Submitted By:

Sabrina Singh (22010760)

ALTERNATIVE DISPUTE RESOLUTION

Q1. Section 89 of the Civil Procedure Code, 1908,1 (read with Order 10, Rule 1A, B, & C),
talks about settlement of disputes outside the court, wherein the concerned parties have party
autonomy and can choose any of the mentioned settlements under this section, from
arbitration, mediation, conciliation, juridical settlements (Lok Adalat’s) etc. this section was
introduced post the 1999 amendment to CPC. The main goal of this section was to reduce the
burden on traditional courts, to efficiently resolve disputes in expeditiously, and to
circumvent the procedural delays. This also aims to promote mutually beneficial resolutions
between both the parties, without the need of any court intervention. The scope of section 89
extends to certain category of disputes such as disputes related to trade, contracts, commerce,
consumer disputes, etc., however, doesn’t extend to criminal matters or enforcement of rights
against the state.

However, there are certain conditions that need to be satisfied before a matter can be referred
to ADR under this section, these are:
 Existence of a dispute – There must be a dispute in question, and that dispute must be
appropriate for ADR, for example, criminal matters cannot be referred to for ADR.
 Existence of elements of settlement in the opinion of the court – Similar to the
previous point, the court must be of the opinion that there lies a case which can be
settled through this. Under this the court assesses and forms an opinion that whether
the case is appropriate to be settled through one of the mentioned methods u/s 89.
 The parties must share the opinion of the court – Since, the main underlying principle
of ADR is party autonomy, therefore, the parties should give mutual consent of
whether they want to go ahead with ADR or not, and the court must respect the
wishes of the parties to such a dispute.
1
Civil Procedure Code § 89 (India).
  There should be an element of compromise, and the same has to be accepted by the
parties – Only if both parties agree, only then the court can exercise its discretion, and
neither the court can force one party to settle. If the court sees that there is a way of
settlement, it can’t force ADR, as consent is important to the parties.
 Formulation of terms of settlement of court, and if need be then reformulation.
 Court should also invite the observation of the parties on the terms of the settlement.

In the case of Afcons Infrastructure Ltd. v. Cherian Varkey (2010), the Supreme Court of
India dealt with the scope and the applicability of section 89.2 Under this the court
emphasized on the importance of ADR mechanism, and also went on the state that reference
to ADR is a must under section 89. In the Afcon’s case the main issue for contention was
whether Section 89 of CPC empowers the court to refer the parties to a suit for arbitration
without the consent of both parties? In this case the agreement between the two construction
companies did not contain an arbitration clause, and a dispute arose between the companies,
and a suit for recovery was filed by the respondent. Therefore, the respondent filed an
application under Section 89 before the trial court, requesting the court to refer the matter to
arbitration, however, the appellant opposed this as they weren’t willing to refer the matter to
arbitration or any of the other ADR processes under Sec 89. The Trial Court heard the
application and recorded that the respondent was agreeable to arbitration, but the appellant
was not but. However, still the Court held that the appropriate method for dispute settlement
would be arbitration since the subject matter related to a work contract. Further, even the
High Court held that u/s 89, the courts in certain cases can refer even unwilling parties to
arbitration. However, the appellant filed an SLP before the Supreme Court of India, wherein
the court deliberated long and hard on the purpose of Section 89 and the drafters’ intent
behind it and deciding that although it is a poorly drafted provision it does presume the
existence of an arbitration agreement between the parties as a condition. Section 89, when
read Rule 1-A of Order 10 requires the court to direct the parties to opt for any five modes of
ADR as mentioned. However, if an arbitration agreement does not exist but the courts feel
that the dispute would be best settled by arbitration, the dispute can be referred to arbitration
but only if the parties consent to it. The court further stated that if there is no express or
implied agreement between the parties in reference to arbitration, then the courts cannot
interfere with the principle of party autonomy and refer the matter to arbitration under
Section 89, as the same is also clear from a reading of the provisions of the Arbitration and
2
Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd. (2010) 8 SCC 24.
Conciliation Act. Therefore, the court’s cannot force the unwilling parties to follow through
with arbitration, as they don’t have authority or the power to do so in the absence of an
arbitration agreement. Therefore, this judgment focuses on certain key points, such as should
analyze whether the case is suitable to be referred to an ADR process or should be tried
before the court, if yes, then the court should clearly explain all the choices present in the
ADR process to the parties, and the court should also ascertain whether the parties are
consenting for arbitration or conciliation.

