Binding nature of Mediation: A discussion by Rakesh Kumar Singh

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Binding nature of mediation: a discussion by Rakesh Kumar Singh 1

Binding nature of Mediation: A discussion by Rakesh Kumar Singh

1. Concept of mediation has though been very effective since its introduction,

instances are also available where it has been used only as tactics to defeat

the purpose of speedy disposal. The reason appears to be the fact that

mediation settlements are not treated as binding unless the court records

statement of parties and passes a decree thereon. The present paper will try

to project a proposition that mediation settlement is final, binding and a

deemed decree without any further approval of court.

2. For convenience, we can formulate following points of determination for a

proper discussion:

i. The manner in which Mediation Rules 2004 were framed in Delhi.

ii. Does Affcons judgment affect the above position?

iii. Can Rule-25 be justified under general rule making power?

iv. When will an Institution or person become Lok Adalat?

v. What are the relevant provisions of LSA Act applicable to mediation?

vi. Can it be said that provisions of LSA Act will not apply to mediation?

vii. Section-89(2)(c) is an illustration of legislation by reference.

viii. Whether contrary observation of Affcons is a binding precedent.

ix. Observations of second Salem Bar case regarding visible record of

mediation.

x. Affcons vs second Sale Bar case: a legal dichotomy.

xi. Rules vs statutory enactment: which one will prevail?

xii. Validity of Rule-25 of Mediation Rules 2004.

xiii. Can mediation rules talking about procedure of pre referral court related

matter be justified?

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xiv. Can mediation rules related to actual mediation be justified to some

extent?

xv. Can criminal compoundable cases be sent for mediation?

xvi. The furture..............

The manner in which Mediation Rules 2004 were framed in Delhi:

3. We have to first understand as to how the Mediation Rules were framed by

the Hon’ble High Court of Delhi. Preamble of the Rules reads as:

“In exercise of the rule making power under Part X of the Code of Civil

Procedure, 1908 (5 of 1908) and clause (d) of sub-section (2) of

Section 89 of the said Code and all other powers enabling it in this

behalf, the High Court of Delhi hereby makes the following rules”

3.1. The above clearly shows that the Hon’ble High Court has primarily used its

power available under Part-X of CPC and Section-89(2)(d) CPC. We can therefore

first scan the anatomy of Part-X. This part of CPC deals with the rule making power

of Hon’ble High Courts and takes in its fold Section-121 to 131. Section-122 and 128

are relevant for the present purpose. Section-122 reads as under:

“Power of certain High Courts to make rules–High Courts (not being

the Court of a Judicial Commissioner may, from time to time after

previous publication, make rules regulating their own procedure and

the procedure of the Civil Courts subject to their superintendence,

and may be such rules annual, alter or add to all or any of the rules in

the First Schedule.”

3.2. Section-128 has two sub-sections. Sub-section-(2) talks about specific

instances of rule making but does not include mediation and therefore the same is

not relevant for the present purpose. Sub-section-(1) is general in nature and reads

as under:

“Such rules shall be not inconsistent with the provisions in the body

of this Code, but, subject thereto, may provide for any matters

relating to the procedure of Civil Courts.”

3.3. What immediately becomes very clear is that the above indicated provisions

empower the Hon’ble High Court to frame rules to regulate the “procedure of civil

courts” and the rules so made must not be inconsistent with the provisions of body

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of the Code, obviously means the part containing the sections. Do these provisions

say that Hon’ble High Court can frame a rule for a procedure which is to be followed

by another institution? Answer is simply NO. Reason is obvious. Both the provisions

indicated above talk about the power of Hon’ble High Court to frame rules to

regulate the procedure of civil courts and not the procedure of any other institution.

3.4. The next provision used in the preamble of Mediation Rules is Section-

889(2)(d) of CPC and the same reads as under:

“(2)Where a dispute has been referred- ……………………………(d) for

mediation, the court shall effect a compromise between the parties

and shall follow such procedure as may be prescribed.”

3.5. It simply shows that whenever the parties choose mediation as an option

under Section-89(1), the court shall effect a compromise. Meaning thereby that it is

the court which has to do the activity for compromise. Now, the CPC does not

provide as to how the court will act or proceed to effect a compromise. Therefore,

the Section itself gives the answer also in the wordings “and shall follow such

procedure as may be prescribed”. So, the court has to follow such procedure as may

be prescribed.

3.6. Who will prescribe the procedure is the next question. The expression

“prescribed” has a definite indication in modern legislative enactments. Section-

2(16) CPC reads as under:

“2(16) “prescribed” means prescribed by rules.”

3.7. Clearly, the procedure to be followed under Section-89(2)(d) has to be

prescribed by rules. The expression “Rules” is also a defined term under Section-

2(18) of CPC which reads as under:

“2(18) “rules” means rules and forms contained in the First Schedule

or made under section 122 or section 125.”

3.8. So, Rules can either be as contained in first schedule or as framed by the

Hon’ble High Court. First schedule does not contain any rule of procedure to be

followed for mediation. Section-125 does not apply to Hon’ble Delhi High Court. As

indicated above, Section-122 talks about rules to regulate procedure of civil courts.

Section-89(2)(d) obliges the court to effect compromise in case of mediation and

procedure to be followed by court is to be prescribed by rules made under Section-

122. So, with all certainty Hon’ble Delhi High Court could have made rules to

regulate the procedure of civil court even for effecting compromise through

mediation. As such, Mediation Rules 2004 could have been framed.

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4. The foundational basis of Mediation Rules 2004 was the first Salem Bar case

(2003) 1 SCC 49. Some extracts therefrom are relevant which is reproduced as

under:

"Sub-section (2) of Section 89 refers to different Acts in relation to

arbitration, conciliation or settlement through Lok Adalat, but with

regard to mediation Section 89(2)(d) provides that the parties shall

follow the procedure as may be prescribed. Section 89(2)(d),

therefore, contemplates appropriate rules being framed with regard

to mediation"

*****

"The Model rules, with or without modification, which are formulated

may be adopted by the High Court concerned for giving effect to

Section 89(2)(d)"

4.1. However, in second Salem Bar case (2005) 6 SCC 344, it was observed:

“In fact, the court is not involved in the actual mediation/conciliation.

