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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 Honble 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 Honble 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 Honble 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 rulesHigh 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 Honble 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 Honble 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 Honble 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 Section889(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. Section2(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 Section2(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
Honble High Court. First schedule does not contain any rule of procedure to be
followed for mediation. Section-125 does not apply to Honble 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 Section122. So, with all certainty Honble 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 Section122 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.
Honble Supreme Court through a judicial legislation has amended Section89(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
draftsmans error.
5.2. Clearly, after the above changes made by the Honble Supreme Court, Section89(2) CPC to the relevant extant will read as under:
(c) for mediation, 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 judicial settlement, the court shall effect a compromise
between the parties and shall follow such procedure as may be
prescribed.
5.3. The Honble 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 Section122 and 128, the Honble 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
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.
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 Honble 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 Section89(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 subclause (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 Section19(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. Section20(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. Section20(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 Honble 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 Section89(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. Honble 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 nonadjudicatory 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 Honble 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 Honble
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 rulemaking 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,
Honble 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 rulemaking 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 Rule25 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 Honble 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 Section8992)(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 prereferral 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 Honble High Court.
The courts in Delhi practically are not choosing a suitable person under Section89(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 reframed 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
Honble 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
Honble Delhi High Court.

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

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