases proposed for Judicial Settlement to another Judge.

(v) If  the  court  refers  the  matter  to  an  ADR  process  (other  than  

Arbitration), it should keep track of the matter by fixing a hearing date for  

the ADR Report. The period allotted for the ADR process can normally vary  

from a week to two months (which may be extended in exceptional cases,  

depending upon the availability of the alternative forum, the nature of case  

etc.).  Under no circumstances the court should allow the ADR process to  

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become a tool in the hands of an unscrupulous litigant intent upon dragging  

on the proceedings.  

(vi) Normally the court  should not send the original  record of the case  

when referring the matter for an ADR forum. It should make available only  

copies  of  relevant  papers  to  the  ADR  forum.   (For  this  purpose,  when  

pleadings  are  filed  the  court  may  insist  upon  filing  of  an  extra  copy).  

However if the case is referred to a Court annexed Mediation Centre which  

is  under  the  exclusive  control  and  supervision  of  a  Judicial  Officer,  the  

original file may be made available wherever necessary.

33. The procedure and consequential aspects referred to in the earlier two  

paragraphs are intended to be general guidelines subject to such changes as  

the concerned court may deem fit with reference to the special circumstances  

of a case. We have referred to the procedure and process rather elaborately  

as we find that section 89 has been a non-starter with many courts. Though  

the  process  under  Section  89  appears  to  be  lengthy  and  complicated,  in  

practice  the  process  is  simple:  know  the  dispute;  exclude  ‘unfit’  cases;  

ascertain consent for arbitration or conciliation; if there is no consent, select  

Lok Adalat  for  simple cases  and mediation  for  all  other  cases,  reserving  

reference to a Judge assisted settlement only in exceptional or special cases.  

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Conclusion

34. Coming back to this case, we may refer to the decision in  Sukanya  

Holdings relied upon by the respondents, to contend that for a reference to  

arbitration under section 89 of the Code, consent of parties is not required.  

The High Court assumed that  Sukanya Holdings has held that section 89  

enables the civil court to refer a case to arbitration even in the absence of an  

arbitration  agreement.  Sukanya  Holdings does  not  lay  down  any  such  

proposition.  In that decision, this Court was considering the question as to  

whether an application under section 8 of the AC Act could be maintained  

even where a part of the subject matter of the suit was not covered by an  

arbitration agreement.    The only observations in the decision relating to  

Section 89 are as under:

“Reliance was placed on Section 89 CPC in support of the argument that  the matter should have been referred to arbitration. In our view, Section 89  CPC cannot be resorted to for interpreting Section 8 of the Act as it stands  on a different footing and it would be applicable even in cases where there  is  no  arbitration  agreement  for  referring  the  dispute  for  arbitration.  Further, for that purpose, the court has to apply its mind to the condition  contemplated under Section 89 CPC and even if application under Section  8  of  the  Act  is  rejected,  the  court  is  required  to  follow the  procedure  prescribed under the said section.”

The observations only mean that even when there is no existing arbitration  

agreement enabling filing of an application under section 8 of the Act, there  

can  be  a  reference  under  section  89  to  arbitration  if  parties  agree  to  

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arbitration.   The observations in  Sukanya Holdings  do not assist  the first  

respondent as they were made in the context of considering a question as to  

whether section 89 of the Code could be invoked for seeking a reference  

under section 8 of the AC Act in a suit, where only a part of the subject-

matter of the suit was covered by arbitration agreement and other parts were  

not covered by arbitration agreement. The first respondent next contended  

that the effect of the decision in  Sukanya Holdings is that “section 89 of  

CPC  would  be  applicable  even  in  cases  where  there  is  no  arbitration  

agreement for referring the dispute to arbitration.” There can be no dispute  

in  regard  to  the  said  proposition  as  Section  89  deals,  not  only  with  

arbitration  but  also  four  other  modes  of  non-adjudicatory  resolution  

processes  and  existence  of  an  arbitration  agreement  is  not  a  condition  

precedent for exercising power under Section 89 of the Code in regard to the  

said four ADR processes.  

35. In  the  light  of  the  above  discussion,  we  answer  the  questions  as  

follows :  

(i) The trial  court  did not  adopt  the proper  procedure while enforcing  

Section  89  of  the  Code.  Failure to  invoke  Section  89  suo  moto after  

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completion of pleadings and considering it only after an application under  

Section 89 was filed, is erroneous.  

(ii) A civil court exercising power under Section 89 of the Code cannot  

refer  a  suit  to arbitration unless all  the parties  to the suit  agree  for such  

reference.

36. Consequently, this appeal is allowed and the order of the trial court  

referring the matter to arbitration and the order of the High Court affirming  

the  said  reference  are  set  aside.  The  Trial  Court  will  now consider  and  

decide upon a non-adjudicatory ADR process.  

…………………….….J. (R V Raveendran)

New Delhi; …………………….…J. July 26, 2010. (J M Panchal)  

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