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Alternative dispute resolution (ADR) or out-of-court settlements have been gaining popularity in the last few decades because of the various conveniences they offer over regular litigation such as simpler procedure and a speedier form of justice. Parties step in voluntarily and have an opportunity to also engage in dialogue through some of these means, leading to swifter resolution.


Under Article 21 of the Constitution of India, the state actually has an obligation to provide speedy trial and justice to the people. With this immense burden on courts, even the judiciary and the legislature are encouraging parties to try and use more and more of out of court settlement techniques.

As early as 1979, in its Report on Delay and arrears in Trial Court, the Law Commission of India discussed the importance of Conciliation Courts, and had recommended their incorporation in the system, based on their success in Japan, France and Norway. [77th Report of the Law Commission of India, 1979]. In fact, the Law Commission dedicated an entire report to the Need for Justice Dispensation through ADR, wherein it was observed:

“Justice in all its facets – social, economic and political – is required to be rendered to the masses of this country without any further loss of time – the need of the hour. The new strategy consists in dispute-resolution by conciliation, mediation and negotiation. The constitutional promise of securing to all citizens, justice, social, economic and political, as promised in the Preamble of the Constitution, cannot be realised unless the three organs of the State, i.e., the legislature, the executive and the judiciary join together to find ways and means for providing to the Indian poor equal access to the State’s justice system.” [See 222nd Report of the Law Commission of India, 2009].

Looking to the future of dispute resolution through ADR, the report further stated:

“The ADR method is participatory and there is scope for the parties to the dispute to participate in the solution-finding process. As a result, they honour the solution with commitment. Above all, the ADR methods are cheaper and affordable by the poor also. As of now, there are some aberrations when it comes to the expenses incurred in arbitration. In course of time, when there is good number of quality arbitrators, the expenses of arbitration will also decrease. The promotion of institutional arbitration will go a long way in improving the quality of ADR services and making them really cheaper.” [Ibid].

In Shakuntla Sawhney v. Kaushalaya Sawhney [(1979) 3 SCR 232], the Supreme Court has observed that “Finest hour of justice is the hour of compromise when parties after burying the hatchet, re-unite by a reasonable and just compromise”. ADR offers parties the opportunity to reach this compromise in a speedy, affordable manner.

In the famous Salem Advocates case [(2003) 1 SCC 49], the Hon’ble Supreme Court observed as under:

“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.”


SAVES TIME: One of the biggest issues facing courts in recent times is that they are so overburdened with cases that providing speedy justice is no longer feasible. Court proceedings go on for years, often having to be carried out by the successors of the parties. To overcome this issue, different modes of ADR provide a swifter path to justice.

LESS EXPENSIVE: Naturally prolonged litigation with various appeals and challenges over the years becomes very costly, and unaffordable to many. ADR can provide an affordable alternative and expenses for only a limited period of time.

CONTROL OVER THE PROCEDURE AND OUTCOME: Parties can choose the manner in which they want their dispute to be resolved. They can choose to arbitrate or go conciliation or mediation. By choosing the seat of arbitration, parties essentially get to decide the applicable laws. By going for mediation, parties have the chance to either settle or refuse a settlement that seems unfavourable or unfair to them. Thus, ADR processes offer the parties a lot more control over their cases.


The most commonly opted for means of out-of-court settlement are:

ARBITRATION: Arbitration is the out of court settlement of a dispute between parties through a mutually agreed arbitrator (or arbitrators). In India, arbitration is governed by the Arbitration and Concilliation Act, 1996.

MEDIATION: Mediation is an alternative dispute resolution process in which parties, with their consent, approach a neutral mediator (a facilitator of dialogue) who helps them explore possible solutions and reach a consensus. The aim of mediation is to facilitate dialogue between the parties in dispute and give them a chance to resolve their issues and reach a compromise that they can work with in the long run. The Supreme Court has described mediation as a method of non-binding dispute resolution with the assistance of a 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 Afcons Infrastructure Limited v. Cherian Varkey Construction Company Private Limited, 2010 (8) SCC 24].

There are some aspects of mediation that make it one of the best choices while moving for an out-of-court settlement:

Voluntary: Parties cannot be forced into mediation; they must opt for the same out of their own will. They are not obligated to stay if the process becomes unpleasant or uncomfortable to them.

Facilitated dialogue: A mediator is present to enable parties to be able to fully communicate with each other and explore all possible solutions available to them, and guide them to the one that is acceptable to both parties. It is not a verdict but a decision that parties reach themselves.

Ability to choose: A good mediator will always be innovative and help parties see all the various options available to them, but not force them into a decision. In a mediation, the control is with the parties. They are not obligated to accept any award, they are free to reach a settlement.