In conclusion, the decision in Afcons emphasized the mandatory nature of the court's
obligation to consider ADR mechanisms and make a sincere effort to explore the possibility
of settlement through ADR before proceeding with the trial, and moreover the court will
exercising its powers u/s 89, cannot refer a suit for arbitration till the time the all the parties
to the suit agree for this reference.

Q4. A multi-tiered dispute resolution clause is a contractual provision that requires parties to
attempt specific forms of dispute resolution, such as negotiation or mediation, before
invoking the final mechanism such as arbitration or litigation. The main intent behind such
clauses is to encourage parties to resolve disputes amicably and efficiently before resorting to
more formal processes like arbitration or in court litigation.

Parties to a contract are required to strictly follow the procedure as agreed upon in a tiered
dispute resolution clause, (for example, a fixed chronological order) as they mainly reflect the
intent of the parties, and their agreed dispute resolving mechanisms. Therefore, the Courts are
required the respect this agreement and comply with the pre-arbitral procedures as stipulated
by the parties in their agreement/ clauses. Moreover, this method is also seen as a condition
precedent for invoking for example, arbitration. Therefore, parties are required to fulfill these
conditions, and the failure to do so can result in the stay of the proceedings.

In the case of M/s. Simpark Infrastructure Pvt. Ltd. v. Jaipur Municipal Corporation, the
court held that where the parties have agreed to go ahead with a particular dispute resolution
procedure and the same is a prescribed condition precedent for invoking the arbitration
clause, then the same is mandatorily required to be followed.3 In cases where the particularly
stipulated steps are not followed by the parties in dispute, and if the aggrieved party goes
ahead and files an arbitration application, then the same would render the application to be
premature, and therefore, won’t be accepted. This case further emphasized on the need for the
parties to adhere to the agreed upon dispute resolution procedures and meet the pre-requisite
conditions first before triggering the final arbitration clause.

The case of Geo Miller & Co. Pvt. Ltd. v. Rajasthan Vidyut Utpadan Nigam Ltd. dealt with
the issue of whether the parties can be compelled to follow the pre-arbitral procedures/stages
agreed upon in a tiered dispute resolution clause before invoking arbitration.4 In this case, the
Supreme Court held that if the parties have agreed to a multi-tiered dispute resolution clause,
they must strictly adhere to the agreed procedure before invoking arbitration. In this case the
parties had agreed upon the process of negotiation, and since that was the pre-condition,
therefore the negotiation history needs to be pleaded before the court. The Court rightly
observed that when the parties have consciously agree to a particular dispute resolution
mechanism, it takes the form of a binding contract, and they cannot disregard the agreed
procedure. The Court further stated that if the parties are allowed to bypass the pre-arbitral

3
M/s. Simpark Infrastructure Pvt. Ltd. v. Jaipur Municipal Corporation, 2012 SCC OnLine
Raj 2738.
4
Geo Miller & Co. Pvt. Ltd. v. Rajasthan Vidyut Utpadan Nigam Ltd 2019 SCC OnLine SC
1137.
procedures, it would render the multi-tiered dispute resolution mechanism redundant and
nugatory. The Court emphasized on the principle of party autonomy and held that parties
must be compelled to follow the agreed procedure as a condition precedent to invoking
arbitration, since the parties had agreed to the same beforehand.

Therefore, the parties to a contract are required to strictly follow the procedure as agreed
upon in a multi-tiered dispute resolution clause. However, under extremely exceptional
circumstances, wherein the pre-arbitral procedures have become impossible, the parties may
directly invoke arbitration. In certain cases, where both the parties have mutually agreed, and
by their conduct, waived or abandoned the pre-arbitral procedures, they may be allowed to
directly refer the dispute to arbitration, without invoking the pre-arbitral procedures. This
further shows that the consent of the parties is an important principle that must be respected
at all stages of ADR.