Out of Court

In this article, Anubhav Pandey editor at iPleaders blog and an academic at Rajiv Gandhi National University of Law discusses how to settle a case out of court. All you need to know about out of court settlement.

Out of Court settlement

Consider the situation of your case getting settled without getting into the nitty-gritty of court procedure. The idea is not only impressive from a litigant perspective but the Court nowadays are more oriented towards settling cases out of court. Let us understand the complexities involved in out of court settlement.

In what cases can we undergo out of court settlement?

The route of out of court settlement can be exercised in both criminal as well as civil matters. Although, in civil matters, complexities are relatively very less compared to criminal matters. Out of court settlement in criminal matters involves lots of issues. For illustration, only those criminal offences can be settled out of court which is not very grave in nature such as criminal defamation.

In addition to the above cases, out of court settlements are observed in cases involving Family disputes, Motor vehicle claims, Industrial disputes and more.

Legal validity of out of court settlements

Out of court settlement in civil matters – (Section 89, & ORDER 23, Rule -1) CPC

Section 89 of the CPC talks of out of court settlement through the means of Alternative Dispute Mechanism. Mediation, Conciliation, Lok Adalats are the new tools of the justice dispensing system. It is to be understood here that, it will be wrong to infer from the provision that if the parties agree they can take the case completely out of court’s court. Still, the case will be regulated as per the provisions of the relevant ADRs Act. [1]

Order 23 Rule 1 of CPC talks of withdrawal of suit or a part of the claim in a suit. The order of CPC discusses out of court settlement without naming it.

Thinking of out of court settlement in civil matters. Do follow the checklist below.

  • Make it sure you mention your clear intention of out of court settlement before the court.
  • Under Order 23 Rule 1 of CPC when a suit is withdrawn for an out of court settlement, litigants are precluded from initiating fresh proceedings of the matter withdrawn.
  • Out of court proceedings can be quashed by the court. Court can do this only under special circumstances.
  • In the following case, the parties opted for an out of court settlement. The settlement was later found out to be malafide. The parties filed a Civil Miscellaneous Appeal (C.M.P) to quash the settlement results.[2]

Out of Court Settlement in criminal matters

Criminal cases which are mostly concerned with private wrong can be settled out of court. These categories of offences are termed as compoundable offences. Therefore only compoundable offences can be settled out of court.

Offences arising from commercial, financial, mercantile, civil, partnership, relating to matrimony or dowry can be opted for out of court settlement.[3] The court observes that the offence should not be of such grave nature to harm the society at large.


The list of the criminal cases which can be settled out of court is listed below.



Can be settled with

Uttering words, etc., with deliberate intent to wound the religious feelings of any person. 298, The person whose religious feelings are intended to be wounded.
Voluntarily causing hurt. 323 The person to whom the hurt is caused
Voluntarily causing hurt on provocation. 334 Same as above
Voluntarily causing grievous hurt on grave and sudden provocation. 335 Same as above
Wrongfully restraining or confining any person. 341 The person restrained or confined.
Wrongfully confining a person for three days or more 343 Same as above
Wrongfully confining a person for ten days or more 344 Same as above
Wrongfully confining a person in secret 346 Same as above
Assault or use of criminal force 352,355,358 The person assaulted or to whom criminal force is used.
Theft 379 The owner of the property stolen.
Dishonest misappropriation of property 403 The owner of the property misappropriated.
Criminal breach of trust by a carrier, wharfinger 407 The owner of the property in respect of which the breach of trust has been committed
Dishonestly receiving stolen property knowing it to be stolen . 411 The owner of the property stolen.
Assisting in the concealment or disposal of stolen property, knowing it to be stolen 414 Same as above
Cheating 417 The person cheated.
Cheating by personation 419 Same as above
Fraudulent removal or concealment of property, etc., to prevent distribution among creditors. 421 The creditors who are affected thereby
Fraudulently preventing from being made available for his creditors a debt or demand due to the offender. 422 Same as above
Fraudulent execution of deed of transfer containing false statement of consideration. [4] 423 The person affected thereby.

Different ways of settling a case out of court

Alternate Dispute Resolution is the need of the hour. It is more convenient to settle a case outside the court in a regulated mechanism than to fight the same in the court of law. The concept of ADR comes as a rescue to help people settling their cases out of court.