Clause (d) of Section 89(2) only means that when mediation succeeds

and parties agree to the terms of settlement, the mediator will report

to the court and the court, after giving notice and hearing the parties,

'effect' the compromise and pass a decree in accordance with the

terms of settlement accepted by the parties.”

4.2. If this was the position, the Rules framed under Section-128 read with Section-

122 could only have provided for the procedure to be followed before the court and

not before the mediator as both the Sections empower to make Rules only to

regulate “procedure before civil court” and not before any other institution. What

could fall under such procedure can now be considered. There may be three stages.

First, before referral i.e. as to how to choose for mediation and how to refer the

dispute to mediation. Second, the actual mediation. Third, procedure after return of

the settlement before the court i.e. how to dispose off the case. Clearly, first and

third situations are related to court and therefore procedure can be prescribed by

making rules under Section-128 read with Section-122. Mediation Rules 2004

contain Rule- 25 which relate to the third stage indicated above and reads as:

“Rule 25 : Court to fix a date for Recording settlement and passing

decree: (a) On receipt of any settlement, the Court shall fix a date of

hearing normally within seven days but in any case not beyond a

period of fourteen days. On such date of hearing, if the Court is

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satisfied that the parties have settled their dispute(s), it shall pass a

decree in accordance with terms thereof. (b) If the settlement

dispose of only certain issues arising in the suit or proceeding, on the

basis of which any decree is passed as stated in Clause (a), the Court

shall proceed further to decide remaining issues.”

4.3. The above rule clearly shows that unless satisfaction is recorded and decree is

passed, the mediation settlement by itself has no legal sanctity. This is the provision

which is primarily responsible for problem. Despite settlement in mediation, one of

the parties may choose not to give statement in the court and thereby defeat the

very purpose. But unfortunately, the court cannot go beyond this rule as it has to

follow such procedure as may be prescribed which means prescribed by rules and

the above procedure has been prescribed by rules.

Does Affcons judgment affect the above position?

5. Hon’ble Supreme Court through a judicial legislation has amended Section-

89(2) of the CPC. Earlier, Section-89(2) CPC was as under:

“(2) where a dispute has been referred –

(a) for arbitration or conciliation, the provisions of the Arbitration and

Conciliation Act, 1996 (26 of 1996) shall apply as if the proceedings

for arbitration or conciliation were referred for settlement under the

provisions of that Act;

(b) to Lok Adalat, the Court shall refer the same to the Lok Adalat in

accordance with the provisions of sub-section (1) of section 20 of the

Legal Services Authority Act, 1987 (39 of 1987) and all other

provisions of that Act shall apply in respect of the dispute so referred

to the Lok Adalat;

(c) for judicial settlement, the Court shall refer the same to a suitable

institution or person and such institution or person shall be deemed

to be a Lok Adalat and all the provisions of the Legal Services

Authority Act, 1987 (39 of 1987) shall apply as if the dispute were

referred to a Lok Adalat under the provisions of that Act;

(d) for mediation, the Court shall effect a compromise between the

parties and shall follow such procedure as may be prescribed.”

5.1. In Affcons, it was held as under:

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“the definitions of ‘judicial settlement’ and ‘mediation’ in clauses (c)

and (d) of section 89(2) shall have to be interchanged to correct the

draftsman’s error.”

5.2. Clearly, after the above changes made by the Hon’ble Supreme Court, Section-

89(2) CPC to the relevant extant will read as under:

“(c) for “mediation”, the court shall refer the same to a suitable




referred to a Lok Adalat under the provisions of that Act;

(d) for “judicial settlement”, the court shall effect a compromise

between the parties and shall follow such procedure as may be

prescribed.”

5.3. The Hon’ble Supreme Court then issued a clear direction as under:

“The above changes made by interpretative process shall remain in

force till the legislature corrects the mistakes, so that section 89 is

not rendered meaningless and infructuous.”

5.4. We have already noted that the base of mediation rules was first Salem Bar

case. The relevant extracts therefrom are:

"Section 89(2)(d), therefore, contemplates appropriate rules being

framed with regard to mediation"

*****

The Model rules, with or without modification, which are formulated

may be adopted by the High Court concerned for giving effect to

Section 89(2)(d)"

5.5. Why it was so? Because, Section-89(2)(d) has used an expression “procedure

as may be prescribed” and the word “prescribed” means, as we know, prescribed by

rules.

5.6. But now, according to the amended definition, Section-89(2)(d) does not talk

about mediation at all which can be seen from a bare perusal of the section itself (as

amended by Affcons):

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“89(2)(d) for “judicial settlement”, the court shall effect a

compromise between the parties and shall follow such procedure as

may be prescribed.”

5.7. There is thus no mention of mediation in the aforesaid provision. Now, the

above section says that if the parties have chosen to go for judicial settlement, then

the court will effect compromise and follow such procedure as may be prescribed. If

the rules are made to give effect to Section-89(2)(d), then it can only apply for a

judicial settlement and not for mediation unlike the situation before amendment.

Meaning thereby that the Rule-25 of Mediation Rules which were made to give

effect to Section-89(2)(d) cannot be treated as valid after the amendment as

Section-89(2)(d) itself is now not applicable to the mediation. (I will talk about other

rules in later part of this journey).

Can Rule-25 be justified under general rule making power?

6. We have seen that due to amendment made, Section-89(2)(d) cannot justify

Rule-25 of Mediation Rules 2004. We have also seen that the Rule falls within third

category of situation which is related to a court procedure. Now, in terms of Section-

122 and 128, the Hon’ble High Court is empowered to frame any rule to regulate the

“procedure of civil court”. Does this general power justify the making of Rule-25 is

now the prime question.

6.1. We have to again go through both the sections which to the relevant extant

read as under:

“122. Power of certain High Courts to make rules-High Courts (not

being the Court of a Judicial Commissioner may, from time to time

after previous publication, make rules regulating their own procedure

and the procedure of the Civil Courts subject to their

superintendence, and may be such rules annual, alter or add to all or

any of the rules in the First Schedule.”

“128(1). Such rules shall be not inconsistent with the provisions in

the body of this Code, but, subject thereto, may provide for any

matters relating to the procedure of Civil Courts.”

