Report No. 238

5.4 An important question discussed by the Supreme Court is whether reference to ADR process is mandatory. In this regard, before we advert to the views expressed by the Supreme Court in Afcons Infrastructure case, we may refer to what was said in Salem Bar Assn. case which considered the aspect of apparent conflict between the language of section 89 and Order 10 Rule-1A. This is what the learned Judges said:

"The intention of the legislature behind enacting Section 89 is that where it appears to the court that there exists an element of a settlement which may be acceptable to the parties, they, at the instance of the court, shall be made to apply their mind so as to opt for one or the other of the four ADR methods mentioned in the section and if the parties do not agree, the court shall refer them to one or the other of the said modes.

Section 89 uses both the words 'shall' and 'may' whereas Order X Rule 1-A uses the word 'shall' but on harmonious reading of these provisions it becomes clear that the use of the word 'may' in Section 89 only governs the aspect of reformulation of the terms of a possible settlement and its reference to one of the ADR methods. There is no conflict. It is evident that what is referred to one of the ADR modes is the dispute which is summarized in the terms of settlement formulated or reformulated in terms of Section 89." (underlined for emphasis)

5.5 This is how the two provisions have been reconciled. The underlined words give rise to an element of ambiguity in understanding the said observations. However, in Afcons Infrastructure case, the Supreme Court clarified the legal position more aptly by stating thus:

'Section 89 starts with the words "where it appears to the court that there exist elements of a settlement". This clearly shows that cases which are not suited for ADR process should not be referred under Section 89 of the Code. The court has to form an opinion that a case is one that is capable of being referred to and settled through ADR process. Having regard to the tenor of the provisions of Rule 1-A of Order 10 of the Code, the civil court should invariably refer cases to ADR process.

Only in certain recognized excluded categories of cases it may choose not to refer to an ADR process. Where the case is unsuited for reference to any of the ADR processes, the court will have to briefly record the reasons for not resorting to any of the settlement procedures prescribed under Section 89 of the Code. Therefore, having a hearing after completion of pleadings, to consider recourse to ADR process under Section 89 of the Code, is mandatory. But actual reference to an ADR process in all cases is not mandatory. Where the case falls under an excluded category, there need not be reference to ADR process. In all other cases reference to ADR process is a must'.

5.6 Then, the Supreme Court went on categorizing the cases, considered suitable or not suitable for ADR process. It was observed that the following categories of cases are normally considered to be not suitable for ADR process having regard to their nature:

"(i) Representative suits under Order 1 Rule 8 CPC which involve public interest or interest of numerous persons who are not parties before the court. (In fact, even a compromise in such a suit is a difficult process requiring notice to the persons interested in the suit, before its acceptance).

(ii) Disputes relating to election to public offices (as contrasted from disputes between two groups trying to get control over the management of societies, clubs, association, etc.)

(iii) Cases involving grant of authority by the section after enquiry, as for example, suits or grant of probate or letters of administration.

(iv) Cases involving serious and specific allegations of fraud, fabrication of documents, forgery, impersonation, coercion etc.

(v) Cases requiring protection of sections, as for example, claims against minors, deities and mentally challenged and suits for declaration of title against the Government.

(vi) Cases involving prosecution for criminal offences."

5.7 The Supreme Court also proceeded to enumerate the cases (whether pending in civil courts or special tribunals), suitable for ADR processes. Such cases are classified under five broad headings:-

(i) All cases relating to trade, commerce and contracts;

(ii) All cases arising from strained relationship, such as matrimonial cases;

(iii) All cases where there is a need for continuation of the pre-existing relationship, such as disputes between neighbour and members of societies;

(iv) All cases relating to tortuous liability, including motor accident claims; and

(v) All consumer disputes.

5.8 Having thus categorized the cases normally 'suitable' and 'not suitable' for ADR process, the Supreme Court made it clear: "They are illustrative, which can be subjected to just exceptions or additions by the court/tribunal exercising its jurisdiction/discretion in referring a dispute/case to an ADR process".