Report No. 238

5. Changes Considered Broadly

5.1 In the light of the above observations, we are proposing amendments to section 89 as well as the allied provisions substantially similar to those suggested by the Supreme Court.

5.2 The Chairman, in the company of some other learned Members tried to get responses from the judicial officers at Visakhapatnam and Delhi whether they experienced or envisaged any practical difficulties in giving effect to the law laid down by the Supreme Court in Afcons Infrastructure case. Most of the judicial officers and even advocates did not express any particular difficulty. However, some have guardedly said that it is only in course of time, it will be known whether any problem would crop up in implementing the section in its altered form.

This qualificatory statement was more with reference to the category of cases described as fit or not fit for adjudication by alternative methods. The Commission is of the view that the view taken by the Supreme Court on a careful analysis of the section in the light of its purpose and intendment is unexceptionable and meant to remove the ambiguity in section 89.

It is high time that the section is recast on the lines suggested by the Supreme Court. In other words, the judge- made law has to be followed up by legislative action on the same lines. However, while recasting section 89, the Commission in the interests of clarity and aptness, has deviated a little from what has been suggested by the Supreme Court in Afcons Infrastructure case.

5.3 We shall briefly advert to the areas of deviation from the observations of the Supreme Court in the aforementioned case. Interchanging clauses (c) & (d), as indicated by the learned Judge in Afcons case, will no doubt give some sense to the provisions as they stand now. However clause (c) dealing with mediation would still be inappropriate. There is no particular reason nor rationale in treating the mediator as Lok Adalat and investing the status of Lok Adalat award to the agreement reached in the course of mediation. A mediator can only facilitate dispute resolution between the parties and draw up the terms of settlement arrived at.

It would be inappropriate to regard it as an award passed by Lok Adalat by means of a deeming fiction and in doing so there is no particular advantage. In fact, the appropriate course has been indicated by the learned Judge at paragraph 39 of the judgment in the following words: "Where the reference is to a neutral third party ("mediation" as defined above) on a court reference, though it will be deemed to be reference to Lok Adalat, as the court retains its control and jurisdiction over the matter, the mediation settlement will have to be placed before the court for recording the settlement and disposal."

Therefore, the more appropriate course would be to require the mediator to submit the terms of settlement reached as a result of mediation to the court so that the court, after due scrutiny, can pass a decree in accordance with the compromise arrived at between the parties. Accordingly, we propose to recast the provision relating to mediation. Secondly, it is not necessary to provide that the award of Lok Adalat or the settlement arrived at through conciliation should be forwarded to the referring court for passing a decree on the same lines, notwithstanding certain observations made by the Hon'ble Supreme Court in paragraph 38 of Afcons to the following effect:

"Though the settlement agreement in a conciliation or a settlement award of a Lok Adalat may not require the seal of approval of the court for its enforcement when they are made in a direct reference by parties without the intervention of court, the position will be different if they are made on a reference by a court in a pending suit/proceedings. As the court continues to retain control and jurisdiction over the cases which it refers to conciliation, or Lok Adalat, the settlement agreement in conciliation or the Lok Adalat award will have to be placed before the court for recording it and disposal in its terms."

As for the award of the Lok Adalat passed on the basis of agreed settlement, the award is deemed to be a decree of a civil court by virtue of section 21 of the LSA Act. The Lok Adalat is presided over by a retired or sitting judicial officer and further scrutiny by referring court would really be unnecessary. Further, if a provision is made in section 89, the award of Lok Adalat should be made a decree of the court concerned, it would introduce conflict with section 21. So also, if the settlement agreement authenticated by the conciliator has to be transformed into a decree of the court, it would conflict with section 74 of the AC Act.

Section 74 enjoins that the settlement agreement has the same status and effect as an arbitral award on agreed terms as if it is rendered by an arbitral tribunal under section 30 of the AC Act. To say that it shall have effect as a decree of the civil court would not be consistent with the existing provisions in the AC Act. To avoid these complications, the Legislature need not necessarily take the course of action indicated by the Supreme Court. Section 89 will serve its purpose even if the further step of passing a decree in terms of the award of Lok Adalat or conciliation agreement is not taken.

On enquiry from some District Judges/Secretaries, LSAs, the Chairman of the Commission has come to know that as per the existing practice, the referring court, on receipt of intimation from Lok Adalat, records the factum of settlement leading to award of Lok Adalat and closes the case in the presence of parties or their counsel. No formal order or decree is being passed. There could possibly be no objection in legitimizing such procedure. We may clarify that "mediation" being non-statutory stands on a different footing.

The imprimatur of the Court is required to make it effective.

Section 89 and Order X, Rule 1.- the Reference Procedure