6.2. No doubt, the general power of rule making does contemplate that the

procedure before the court may be regulated by the rules but with certainty it bars

making of any rule which is inconsistent with the body of the code. Needless to say

that body of the code means part of CPC which contains the sections (for obvious

reasons, first schedule cannot be included as the rules can even alter/annul the first

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schedule). One of the sections in body of the code is Section-89(2)(c) which after the

amendment through Affcons reads as under:

“(c) for “mediation”, the court shall refer the same to a suitable




referred to a Lok Adalat under the provisions of that Act”.

6.3. The above provision contemplates three stages. First, referring the dispute to

a suitable institution or person. Second, creation of deeming fiction for such

institution or person. And third, applicability of law to such institution or person.

6.4. First stage is the activity covered before the civil court i.e. the court that is

referring the matter and there is nothing in the CPC or any other law which provides

any procedure to be followed by the court at this stage. Therefore, rules may be

made under general rule making power of the Hon’ble High Court. Second stage is

clearly a creation of Parliament. It creates a Lok Adalat by a deeming fiction. There

remains nothing for anyone to do anything at this stage. Reason is obvious. In all

circumstances, once the referral stage is over, the institution or person to whom

matter has been referred will become a Lok Adalat in itself without anything more.

Next is the third stage of applicability of law. Again by a deeming fiction created by

the Parliament, the law governing the procedure has been provided i.e. the

provisions of Legal Services Authority Act, 1987. Meaning thereby that procedure for

mediation has been provided by a deeming fiction created under Section-89(2)(c).

Section-128(1) says that Rules shall not be inconsistent with the body of the code

and further that subject to the provisions available in the body of the code, rules

may be made to regulate the procedure of court. So, not only the rules should not

be inconsistent to Section-89(2)(c) but such rules shall also be subject to Section-

89(2)(c). Once, Section-89(2)(c) provides that provisions of Legal Services Authority

Act shall apply, there cannot be any question of framing any other rule in this

regard. The mediation has to be governed by the provisions of Legal Services

Authority Act (as if the matter has been referred under relevant provisions of LSA

Act) once the matter is received by the institution or person to whom the same has

been referred.

When an Institution or person will become Lok Adalat:

7. One thing is however very significant. Even amended Section-89(2)(c) does not

make the mediation institute or person a Lok Adalat. What it says is simply this:

whenever the dispute is referred for mediation to any suitable institution or person,

such institution or person shall be deemed to be a Lok Adalat. Obviously, to deem

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“A” as “B” the pre-existence of “A” is a necessity. Means, unless the “A” already

exits, it cannot be deemed to be “B” through a fiction. Here, “A” is a suitable

institution or person. Can we say that if an institution by the name of mediation

centre or a person by the name of mediator exists in Delhi, therefore the same shall

be deemed to be Lok Adalat? Answer is bound to be in the negative. The Section has

used “institution or person” at two places. It has used an indefinite article “a” at the

first place denoting that it may be any institution or person to whom matter may be

referred for mediation. But at the second place, the Section has used “such” before

“institution or person”. As is well settled, expression “such” is used to denote that

the forthcoming expression has already been used earlier.

The earlier use of “institution or person” has been available in the Section only with

reference to an institution or person to whom matter has been referred. Meaning

thereby that only an institution or a person to whom a particular matter has been

referred to can be considered for the second stage i.e. for deeming fiction. Further,

the section does not create and rather cannot create a Lok Adalat of a permanent

character. Even LSA Act provides for constitution of Lok Adalat for a particular

purpose only as distinct from Permanent Lok Adalat which is established for utility

services and does not contemplate court referred matter. So, it cannot be said that

once a matter is referred to a mediation centre or person, the same shall become

Lok Adalat for all future matters. In other words, if a matter is referred to an

institution or a person, only thereafter such institution or such person can be

deemed to be Lok Adalat and that too only for that referred matter.

What are the relevant provisions of LSA Act applicable to mediation:

8. We should go through the provisions of LSA Act to ascertain as to what are the

provisions which can apply to the mediation. Section-3 to 18 talks about constitution

of different authorities, provisions for legal aid and finances. Therefore, these

sections are not material for mediation. Chapter-VIA talks about permanent Lok

Adalat which does not contemplate court referred matters and therefore the same

is also not material for mediation. Chapter-VII talks about rule making power of

government and legal services authorities, removal of difficulties, exemption from

prosecution etc. and therefore is not material for our purpose except section-25

which gives overriding effect. Then remains Section-19 to 22 which read as under:

“19. (1) Every State Authority or District Authority or the Supreme

Court Legal Services Committee or every High Court Legal Services

Committee or, as the case may be, Taluk Legal Services Committee

may organize Lok Adalats at such intervals and places and for

exercising such jurisdiction and for such areas as it thinks fit.

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(2) Every Lok Adalat organized for an area shall consist of such

number of- (a) serving or retired judicial officers; and (b) other

persons, of the area as may be specified by the State Authority or the

District Authority or the Supreme Court Legal Services Committee or

the High Court Legal Services Committee or, as the case may be, the

Taluk Legal Services Committee, organizing such Lok Adalat.

(3) The experience and qualifications of other persons referred to in

clause (b) of sub-section (2) for Lok Adalats organized by the Supreme

Court Legal Services Committee shall be such as may be prescribed by

the Central Government in consultation with the Chief Justice of

India.

(4) The experience and qualifications of other persons referred to in

clause (b) of sub-section (2) for Lok Adalats other than referred to in

sub-section (3) shall be such as may be prescribed by the State

Government in consultation with the Chief Justice of the High Court.

(5) A Lok Adalat shall have jurisdiction to determine and to arrive at a

compromise or settlement between the parties to a dispute in

respect of-- (i) any case pending before; or (ii) any matter which is

falling within the jurisdiction of and is not brought before, any court

for which the Lok Adalat is organized: Provided that the Lok Adalat

shall have no jurisdiction in respect of any case or matter relating to

an offence not compoundable under any law.

20. (1) Where in case referred to in clause (i) of sub-section (5) of

section 19. (i) (a) the parties thereof agree; or (b) one of the parties

thereof makes an application to the court, for referring the case to

the Lok Adalat for settlement and if such court is prima facie satisfied

that there are chances of such settlement; or (ii) the court is satisfied

that the matter is an appropriate one to be taken cognizance of by

the Lok Adalat, the court shall refer the case to the Lok Adalat :

Provided that no case shall be referred to the Lok Adalat under sub-

clause (b) of clause (i) or clause (ii) by such court except after giving a

reasonable opportunity of being heard to the parties.

