Arbitration
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This article is written by Uzair Ahmad Khan.

Introduction

In the year 2003, the need for alternate dispute resolution method and their efficacy was brought before the judicial scrutiny. The Indian legislature amends the code of civil procedure, 1908 and brought section 89 which introduced alternate dispute resolution methods. Section 89 and other amended provisions were challenged before the Supreme Court of India by the Salem Advocate’s Bar Association.

Why section 89 inserted in the Code of Civil Procedure, 1908?

Section 89 of the Code of Civil Procedure, 1908 gives power to the court to refer the matter to the alternate dispute resolution methods when it appears to the court that there exists an element of settlement which may be acceptable to the parties then the court may formulate such settlement or propose a tentative settlement and refer the parties to an alternate means of setting the dispute such as arbitration, conciliation, Lok Adalat or mediation.

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The intention behind section 89 was quite apparent, as most of the developed countries had already adopted the alternate dispute resolution methods and the methods adopted by them were proved to be successful to the extent that over 90 per cent of the cases were being settled out of court. It had been inserted to provide justice in spite of the law’s delays and the limited number of judges available. Parties can prevent themself from indulging into litigation and go for dispute resolution methods for resolving their dispute.

How section 89 is inserted in the Code of Civil Procedure, 1908?

The Law Commission of India in its 163rd report on the Code of Civil Procedure (Amendment Bill), 1997 raise its concerns on the quality of the justice delivery system in the country. The commission also states that any delay in the disposal of cases threatens justice. Due to passage of time, the memory of witnesses weakens and makes the presentation of evidence difficult which ultimately leads to the loss of public confidence in the judicial process which in itself is a threat to the rule of law and consequently to democracy. Thus, section 89 came into being.

Section 89 also states which set of law will be applicable to the settlement proceedings depending on which method is chosen. As for arbitration or conciliation proceedings the Arbitration & Conciliation Act, 1996 will apply; for a reference to Lok Adalat or judicial settlement the Legal Services Authority Act, 1987 will apply and for mediation the Mediation Rules, 2009 will apply.

Recommended changes to Section 89

The changes were brought up by the Law Commission of India to encourage dispute resolution methods. The commission stated that the court should not be required to undertake the exercise proposed by section 89 either the court should not be requested to negotiate a settlement between the parties. To do so, the court may be required to abandon its impartiality and be obliged to express an opinion on a particular aspect of the dispute while formulating the terms of a possible settlement. 

Law Commission observed that the parties to the dispute should be referred to a committee or a board which was to be constituted with the specific intent of determining whether or not a settlement could be reached between them and if so, to attempt to reach such a settlement during the period when there is a good amount of time in the interval between the framing of issues in a suit and the commencement of the trial. The board or committee is required to use conciliatory methods within a limited time to ensure that no further delay would cause. The Law Commission was of the opinion or belief that this method would substantially reduce the case backlog in our courts.

The above-mentioned recommendation of the Law Commission was not adopted in section 89 of the CPC but the report was adopted and incorporated in Rules 1-A, 1-B and 1-C of Order X of the CPC.  

The rules stated that after the recording of the admissions and denials, the court may request the parties to the suit to choose one of the modes of settlement specified in Section 89. After the request of the court, the parties will appear before such forum, authority, committee or board for conciliation of the suit. The provision uses the term “request” which means that the parties to the dispute have the option to refuse to have their case sent to the conciliation board or committee. 

If the authority believes that after the conduct of the conciliation proceeding it will not be possible in the interest of justice to proceed further with the matter, then the parties may be redirected to the court for the adjudication of their dispute.

Interpretation of Section 89

In section 89 there are words used “shall and “may” which needs to be clarified in order to settle any doubts or possible conflicts that may have arisen with regard to the interpretation of the provision. The wording “the court shall formulate the terms of settlement” comes earlier and the word “may” is used in the latter part of the provision. The was interpreted to mean that the court has wide discretion in deciding whether the dispute at hand can be settled out of court. 

Section 89 does not impose a mandatory duty upon the court to refer the parties to arbitration, conciliation, mediation merely because it is possible to resort to such methods in that particular case. The word shall is also used in Order X of the CPC and it is observed that the court is under no compulsion to refer the parties to alternate means of resolving their dispute if it does not feel it

Second, section 89 fills a lacuna in the law. As the Arbitration Act, 1996 imposes a duty upon the court to refer the parties to an arbitral tribunal where the arbitration agreement is already in existence. However, before the enactment of section 89, there was no provision which allows the court to suggest arbitration as a means of dispute settlement to the parties to suit where no arbitration agreement existed prior to such suggestion or recommendation. 

The constitutional validity of Section 89

Constitutional validity of section 89 was challenged before the Supreme Court of India by the Salem Advocate’s Bar Association on the grounds of arbitrariness. There was a series of arguments on the followings issues:

  • There was no explanation on how the provision would be implemented.
  • No guidelines concerning which cases are to be referred for settlement out of court.
  • How to refer the disputes
  • What would be the management formula regarding referring the dispute to the alternate dispute resolution methods.
  • What rules and regulations should be followed while taking recourse to alternate dispute resolution under section 89.

What court responded on the above issues?

The Supreme Court ardently defended the provision by stating that the intent and purpose behind the framing of section 89 was to ensure the speedy delivery of justice which is one of the supporting rights to the fundamental right of life and personal liberty found in Article 21 of the Constitution.

The Supreme Court recognized that it was necessary to frame and guidelines for the conduct of alternate resolution proceedings in the interest of giving full effect to the right to timely justice. As the arbitrariness of the provision could be resolved by passing guidelines and rules for the manner in which the disputes may be referred and resolved.

Justice M. Jagannadha Rao Committee Report

The Supreme Court of India constituted a committee headed by the former judge of the Supreme Court and Chairman of Law Commission of India, Justice M. Jagganda Rao after its judgement in Salem Advocate Bar Association v. Union of India in the year 2003.

The committee filed a report considering the difficulties that arose in the working of the amendments and made suggestions for necessary changes. The Court adopted the report filed by Justice M. Jagannadha Rao Committee in the follow-up judgement to the Salem Advocate Bar case in 2005.

The report was divided into three parts the first part of the report considers various grievances that arose in relation to the new amendments to the CPC. The second part of the report takes into consideration issues concerning the dispute resolution methods and mediation under Section 89 reads with Order X. it also contains model rules for arbitration and mediation. The third part of the report contains a conceptual appraisal of case management and model rules for case management. 

Impact on High Courts

The Supreme Court ordered that every High Court in the country have to take notice of the recommendations in the Justice M. Jagannadha Rao Committee Report and frame rules on the basis of the report for the state where it exercises its territorial jurisdiction. Under Order X of the CPC various High Courts were required to pass rules for the governance of alternate dispute resolution methods.

Section 82 of the Arbitration & Conciliation Act, 1996  empowers the High Courts to make rules consistent with the Act in respect of all proceedings governed by the Act. The objective behind drafting rules is to provide guidelines for the regulation of the procedure to be followed from the beginning to the end of the dispute resolution process.

Conclusion

The final conclusion of this article is with respect to the role of alternate dispute resolution methods in the code of civil procedure. Section 89 fills a lacuna in the law. The judiciary is already overburdened with the cases and because of this, there is a delay in the disposal of cases which threatens justice. With the insertion of section 89 the court can suggest alternate dispute resolution methods to the parties where there is no arbitration agreement between the parties. The parties can avoid litigation and choose alternate dispute resolution methods for resolving their dispute expeditiously.

Reference

  1. Arbitration Law – A Primer

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