The most common types of ADRs are

  1.  Arbitration
  2.  Conciliation
  3.  Mediation
  4.  Neutral Evaluation

Arbitration as a mechanism of ADR is used mostly by corporate entities. Mediation is mostly used to settle matters relating to family disputes. Conciliation is a form of arbitration but it is less formal in nature. It is the process of facilitating an amicable resolution between the parties, whereby the parties to the dispute use conciliator who meets with the parties separately to settle their dispute.Neutral Evaluation is a new mode of ADR introduced in India in 2007.

Defining Neutral Evaluation in Robert A Goodin’s words. “ Early neutral evaluation is a technique used in American litigation to provide early focus to complex commercial litigation, and based on that focus, to provide a basis for sensible case management or offer resolution of the entire case, in the very early stages”.[5]

To read more on ADR VISIT. https://blog.ipleaders.in/adr-alternative-dispute-resolution/

Do we need court’s permission to do out of court settlement?

In case of civil suits, out of court settlement can be brought at any stage of the suit. The only requirement to formalise the settlement is a compromise Agreement in Civil Cases.

The complexities arises in criminal cases. But the same is settled by the new guidelines issued by the Supreme Court.[6] In case of compoundable offences, court permission is not required. But when there is compromise between the parties or out of court settlement in non-compoundable offences, prior permission of court is required. Although court holds a discretionary power to cancel the settlement anytime.

What to do when out of court settlement does not works out? What if any parties to the agreement retract from the settlement?

In civil cases, only those settlements made out of court and involving the elements of fraud or coercion or made with malafide intent can be called off. For more detailed answer to the provision, please refer to the following judgment, Ghulam Nabi Dar v State of J&K, (2013) 3 SCC 353”. In usual sense, if any parties to the agreement retract from the settlement one can always approach the appropriate court for the grant of specific performance of the compromise agreement.

Out of court settlement in cases of Property Disputes?

Cases relating to property disputes usually take years to settle. Therefore, an alternative of mediation is always available to settle the dispute. This is a form of out of court settlement the only condition is, all the parties to the dispute must agree to out of court settlement.

Family Settlement Deed

By agreeing to Family Settlement Deed, the family members mutually work out and distribute the property among themselves. Family Settlement Deed is an out of court settlement to which the court agrees. There is always a discretionary power available with the court. Using this discretionary power the Court can anytime declare the agreement null and void if there is presumptive essence of fraud or coercion.Disputes relating to Real Estate, Jewellery or money in bank accounts.

Only disputes relating to common property or joint family property can be settled with a Family Settlement Deed.

The following is the procedure for undergoing a Family Settlement Deed.

  • The settlement must be signed by all the concerned family members to the settlement. This is formally called the Memorandum of Partition.
  • The memorandum consists respective shares of particulars in each schedule.
  • A usual practice is to get the deed attested by two witnesses.
  • Registration according to Section 17 of the Indian Registration Act.

Out of court settlement in divorce matters? Say no.

Indian court does not accept out of court settlement in divorce matters. Mediation is a way to settle the dispute but if the couple wish to simply call off the marriage without letting the court know of their intention, this is not an intelligent way to separate. If you are legally married, you can apply for and avail a decree of divorce dissolving your marriage, Out of court divorce is not accepted by the courts in our country.

Couple cannot enter into a compromise deed wherein the wife forgoes her maintenance rights and settle for a divorce out of court via an agreement. Justice, Akil Qureshi in a case illustrated this point clearly. The same goes with prenuptial agreements. The couple cannot get a prenuptial agreement as it is not valid in India. Prenuptial agreements have no binding value in the Indian Courts.[7]

Out of Court Settlement in case of Industry Disputes?

Collective Bargaining – Out of Court settlement of Industrial Disputes

The term ‘Collective Bargaining’ is to be understood by its etymological sense. Lengthy court procedure is not a solution nowadays. Both the management as well as the workers are not in favour of lockouts or strikes. The Industrial sector depends on manpower and labour. An alternative to court procedure is the option of ‘Collective Bargaining’.

Stages of Collective Bargaining

Collective Bargaining is a very organised way to settle Industrial disputes without going into litigious processes. The stages to collective Bargaining are as follows[8]

Step 1 – Preparation for Negotiation

The first step includes the overall process of forming a team both from management’s and worker’s side. The workers decide the demands to put forth before the management. The management decides the extent to which they will accept the demands put forwarded by the workers.