(2) Notwithstanding anything contained in any other law for the time

being in force, the Authority or Committee organizing the Lok Adalat

under sub-section (1) of section 19 may, on receipt of an application

from any one of the parties to any matter referred to in clause (ii) of

sub-section (5) of section 19 that such matter needs to be determined

by a Lok Adalat, refer such matter to the Lok Adalat, for

determination: Provided that no matter shall be referred to the Lok

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Adalat except after giving a reasonable opportunity of being heard to

the other party.

(3) Where any case is referred to a Lok Adalat under sub-section (1)

or where a reference has been made to it under sub-section (2), the

Lok Adalat shall proceed to dispose of the case or matter and arrive at

a compromise or settlement between the parties.

(4) Every Lok Adalat shall, while determining any reference before it

under this Act, act with utmost expedition to arrive at a compromise

or settlement between the parties and shall be guided by the

principles of justice, equity fair play and other legal principles.

(5) Where no award is made by the Lok Adalat on the ground that no

compromise or settlement could be arrived at between the parties,

the record of the case shall be returned by it to the court, from which

the reference has been received under sub-section (1) for disposal in

accordance with law.

(6) Where no award is made by the Lok Adalat on the ground that no

compromise or settlement could be arrived at between the parties, in

a matter referred to in sub-section (2), that Lok Adalat shall advice

the parties to seek remedy in a court.

(7) Where the record of the case is returned under sub-section (5) to

the court, such court shall proceed to deal with such case from the

stage which was reached before such reference under sub-section (1).

21. (1) Every award of the Lok Adalat shall be deemed to be a decree

of a civil court or, as the case may be, an order of any other court and

where a compromise or settlement has been arrived at by a Lok

Adalat in a case referred to it under sub-section (1) of section 20, the

court-fee paid in such case shall be refunded in the manner provided

under the Court-fees Act, 1870.

(2) Every award made by a Lok Adalat shall be final and binding on all

the parties to the dispute, and no appeal shall lie to any court against

the award.

22. (1) The Lok Adalat “or Permanent Lok Adalat” shall, for the

purposes of holding any determination under this Act, have the same

powers as are vested in a civil court under the Code of Civil

Procedure, 1908, while trying a suit in respect of the following

matters, namely:- (a) the summoning and enforcing the attendance of

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any witness and examining him on oath; (b) the discovery and

production of any document; (c) the reception of evidence on

affidavits; (d) the requisitioning of any public record or document or

copy of such record or document from any court or office; and (e)

such other matters as may be prescribed.

(2) Without prejudice to the generality of the powers contained in

sub-section (1), every Lok Adalat “or Permanent Lok Adalat” shall

have the requisite powers to specify its own procedure for the

determination of any dispute coming before it.

(3) All proceedings before a Lok Adalat “or Permanent Lok Adalat”

shall be deemed to be judicial proceedings within the meaning of

sections 193, 219 and 228 of the Indian Penal Code and every Lok

Adalat shall be deemed to be a civil court for the purpose of section

195 and Chapter XXVI of the Code of Criminal Procedure, 1973.”

8.1. Section-19 empowers the legal services authorities to constitute a Lok Adalat,

to provide for number of members thereof or their qualification. It is only Section-

19(5) which talks about the matters which can be dealt with by the Lok Adalat.

However, even this sub-section has no relevance for the present purpose as the

deemed Lok Adalat under Section-89(2)(c) can deal with only the matter which has

the basis of its creation through the deeming fiction i.e. the matter specifically

referred to it there-under.

8.2. Section-20(1) and 20(2) talk about who can refer a matter and how. But in the

case of mediation under Section-89(2)(c), the matter has already been referred and

therefore, these sub-sections cannot have any relevance for the present purpose.

8.3. Section-20(3) to Section-20(7) talk about the circumstances after the matter

referred is received by the Lok Adalat. Section-21 talks about effect of award.

Section-22 talks about powers of Lok Adalat. Clearly, from this stage the provisions

will be applicable to the deemed Lok Adalat under Section-89(2)(c). These provisions

therefore will require a closure scrutiny.

8.4. Section-20(6) is related to pre-litigative stage and therefore is not material for

the present purpose. Section-20(5) says that if matter is not settled, the same shall

be returned to the concerned court. Section-20(7) says that whenever the court

receives the matter unsettled, it will continue from the stage at which the matter

was referred for Lok Adalat. Clearly, therefore, Section-20(5) & (7) will apply to failed

mediation. No separate rule is therefore required to be made and atleast no

inconsistent rule can be made.

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8.5. Section-20(4) and Section-22 are required to be considered together. Section-

20(4) indicates that Lok Adalat shall be guided by natural principles. Section-22(1)

gives the Lok Adalat some of the powers of civil court. It is however Section-22(2)

which provides for some additional avenue to lay down procedure which may, by

way of some farfetched interpretation, be utilized for procedure before mediator (I

will deal with this concept in later part of this opinion). But even this provision

cannot be invoked for providing any procedure either before the referral or after

return of the matter unsettled or after settlement of the matter.

8.6. Section-20(3) and Section-21 are significant. Section-21 reads as under:

“21. (1) Every award of the Lok Adalat shall be deemed to be a decree

of a civil court or, as the case may be, an order of any other court and

where a compromise or settlement has been arrived at by a Lok

Adalat in a case referred to it under sub-section (1) of section 20, the

court-fee paid in such case shall be refunded in the manner provided

under the Court-fees Act, 1870.

(2) Every award made by a Lok Adalat shall be final and binding on all

the parties to the dispute, and no appeal shall lie to any court against

the award.”

8.7. Following situations immediately become clear:

Award shall be deemed to be a decree;

Award shall be final;

Award shall be binding on parties;

No appeal shall lie against award to any court.

8.8. By virtue of deeming fiction available in Section-89(2)(c) of CPC, the aforesaid

provision has to apply to the matter sent for mediation to any institution or person.

