Judgement Briefs

Alternative Dispute Resolution

Salem Advocate Bar Association, T.N. v. Union of India (II)

(2005) 6 SCC 344

Citation
(2005) 6 SCC 344
Court
Supreme Court of India
Date
2 August 2005
Bench
Y.K. Sabharwal, D.M. Dharmadhikari and Tarun Chatterjee, JJ.

Facts

  • Parliament amended the Code of Civil Procedure to improve the speed and efficiency of civil litigation.
  • One important amendment introduced Section 89 and Order X Rules 1A to 1C.
  • These provisions required courts to consider settlement of civil disputes through:
  • arbitration;
  • conciliation;
  • judicial settlement;
  • Lok Adalat; or
  • mediation.
  • In Salem Advocate Bar Association (I), the Supreme Court upheld the constitutional validity of the amendments.
  • However, it recognised that Section 89 could not operate effectively without:
  • procedural rules;
  • trained mediators;
  • clear referral mechanisms; and
  • institutional guidance.
  • The Court therefore appointed a committee chaired by Justice M. Jagannadha Rao.
  • The Committee prepared reports and proposed:
  • model ADR Rules;
  • model Civil Procedure Mediation Rules;
  • case-management measures; and
  • procedures for referring and returning cases.
  • In Salem Advocate Bar Association (II), the Supreme Court considered these recommendations.

Issue

  • How Section 89 and Order X should be practically implemented by civil courts.
  • Whether courts have a duty to consider ADR before proceeding to trial.
  • What procedure should govern court-referred mediation and settlement.

Rule

  • Section 89 must be interpreted purposively so that its objective of encouraging settlement is achieved.
  • Civil courts must apply their minds to whether a dispute is suitable for ADR.
  • The court’s role is to:
  • identify the possibility of settlement;
  • direct the parties to consider an appropriate ADR process;
  • refer the matter to the suitable forum; and
  • deal with the case after settlement or failure.
  • Actual mediation should be conducted by a neutral mediator rather than by the trial judge deciding the dispute.
  • If settlement is achieved, it must return to the referring court for lawful recording and disposal.
  • If settlement fails, the case must return to the court without prejudice to the parties.

Application

  • The Supreme Court accepted that Section 89 had drafting difficulties.
  • A literal requirement that the trial judge formulate detailed settlement terms before referral would be impractical.
  • The trial judge does not yet know what concessions the parties may offer in confidential negotiations.
  • Requiring the judge to conduct extensive settlement discussions would also risk compromising neutrality if the case later returned for trial.
  • The Court therefore adopted a workable interpretation.
  • The judge should initially identify whether the dispute contains elements capable of settlement.
  • The parties should then be directed to consider the available ADR mechanisms.
  • Once an appropriate process is selected, the matter should be sent to the relevant institution or neutral.
  • For mediation:
  • the mediator assists communication;
  • the parties retain control over the outcome;
  • no settlement can be imposed;
  • confidential discussions are protected; and
  • failure returns the suit to the trial court.
  • Where an agreement is reached, the mediator reports the settlement rather than deciding the merits.
  • The court then examines and records the compromise and passes the appropriate decree or order.
  • The Supreme Court approved the model ADR and Mediation Rules, subject to modifications.
  • It encouraged High Courts to adopt them so that implementation would not depend upon ad hoc local practices.
  • The Court also stressed:
  • mediator training;
  • preparation of manuals;
  • creation of panels;
  • adequate infrastructure; and
  • governmental financial support.
  • This transformed Section 89 from a general statutory aspiration into an operational framework.
  • The judgment initially used broad language about referral.
  • Afcons Infrastructure later clarified that parties cannot be compelled into arbitration or conciliation without the legally required consent, although courts must still examine ADR suitability.

Conclusion

  • The Supreme Court approved the Committee’s model ADR and Mediation Rules with modifications.
  • High Courts were expected to frame and implement appropriate rules.
  • Civil courts were required to meaningfully consider ADR rather than treating Section 89 as optional or ornamental.
  • The judgment established the institutional foundation for court-annexed mediation in India.
  • Use this case for: Section 89 requires an organised court-referral system supported by mediation rules, trained neutrals and judicial recording of settlements.