Step 2 – Negotiations between the management and union

This stage is excessively a complicated one. It requires a protracted and complex interchange of ideas combining argument, horse-trading, bluff, cajolery and threats. The result of the overall negotiation is the actual settlement reached between the workers and the management. When the terms of the negotiation is formally decided, this results in the final third step.

Step 3 – Drafting Agreement

Drafting of agreement must be in such a manner as to respect the real intention of the parties. The provisions mentioned in the agreements are supposed to be clear and definite and should explicitly cover the subject matter in accordance with the intent of the agreement.

Enforceability of Collective Bargaining Agreement

In India, collective bargaining agreement can be enforced under Section 18 of Industrial Disputes Act, 1947, as a settlement arrived between the workers and the employers. Under Section 18 (1) of Industrial Dispute Act, 1947, a settlement arrived at by an agreement between the employer and workmen otherwise than in the course of conciliation proceedings is binding only on the parties to the agreement.[9]

Settlement of Motor Accidents Claims through Compromise


Steps to be taken for implementation of the Scheme General Insurance Corporation has prescribed certain steps as follows:

  1. Calling for application from claimants who desire to secure compensation at pre litigation stage.
  2. For this purpose, it may be necessary to insert public notice so that the claimants who are having complete documents may apply for compensation in the prescribed form which can be obtained from the address indicated in the public notice.
  3. The claimant has to submit the prescribed application duly completed along with the supporting documents as enumerated in the application.
  4. The application along with the documents may be scrutinised to confirm that the application so received can be considered for payment of compensation at the pre-litigation stage.
  5. Motor Policy of the involved vehicle is required to be verified to ensure that accident has fallen within the policy period.
  6. There is a valid insurance at the material time of the accident due to compliance of Section 64 V B of the Insurance Act, 1938.
  7. To ascertain that the liability about the accident reported is established under the policy.
  8. Vehicle documents and driving licence of the person driving at the material time of accident needs to be verified.
  9. On considering the foregoing, if the application is found in order, the amount of compensation can be estimated.
  10. A panel to recommend the quantum of compensation consisting of retired judge and medical practitioner as nominated by the State Legal Aid Board may be constituted.
  11. A retired Insurance Executive to work on the panel may also be nominated by Chairman, GIC/CMD of the company.
  12. Notice about the date of the session may be given to claimant and issued to remain present before the panel to negotiate compensation.
  13. Once the amount is agreed in the presence of the claimant, insured and representative of the Insurance Company, a prescribed form of agreement may be signed by the concerned parties. A discharge voucher in the prescribed form may be obtained from the claimant so as to disburse the amount of compensation as agreed.
  14. An intimation of the agreement and the amount agreed may be furnished to the concerned MACT to record with them the compromised settlement.[10]


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[1] Salem ADvocate Bar Association v Union of India, AIR 2003 SC 189

[2] Ghulam Nabi Dar v State of J&K, (2013) 3 SCC 353

[3] Gian Singh v. State of Punjab and another (2012) 10 SCC 303

[4] For the complete list you can visit – http://devgan.in/crpc/section/320/

[5] Bawa Masala Company vs. Bawa Masala Company Pvt. Ltd. (OS No.139 of 2002).

[6] Narinder Singh & Ors V State of Punjab & Anr. (SLP Criminal 9547 of 2013)


[8] 47 Indian Law Institute, Labour Law and Labour Relations, 1968, p. 30.

[9] Marysur, Collective Bargaining, 1965, p.4.

[10] http://shodhganga.inflibnet.ac.in/bitstream/10603/8947/14/14_chapter%2010.pdf

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  1. […] Section 89 of the CPC talks of out of court settlement through the means of Alternative Dispute Mechanism. Mediation, Conciliation, Lok Adalats are the new tools of the justice dispensing system. It is to be understood here that, it will be wrong to infer from the provision that if the parties agree they can take the case completely out of court’s court. Still, the case will be regulated as per the provisions of the relevant ADRs Act. [1] […]

  2. When you say that in case party retract from outside court settlement, other party to the settlement will have in general the relief of specific performance, however, you have not provided any authority for the same. I wanted to ask you for the authority as i am researching on the same line and was not able to find authorities for the same.
    Please provide the authority, if you have any, for the same.