If we are to hold that unless the parties give their statement and the court passes a

decree, the award shall have no value, or that unless that happens, the award shall

not be final or binding, such proposition will run counter to the parliamentary

dictate available in Section-21. The proposition will also go against Section-20(3)

which reads as under:

“(3) Where any case is referred to a Lok Adalat under sub-section (1)

or where a reference has been made to it under sub-section (2), the

Lok Adalat shall proceed to dispose of the case or matter and arrive

at a compromise or settlement between the parties.”

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8.9. It clearly says that upon settlement the case has to be disposed of. The term

“case” has been defined in Section-2(a) of LSA Act which reads as under:

“2(a) “case” includes a suit or any proceeding before a court”.

8.10. A suit pending before a civil court is clearly a “case” for the purpose of

Section-20(3) of LSA Act and therefore it has to be disposed of by the Lok Adalat and

the same procedure has to be applied by the mediator in terms of Section-89(2)(c).

Once the matter is settled, the case (i.e. the suit) has to be disposed of by the Lok

Adalat (even by deemed Lok Adalat) and therefore there remains nothing for the

court to do with the suit. Even the LSA Act talks about return of matter in cases of

no-settlement but does not provide for return in case of settlement. Therefore,

there cannot be any question of returning the case to the civil court after

settlement. Consequently, the aforesaid proposition cannot be adopted.

8.11. Interestingly, Section-20(5) and 20(6) talk about dispute referred to by a court

and a dispute which has not been referred to by a court and provide for different

consequences in case of non-settlement. Whereas Section-21 does not differentiate

between an award made upon reference of court and an award made in the matter

not referred by court. Expression used in both the sub-sections of Section-21 is

“every award” and therefore it will take widest possible meaning and include in its

fold all the awards made by a Lok Adalat irrespective of the referral position i.e. who

referred the dispute or how it has been referred. Similarly, Section-20(3) has used

“disposed of” in respect of case/matter if settlement is arrived at and there is no

distinction between dispute referred by a court and a dispute not referred by a

court. The only distinction made by the LSA Act is between consequence of

settlement and no-settlement. If settlement happens, one particular line of action

will ensue whereas if dispute is not settled, the other line of action will ensue.

Nothing more. Clearly, when the Parliament wanted to differentiate between

consequences of two modes of referral, it has done so specifically but for award &

disposal, it has not made any differentiation. We cannot adopt any proposition

which goes contrary to plain language of the statutory provisions.

Can it be said that provisions of LSA Act will not apply to mediation?:

9. Section-89(2)(c) says “all the provisions of the Legal Services Authority Act,

1987 (39 of 1987) shall apply as if the dispute were referred to a Lok Adalat under

the provisions of that Act”. The only provision of LSA Act which provides for

reference by a court is Section-20(1). Therefore, once the court sends the dispute for

mediation, the mediator shall be deemed to be a Lok Adalat and the dispute shall be

treated as if it has been referred to under Section-20(1). Once it is treated as

referred under Section-20(1), all the provisions consequent thereto shall

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automatically become applicable. Section-20(3), 20(5), 20(7) clearly talk about

dispute referred under Section-20(1). So these provisions will apply to the matters

referred to mediation (deemed Lok Adalat) and consequently, case has to be

disposed of if settlement is arrived at and in the situation of no-settlement, the case

has to be returned to concerned court which shall continue with the trial. Section-

20(4), 21, 22 talk about any reference, every award, any determination. So, these

provisions will apply without any discrimination. Consequently, the same shall also

apply to the matters referred to mediation in terms of deeming fiction created

under Section-89(2)(c) CPC.

Section-89(2)(c) is an illustration of legislation by reference:

10. A constitution bench of Hon’ble Supreme Court in Girnar Traders vs State of

Maharashtra & Ors. dated 11.01.2011 has commented upon the doctrine of

legislation by reference in following manner:

“When there is general reference in the Act in question to some

earlier Act but there is no specific mention of the provisions of the

former Act, then it is clearly considered as legislation by reference. In

the case of legislation by reference, the amending laws of the former

Act would normally become applicable to the later Act; but, when the

provisions of an Act are specifically referred and incorporated in the

later statute, then those provisions alone are applicable and the

amending provisions of the former Act would not become part of the

later Act. This principle is generally called legislation by incorporation.

General reference, ordinarily, will imply exclusion of specific

reference and this is precisely the fine line of distinction between

these two doctrines. Both are referential legislations, one merely by

way of reference and the other by incorporation. It, normally, will

depend on the language used in the later law and other relevant

considerations. While the principle of legislation by incorporation has

well defined exceptions, the law enunciated as of now provides for no

exceptions to the principle of legislation by reference.

***

In the case of legislation by reference, it is fictionally made a part of

the later law.

****

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When the later law depends on the former law for

procedural/substantive provisions or is to draw its strength from the

provisions of the former Act, the later Act is termed as the

supplemental to the former law.”

10.1. Meaning thereby that Section-89(2)(c) has made the provisions of LSA Act as

part of CPC by fiction whenever a dispute is referred for mediation. If this is the

position, no rule can be made which is inconsistent or if a rule is to be made the

same will be subject to sections of CPC as laid down in Section-128. (And of course,

provisions of LSA Act will fictionally be treated as being made part of Section-

89(2)(c) in view of doctrine of legislation by reference).

10.2. Further, if provisions of LSA Act (including Section-20 and 21) are fictionally

treated as being made in Section-89(2)(c) of CPC, how one will be able to say that

those provisions cannot apply to matter settled in mediation.

Whether contrary observation of Affcons is a binding precedent:

11. Hon’ble Supreme Court in Affcons has made some interesting observations in

following manner:

“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 conciliations, or Lok Adalats, 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.

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 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.

***

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Whenever such settlements reached before non-adjudicatory ADR

Fora are placed before the court, the court should apply the

principles of Order 23 Rule 3 of the Code and make a decree/order in

terms of the settlement, in regard to the subject matter of the

suit/proceeding. In regard to matters/disputes which are not the

subject matter of the suit/proceedings, the court will have to direct

that the settlement shall be governed by Section 74 of AC Act (in

respect of conciliation settlements) or Section 21 of the Legal Services

Authorities Act, 1987 (in respect of settlements by a Lok Adalat or a

Mediator). Only then such settlements will be effective.”

11.1. The above quoted portions show that three proposition were contemplated.

First, there is a difference between settlement on court reference and settlement of

matter without being referred by a court. Second, since court retains the control,

the settlement has to be vetted by it. Third, court related subject matter shall be

governed by Order 23 Rule 3 whereas subject matter not forming part of case before

court shall be directed to be governed by relevant statutory provisions even if the

same is incorporated in a single award.

