The CPC amendment Act, 1999 as amended, Section 89 of the Code provides for settlement of disputes outside the court, this amendment has been made on the basis of the recommendations made by the law commission of India and the Malimath Committee.
This section under CPC describes the procedure to be followed in matters referred for different modes of settlements and it also empowers the government and high courts to make rules to be followed in mediation proceedings for the purpose of bringing about compromise between the parties.
According to section 89 of the code where it appears to the court that there exists elements of a settlement which may be acceptable to the parties, the court shall formulate the terms of settlement and give them to the parties for their observations and after receiving the observations of the parties, the court may reformulate the terms of a possible settlements and refer the same for arbitration, conciliation, judicial settlement including through Lok Adalats or Mediation.
However, if the parties fail to get their disputes settled through any of the alternative dispute resolution methods, the suit would come back to proceed further in the court in which it was filed.
The provisions under section 89 of the CPC is an attempt to bring about resolution of disputes between parties outside the court, minimize cost and reduce the burden of the courts. This provision has been made with the sole objective of blending judicial and non-judicial dispute resolution mechanisms and bringing alternative dispute resolution mechanisms to the center of the Indian judicial system.
The long drawn process of litigation and the cost incurred by the parties for the same have alternative dispute resolution and are important aspects of the judicial system to ensure speedy justice.
Thus section 89 along with rules 1 (a,b,c) of order XI of the CPC was introduced with the purpose of amicable, peaceful and mutual settlement of dispute between parties without intervention of the court.