CONCILIATION: Like mediation, conciliation is also a voluntary, confidential process aimed at serving the interest of the parties involved. The conciliator, a neutral third party, helps parties reach a settlement. The main difference from mediation in conciliation proceedings is that the conciliator provides the parties with a non-binding settlement proposal, which a mediator usually would not. In India, conciliations are also governed by the Arbitration and Concilliation Act, 1996.



Civil disputes, particularly those of a commercial nature, pertaining to contracts, matrimonial or custodial disputes and torts are commonly addressed through ADR.

1. PRIVATE SETTLEMENTS: In a voluntary/private mediation, parties themselves resolute to approach a trained mediator who will address their issues with one another and help them reach a compromise. Thus, parties can directly approach a mediation facility rather than approaching a court for litigation. It is however clarified that not all matters are appropriate to be directly be taken to mediation. Cases involving bad faith, dealing with a burning question of law that requires a precedent or public vindication are not best suited to mediation, so parties should be clear about the outcome they want before participating in a mediation.

2. COURT-REFERRED DISPUTE RESOLUTION: Under Section 89 of the Code of Civil Procedure 1908, the court may refer a case pending before it for out of court settlement if it believes a settlement is possible through those means, and the parties involved agree to going for arbitration, conciliation, Lok Adalat or mediation, as the case may be.

In court-referred ADR, the stage at which the dispute resolution is supposed to start has been deliberated upon by the Courts. The Supreme Court of India, in Afcons Infrastructure Limited v. Cherian Varkey Construction Company Private Limited [2010 (8) SCC 24], examined Section 89 of the Code of Civil Procedure and observed as under:

“9. 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...

...15. If sub-section (1) of Section 89 is to be literally followed, every Trial Judge before framing issues, is required to ascertain whether there 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.”

Thus, it is evident from the above judgment that Courts cannot exactly follow the procedure laid down in Section 89 due to its impractical aspects. A better guide to the process, which have been adopted by a few High Courts with small modifications eventually too, are the Alternative Dispute Resolution and Mediation Rules, 2003. These Rules specify In Rule to that “where it appears to the Court that there exist elements of a settlement which may be acceptable to the parties, formulate the terms and settlement and give them to the parties for their observations under sub-section (1) of Section 89, to be furnished to the Court within fifteen days of the first hearing.

·         (b) At the next hearing, which shall be not later than fifteen days of the first hearing, the Court shall reformulate the terms of a possible settlement and direct the parties to opt for one of the modes of settlement of disputes outside the Court as specified in clauses (a) to (d) of sub-section (1) of Section 89 read with Rule 1A of Order X, in the manner stated hereunder,

·         Provided that the Court, in the exercise of such power, shall not refer any dispute to arbitration or to settlement through Lok Adalat or judicial settlement, under the Legal Services Authority Act, 1987, as envisaged under clauses (a) and (c) of sub-section (1) of sec. 89, without the written consent of all the parties to the suit.”

Rule 2 therefore states that the Court may, with the consent of parties, where it sees possibility of a settlement while hearing a dispute, draw up the settlement and send the dispute for alternative resolution.

Therefore, while in a private dispute, parties may turn to out of court settlements at any stage as they please, a court may refer a matter for ADR if it feels a settlement is possible, and all the parties to the dispute agree to that method.



There is a belief that criminal matters cannot be settled, but this is a misconception. In fact, in small offences, and often in cases where parties are well known to each other, settling criminal disputes is encouraged by the courts.

. PLEA BARGAINING: A person accused of an offense may file an application for plea-bargaining in the court in which such offense is pending for trial. The application for plea-bargaining should be filed by the accused voluntarily. The accused and the complainant are given time to reach a mutually satisfactory disposition of cases including expenses, compensation etc. The secrecy of the matter is maintained as to ensure that the statement made by the accused during plea-bargaining shall be voluntary. The report of this mutually satisfactory disposition is to be given to the Court, and the case is disposed of accordingly. [See S. 265-B, 265-C, 265-D and 265-E of the Code of Criminal Procedure, 1973].

A large number of criminal cases are disposed of through the process of plea bargaining, saving the accused and the complainant of the hassles of going to trial.

2. COMPOUNDING OF OFFENCES: The Criminal Procedure Code provides for compounding of offenses in two parts. Part one gives a list of offenses which can be compounded without the consent of the court. These are less serious offences and some examples are causing hurt, wrongful restraint, criminal trespass, adultery, etc. The second part provides for compounding of serious offenses with the court’s permission; these offences are of a more serious nature and therefore, the permission of the Court must first be obtained. [See S. 320 of the Code of Criminal Procedure, 1973].

A large number of offences are compoundable, and the accused and complainant must consider the option of compounding the case out of court in a less expensive, solution driven manner, addressing the needs of the complainant/victim, while also giving the accused a chance to improve the situation.

By Shiv Mangal Sharma & Aishwarya

Advocate Supreme Court