11.2. All the three propositions, in my humble view, cannot be said to be the

binding ratio of the judgment. Order 23 Rule 3 covers the matters beyond the

subject matter of a suit. Neither the Arbitration and Conciliation Act nor LSA Act

differentiates between any settlement arrived at in a matter referred by the court

and a settlement of a matter which is not referred by court. We have seen in detail

the Section-21 of LSA Act. Conciliation Act is not different. Through Section-74 it

contemplates the applicability of Section-30 thereof which in turn says that award

on settlement shall have same status & effect as is available with any other arbitral

award. Consequently, finality & binding clause and deeming decree provisions of

Section-35 & 36 will become applicable to the settlement in conciliation. If due to

Section-35 & 36, an arbitral award is treated as final, binding and deemed to be a

decree and not requiring any approval even if the same is arrived at in a matter

referred by a court, there is no reason as to why conciliation award, mediation

settlement, lok adalat award having the same provisions will not have the same

value only because it has been arrived at in a matter referred by a court.

None of the statutory provisions require any approval of the court for treating such

settlement as final, binding and a deemed decree. Affcons also appears to premise it

on an assumption that being an adjudicatory procedure, arbitration goes out of the

stream of court system whereas other four ADR being non-adjudicatory, remain in

the court system. However, this remains an assumption as neither Conciliation Act

nor LSA Act and nor even CPC, differentiates between ADRs on adjudicatory or non-

adjudicatory basis. So far as first proposition is concerned, none of the statutory

provisions of LSA Act or Arbitration & Conciliation Act makes a distinction between

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settlement on court reference and settlement of matter without being referred by a

court.

11.3. Does the observations in Affcons bind the courts and refrain deviation?

Answer is simply No. Reason is obvious. A judgment which goes contrary to

statutory provisions cannot be treated as a binding precedent. Fortunately, I am not

obliged to say so as a Constitution bench of Hon’ble Supreme Court has already

commented upon this issue in CBI vs Keshub Mahindra dated 11.05.2011 in

following manner:

“No decision by any court, this Court not excluded, can be read in a

manner as to nullify the express provisions of an Act or the Code…….”

11.4. Authorities may be multiplied as the same are in abundance so far as concept

of precedent is concerned but will only be a formality. The observations in Affcons

cannot be read as binding. Statutory provision of LSA Act and Arbitration &

Conciliation Act will have to be followed.

Observations of second Salem Bar case regarding public record of mediation:

12. Then there are some observations regarding visible records for mediation in

the second Salem Bar case (2005) 6 SCC 344 which reads as:

“When the parties come to a settlement upon a reference made by

the Court for mediation, as suggested by the Committee that there

has to be some public record of the manner in which the suit is

disposed of and, therefore, the Court has to first record the

settlement and pass a decree in terms thereof and if necessary

proceed to execute it in accordance with law. It cannot be accepted

that such a procedure would be unnecessary. If the settlement is not

filed in the Court for the purpose of passing of a decree, there will be

no public record of the settlement. It is, however, a different matter if

the parties do not want the court to record a settlement and pass a

decree and feel that the settlement can be implemented even

without decree. In such eventuality, nothing prevents them in

informing the Court that the suit may be dismissed as a dispute has

been settled between the parties outside the Court.”

12.1. The above extract clearly shows that Rule-25 was its byproduct. Since at that

point of time there was no procedure available for showing disposal of case referred

to mediation, the committee suggested the aforesaid procedure and the Hon’ble

Supreme Court accepted the same. It would be somewhat interesting to note that

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no such procedure for visible record was suggested or made in the said judgment for

other modes of ADR. Reason was obvious. They were to be governed by relevant

statutory provisions of 1996 Act and 1987 Act. (see the observation “Section 89

makes applicable 1996 Act and 1987 Act from the stage after exercise of options

and making of reference” in the aforesaid judgment). This also strengthen the view

that the observation of Affcons about vetting by court for Conciliation and Lok

Adalat would be contrary to the second Salem Bar Case which otherwise has to be

given preference being rendered by a three judges bench whereas Affcons is two

judges bench decision.

12.2. Be that as it may. Affcons has made a judicial amendment in Section-89 CPC

whereby it brings the mediation in Section-89(2)(c) and therefore now, a visible

procedure is available for disposal of the case in terms of LSA Act being the

governing statute by deeming fiction. Now, the Award even for mediation is to be

treated as a decree in terms of Section-21 LSA Act and therefore a public record is

available like other ADR such as Arbitration, Conciliation, Lok Adalat. As such, there

cannot be any need of placing the mediation settlement before the court and then

passing of decree by the court as Section-21 of LSA Act will take care of everything

even for mediation. The observations made in second Salem Bar case regarding

mediation therefore become insignificant in the like manner where any observation

becomes insignificant when a particular law is amended by the Parliament.

Affcons vs second Sale Bar case: a legal dichotomy:

13. This is somewhat interesting. Some fertile mind may say that at one point of

time I am accepting some observation of second Salem Bar case regarding

applicability of 1996 Act & 1987 Act in preference to Affcons on the ground that

former is rendered by a bench larger than the later whereas I am accepting later in

respect of the amendment made. Why this dichotomy? Answer is obvious. Second

Salem Bar case interpretated the provisions as were available and therefore that

interpretation cannot be treated as overruled by a two judges bench decision. But a

judicial decision can always read down/quash any provision at any point of time

unless the same has been upheld by any earlier bench of equal strength or larger

strength.

The recent example of a judicial change of statute was Satyawati Sharma (Dead) by

L.Rs v. Union of India and another 2008 (5) SCC 287 where by deleting some

offending portions, Section-14(1)(e) of Delhi Rent Control Act 1958 was made

applicable to all type of tenancies. The concept of amendment made by the Affcons

was never the subject matter of consideration in the second Salem Bar case and

therefore, no precedent exists on this point prior to Affcons. As such, amending

proposition of Affcons has to be followed as a law declared under Article-141 of the

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Constitution. Needless to say therefore that both the judgments have to be followed

for what is not contrary to the statutory provisions or any earlier precedents.

