Code of Civil Procedure, 1908 · Chapter V: Special Proceedings Arbitration
Section 89: Settlement of disputes outside the Court
In plain words
Where the court sees elements of a settlement acceptable to the parties, it must formulate settlement terms, take the parties' observations, and refer the dispute to arbitration, conciliation, judicial settlement including Lok Adalat, or mediation.
- Arbitration and conciliation follow the Arbitration and Conciliation Act, 1996.
- Lok Adalat and judicial settlement follow the Legal Services Authorities Act, 1987.
- For mediation, the court effects a compromise following prescribed procedure.
A simplified explanation, prepared with AI assistance from the official text below and checked automatically against it for numbers and cross-references. The official text is the law and prevails over this summary. Not legal advice.
Read the in-depth explanation, with key Supreme Court rulings ↓
Official text
(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) Were 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.]
Source: India Code (indiacode.gov.in), the consolidated text published by the Legislative Department, Government of India. Text as updated on India Code on 15 October 2026. Words in square brackets [ ] were inserted or substituted by later amending Acts, and *** marks words omitted by an amendment. The amendment footnotes are not reproduced here. Official text on India Code.
Understanding this section
Section 89 requires the court, where it appears that elements of a settlement exist, to refer the dispute to arbitration, conciliation, judicial settlement including Lok Adalat, or mediation. It is the CPC's gateway to alternative dispute resolution.
The four routes
- Arbitration: only with the consent of all parties.
- Conciliation: only with consent.
- Judicial settlement, including Lok Adalat.
- Mediation.
Correcting the drafting
The Supreme Court noted that the definitions of mediation and judicial settlement in sub-section (2) were mixed up, and read them interchanged so they make sense. It also held that courts need not formulate detailed settlement terms before referral; it is enough to consider whether a case is suitable for ADR.
Unsuitable cases
Cases involving serious allegations of fraud, criminal offences, election disputes, matters involving the public at large, and cases requiring the court's protection, such as minors, are generally unsuitable. Most commercial, family and neighbour disputes are suitable.
Timing
The court should consider ADR after pleadings are complete and before framing issues.
Key Supreme Court rulings
Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. 2010 INSC 431
The object of section 89 is to try for settlement through ADR before trial; the definitions of mediation and judicial settlement must be read interchanged to cure a drafting anomaly, and the court need not formulate settlement terms before referral.
Salem Advocate Bar Association v. Union of India 2005 INSC 324
Upheld the amended CPC provisions, including section 89, and approved model rules for ADR and mediation to give effect to the provision.
Common mistakes
- Referring a case to arbitration under section 89 without the consent of all parties.
Read with: Section 9 CPC
Prepared with AI assistance as a study aid. Every ruling listed was checked against the Supreme Court's own judgments on this site, and quoted words appear in those judgments; linked names open the full judgment. Read the judgments themselves before relying on them. Not legal advice.
Supreme Court judgments citing the section 89
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M/S Sonali Power Equipments Pvt. Ltd. v. Chairman, Maharashtra State Electricity Board, Mumbai & Ors.
(i) Whether the Limitation Act applies to conciliation proceedings u/s.18 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act), and even if not, whether time-barred debts can be referred to…
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Smt. Lavanya C & Anr. v. Vittal Gurudas Pai Since Deseased by Lrs. & Ors.
Whether the High Court was correct in setting aside the order of the Trial Court holding the appellants not guilty of wilful disobedience of their undertaking given to the Court.
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Sanjeevkumar Harakchand Kankariya v. Union of India & Ors.
Issue arose whether in view of the inconsistency between the Court Fees Act, 1870 and Maharashtra Court Fees Act, 1959, if any, would the appellant be entitled to a complete refund of court fees per the former, since it…
- Public Works Department v. Larsen and Tourbo Limited
- Mr Anirudh Singh & Anr v. Google India Private Limited & Ors
- Campos Brothers Farms v. Matru Bhumi Supply Chain Pvt. Limited and Ors
- Rail Land Development Authority v. Parsvnath Developers Limited & Anr
- Jcb India Limited & Anr v. The Competition Commsiion of India & Anr
- Mf Buildcon Pvt Ltd v. Anjali
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Bombay Slum Redevelopment Corporation Private Limited v. Samir Narain Bhojwani
In the instant case, issue revolves around the power of the Appellate Court dealing with the appeal under Section 37(1)(c) of the Arbitration and Conciliation Act, 1996 to pass an order of remand to Section 34 Court.
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Child in Conflict With Law Through His Mother v. The State of Karnataka and Another
(i) Whether the period provided for completion of preliminary assessment u/s. 14(3) of the Juvenile Justice (Care and Protection of Children) Act, 2015 is mandatory or directory; (ii) Whether the words ‘Children’s…
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The State of Madhya Pradesh v. Satish Jain (Dead) by Lrs & Ors.
Issue arose that when there is an agreement based on ex-parte decree, and the ex-parte decree having been set aside, parties if could rely upon the agreement.
- Rajeev Dagar v. State & Ors
- Usha Bansal v. M/S Genesis Finance Co.Ltd
- Sanjeev Bansal v. M/S Genesis Finance Company Ltd
- Powergrid Corporation of India Limited v. Spml Infra Limited
- Powergrid Corporation of India Limited v. Spml Infra Limited
- Madhu Sudan Sharma & Ors v. Omaxe Ltd
- Rajender Kumar v. Devender
- A.Es Engineers Private Limited v. Ugro Capital Limited & Anr
- Shilpa Sailesh v. Varun Sreenivasan
- Central Warehousing Corporation v. Adani Ports Special Economic Zone Limited (Apsezl) and Others
- M/S. Patil Automation Private Limited and Ors. v. Rakheja Engineers Private Limited
- New Okhla Industrial Development Authority (Noida) v. Yunus & Ors.
- The High Court of Judicature at Madras Rep. by Its Registrar General v. M.C. Subramaniam and Ors.
- Vidya Drolia and Others v. Durga Trading Corporation
- Lahari Sakhamuri v. Sobhan Kodali
- M.R. Krishna Murthi v. The New India Assurance Co. Ltd. & Others
- Perry Kansagra v. Smriti Madan Kansagra
- Kerala State Electricity Board and Anr v. Kurien E. Kalathil and Anr.
- Lal Shah Baba Dargah Trust v. Magnum Developers and Others
- Shailesh Dhairyawan v. Mohan Balkrishna Lulla
- Madhya Pradesh State Legal Services Authority v. Prateek Jain & Anr.
- Mr. Vikram Bakshi & Ors. v. Ms. Sonia Khosla (Dead) by Lrs.
- B.S. Krishna Murthy and Anr. v. B.S. Nagaraj and Ors.
- Afcons Infrastructure Ltd. and Anr. v. Cherian Varkey Construction Cq. (P) Ltd. and Ors.
- Vinod Seth v. Devinder Bajaj and Anr.
- B.P. Moideen Sevamandir & Anr v. A.M. Kutty Hassan
- M/S Indtel Technical Services Pvt. Ltd. v. W.S. Atkins Rail Ltd.
- United India Insurance Co. Ltd. v. Ajay Sinha and Another
- Jagdish Chander v. Ramesh Chander and Ors.
- Paramjeet Singh Patheja v. Icds Ltd.
- Sukanya Holdings Pvt. Ltd v. Jayesh H. Pandya and Anr.
- Societe De Traction Et D'Electricite Societe Anonyme v. Kamani Engineering Company Ltd.