Rules vs statutory enactment: which one will prevail?:

14. There cannot be any problem. Rule has to give way to the statutory provisions.

14.1. In State Of Karnataka And Anr vs H. Ganesh Kamath Etc AIR 1983 SC 550, it

has been observed as under:

“Though the substituted clause (aa) inserted in sub-section (2) of

section 21 confers power upon a State Government to make rules

providing for the minimum qualifications of persons to whom licences

to drive a transport vehicle are issued, such power cannot include

within its scope the power to make a rule contrary to the provisions

of the Act conferring the rule-making power. It is a well settled

principle of interpretation of statutes that the conferment of rule-

making power by an Act does not enable the rule-making authority to

make a rule which travels beyond the scope of the enabling Act or

which is inconsistent there with or repugnant thereto.”

14.2. In General Officer vs Subhash Chandra Yadav AIR 1988 SC 876, it has been

observed as under:

“This contention is unsound. It is well settled that rules framed under

the provisions of a statute form part of the statute. In other words,

rules have statutory force. But before a rule can have the effect of a

statutory provision, two conditions must be fulfilled, namely, (1) it

must conform to the provisions of the statute under which it is

framed; and (2) it must also come within the scope and purview of

the rule making power of the authority framing the rule. If either of

these two conditions is not fulfilled, the rule so framed would be

void.”

14.3. In Kerala Samsthana Chethu vs State Of Kerala & Ors on 24 March, 2006,

Hon’ble Supreme Court observed as under:

“A rule is not only required to be made in conformity with the

provisions of the Act whereunder it is made, but the same must be in

conformity with the provisions of any other Act, as a subordinate

legislation cannot be violative of any plenary legislation made by the

Parliament or the State Legislature.

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******

Its power, therefore, was to make rules only for the purpose of

carrying out the purposes of the Act and not de'hors the same. In

other words, rules cannot be framed in matters that are not

contemplated under the Act.”

14.4. In Ashok Lanka and Another vs Rishi Dixit and Others (2005) 5 SCC 598, it was

held:

“We are not oblivious of the fact that framing of rules is not an

executive act but a legislative act; but there cannot be any doubt

whatsoever that such subordinate legislation must be framed strictly

in consonance with the legislative intent as reflected in the rule-

making power contained in Section 62 of the Act.”

14.5. Authorities are therefore clear to the effect that rules being a subordinate

legislation have not only to give way to the substantive provisions of the statute

under which they have been made but also of the other statutes as Rules are

example of subordinate legislation. And if the rules are violative, they would be void.

Validity of Rule-25 of Mediation Rules 2004:

15. Rule-25 talks about satisfaction of court after settlement in mediation, passing

of decree by court etc. Rule-24 shows that mediator will not do anything after

recording of settlement and only forward the settlement to the court and then Rule-

25 shows that the court will record its satisfaction about settlement, and then the

court will pass a decree. All these procedures are clearly contrary to Section-20 and

21 of LSA Act and therefore is also contrary to Section-89(2)(c) which makes the LSA

Act as part of itself by fiction (see also the doctrine of legislation by reference). Rules

made by a Hon’ble High Court have to be subject to provisions of the section part of

CPC and also should not be inconsistent therewith in terms of Section-128. As such,

Rule-25 cannot continue to exist after the amendment made by Affcons.

Can mediation rules talking about procedure of pre referral court related matter

be justified?:

16. Section-122 and 128 CPC, we have seen, provide for the rules which may be

made to regulate the procedure before the court. Therefore, how a pre-referral

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procedure will be governed can certainly be provided by the rules made under

aforesaid provisions.

16.1. This also finds support from the second Salem Bar case (2005) 6 SCC 344

which observes:

“As already noticed, for the purposes of Section 89 and Order X, Rule

1A, 1B and 1C, the relevant Sections in Part X of the Code enable the

High Court to frame rules. If reference is made to Arbitration under

Section 89 of the Code, 1996 Act would apply only from the stage

after reference and not before the stage of reference when options

under Section 89 are given by the Court and chosen by the parties. On

the same analogy, 1996 Act in relation to Conciliation would apply

only after the stage of reference to Conciliation. The 1996 Act does

not deal with a situation where after suit is filed, the court requires a

party to choose one or other ADRs including Conciliation. Thus, for

Conciliation also rules can be made under Part X of the Code for

purposes of procedure for opting for 'Conciliation' and upto the stage

of reference to Conciliation. Thus, there is no impediment in the ADR

rules being framed in relation to Civil Court as contemplated in

Section 89 upto the stage of reference to ADR. The 1996 Act comes

into play only after the stage of reference upto the award. Applying

the same analogy, the Legal Services Authority Act, 1987 (for short

'1987 Act') or the Rules framed thereunder by the State Governments

cannot act as impediment in the High Court making rules under Part X

of the Code covering the manner in which option to Lok Adalat can be

made being one of the modes provided in Section 89. The 1987 Act

also does not deal with the aspect of exercising option to one of four

ADR methods mentioned in Section 89. Section 89 makes applicable

1996 Act and 1987 Act from the stage after exercise of options and

making of reference.”

16.2. The above observation clearly shows that the procedure for pre-referral stage

can be provided by rules made under Part-X which basically contains Section-122 &

128 CPC. And the governing statutes i.e. 1996 Act and 1987 Act will cover the post

referral stage.

16.3. Some fertile mind will immediately ask question as to why the above extract

does not refer to mediation and some other observation has been made in the said

case regarding mediation. The answer is simple. In the year 2005 when second

Salem Bar case was decided, mediation was part of Section-89(2)(d) which was not

governed by 1987 Act whereas in present times, mediation is part of Section-

8992)(c) which is governed by 1987 Act and therefore the observation regarding

1987 Act in aforesaid extract will apply to the mediation also.

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16.4. Be that as it may, the Mediation Rules which provide for procedure of pre-

referral stage can be justified under Part-X CPC.

Can mediation rules related to actual mediation be justified to some extent ?

17. Mediation centre and mediators are basically creation of Hon’ble High Court.

The courts in Delhi practically are not choosing a suitable person under Section-

89(2)(c) but they are choosing a suitable institution i.e. mediation centre and such

institution is deciding as to who shall be the mediator. Naturally, such institution

would be deemed to be a Lok Adalat for the purpose of specific matter referred to it.

We have seen that to such deemed Lok Adalat, the provisions of LSA Act will apply.

17.1. Section-20(4) provides that Lok Adalat shall follow the natural principles.

Section-22(1) gives some powers of civil court. It is Section-22(2) which is very

significant and empowers the Lok Adalat to lay down its own procedure. It is this

provision which can be utilized. The mediation centre on becoming deemed Lok

Adalat can certainly lay down its own procedure for determining the dispute which

is before it i.e. the specific referred matter. The procedure can be in writing. There

can be no bar if the mediation centre says each time when it becomes deemed Lok

Adalat that it will follow the same procedure. As such a written procedure may exist

which the mediation centre after becoming deemed Lok Adalat can say that it will

follow. Such written procedure may be prepared by anyone but the only rider is that

the mediation centre has to say in every case when it becomes deemed Lok Adalt

that it is going to follow that procedure as its own.

17.2. Even the Mediation Rules, 2004 may be treated as such written procedure so

far as actual mediation is concerned and the mediation centre on becoming a

deemed Lok Adalat for every matter can say that it will follow the said procedure. By

this farfetched reasoning, the Mediation Rules, 2004 governing the actual mediation

may be justified so far as they are not inconsistent with the express provisions of LSA

Act.

Can criminal compoundable cases be sent for mediation?:

18. Though the present case is of civil nature, some observation regarding criminal

compoundable cases being sent for mediation is also required to be made. It is a

common knowledge that criminal compoundable cases are being sent for mediation

and Mediation Rules, 2004 (including Rule-25) are used and normally even for those

cases mediators are proposing vide the settlement communications that statement

of parties be recorded. This appears to be presumably done as per Rule-25. (Though

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obviously, in such cases, Courts are not passing any decree). In such circumstances,

before seeking the invalidity of Rule-25, it is found appropriate to make some

observations on this count. A very innovative proposition is normally made i.e. since

mediation is a deemed Lok Adalat and as per LSA Act criminal compoundable cases

can be referred, such cases can be referred to mediation.

The proposition though looks to be innovative is clearly fallacious. It assumes that

mediation is Lok Adalat or the mediator is a Lok Adalat or the mediation centre is a

Lok Adalat. This assumption is wrong. They are not the Lok Adalat. They will become

a Lok Adalat by virtue of a deeming fiction created by Parliament when a matter is

referred to them under Section-89(2)(c) of CPC. Unless this happens, they do not

become Lok Adalat. Lok Adalat is a creature of Section-19 of LSA Act or a deeming

creature of Section-89 of CPC. Neither the mediation centre nor a mediator is a

creature of LSA Act. So far as Section-89 CPC is concerned, the deeming fiction will

come into play only when a matter is referred and not before that. (for detail, see

paragraph-7 of the present discussion).

Now, under CPC, a criminal case cannot be referred and this position cannot be

disputed as CPC is a governing law of civil disputes. Borrowing a phrase from the

Affcons, the aforesaid proposition “puts the cart before the horse”. It is clear that

unless a matter is referred to an institution or person u/s-89(2)(c), the same will not

become deemed Lok Adalat. Despite that the above proposition without referring

the matter first assumes that such institution or person has become deemed Lok

Adalat. This is the fallacy inherent in the above proposition. With all due certainty, it

can be said that a criminal compoundable case cannot be sent to mediation centre

at present.

The future..........

19. For the civil matter, It would be appropriate if the mediation rules are re-

framed in consonance with the provisions of LSA Act and till then, the courts should

follow the statutory dictate.

19.1. If the system wants disposal of criminal compoundable cases through

mediation, the appropriate way is to frame rules under some specific provisions if

available. Section-477 CrPC governs the framing of rules and gives power to the

Hon’ble High Court. It reads as under:

“(1) Every High Court may, with the previous approval of the State

Government, make rules—

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(a) as to the persons who may be permitted to act as petition-writers

in the Criminal Courts subordinate to it;

(b) regulating the issue of licences to such persons, the conduct of

business by them, and the scale of fees to be charged by them.

(c) providing a penalty for a contravention of any of the rules so made

and determining the authority by which such contravention may be

investigated and the penalties imposed;

(d) any other matter which is required to be, may be, prescribed.

(2) All rules made under this section shall be published in the Official

Gazette.”

19.2. Though on a superficial reading one may say that the above section does not

provide any power to make rules for mediation in a criminal matter, a purposive

reading will show otherwise. Clause-(d) supra is a residuary clause and includes

everything which is required. CrPC otherwise does not prescribe any mode or

manner in which a settlement between parties can be arrived at for the purposes of

compounding. Since legislation is silent, the rules may be made to supplement it.

The mode and manner of settlement for compounding may be required and

therefore the same may be prescribed also. Section-2(t) of CrPC provides the

meaning of prescribed as “means prescribed by rules made under this Code”.

Therefore, rules may be made to prescribe the mode and manner of settlement

which is required. This mode and manner can certainly include a system which may

facilitate the parties in arriving at a settlement and such system may be anything

including mediation.

19.3. Needless to say that unless there are some contrary statutory provisions for

compounding under statutes other than IPC, the provisions of CrPC have to be

followed in terms of Section-4 thereof. It is hard to find compoundable offences for

which any statutory provisions exist for the mode & manner of settlement in court

system. As such, the above proposed rules may also apply to all compoundable

offences.

For convenient reading:

20. In the present discussion, some expressions have been used in short to

maintain the flow. Therefore, the same are clarified as under:

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CrPC: Code of Criminal Procdeure, 1973

CPC: Code of Civil Procedure, 1908

IPC: Indian Penal Code, 1860

Affcons: M/S. Afcons Infra. Ltd. & Anr vs M/S Cherian Varkey (2010) 8

SCC 24

First Salem Bar: Salem Advocate Bar Association vs Union of India (2003)

1 SCC 49

Second Salem Bar: Salem Advocate Bar Association vs Union of India

(2005) 6 SCC 344

1996 Act or Conciliation Act: Arbitration and Conciliation Act, 1996

1987 Act or LSA Act: Legal Service Authority Act, 1987

Mediation Rules: Mediation and Conciliation Rules, 2004 framed by

Hon’ble Delhi High Court.

****************

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Documents

Binding nature of Mediation: A discussion by Rakesh Kumar Singh