Pre-Institution Mediation and Section 89 CPC Explained

Pre-institution mediation is an attempt to settle a dispute through a neutral mediator before filing a suit in court. For commercial disputes it is now mandatory in most cases, while in ordinary civil suits the court can refer parties to mediation under Section 89 of the Code of Civil Procedure, 1908 (CPC). This guide explains the rules, timelines and practical benefits of mediation.

Understanding Pre-Institution Mediation Under Section 89 CPC

Mediation under Section 89 CPC

Section 89 allows the court, where it appears that there exist elements of a settlement that may be acceptable to the parties, to formulate the terms and refer the dispute to one of the following:

• Arbitration or conciliation
• Judicial settlement, including settlement through a Lok Adalat
• Mediation

Order 10 Rules 1A to 1C CPC provide for the court to direct the parties to opt for one of these modes. In *Afcons Infrastructure v. Cherian Varkey Construction* (2010), the Supreme Court explained that the court should not refer cases that are unsuitable, such as those involving serious allegations of fraud or forgery, representative suits and certain cases involving criminal offences. The Madras High Court has a well-known mediation centre that conducts court-referred mediation.

Mandatory pre-institution mediation: Section 12A

The Commercial Courts Act, 2015 requires a plaintiff to exhaust pre-institution mediation before instituting a commercial suit, where the suit does not contemplate any urgent interim relief (Section 12A). The Supreme Court in *Patil Automation v. Rakheja Engineers* (2022) held that Section 12A is mandatory, and a suit filed without it can be rejected under Order 7 Rule 11. The ruling applied prospectively from 20 August 2022. See our guide on rejection of plaint under Order 7 Rule 11 CPC.

Key points:

• The mediation is conducted through the Legal Services Authority.
• It must be completed within three months of the application, which may be extended by two months with the consent of the parties.
• If the mediation fails, a non-starter report is given, which the plaintiff attaches to the plaint.
• The period of mediation is excluded for limitation.

### The urgent relief exception

If the plaintiff genuinely needs urgent interim relief, such as an injunction, he may file the suit without mediation. The Supreme Court in *Yamini Manohar v. T.K.D. Keerthi* (2023) held that the court should examine whether the suit really contemplates urgent relief, and not merely rely on the plaintiff’s request. Read our guide on temporary injunction under Order 39 CPC.

Lok Adalat

First, Section 19 of the Legal Services Authorities Act, 1987 establishes the Lok Adalat as a specialized dispute resolution forum. Furthermore, parties can bring pre-litigation disputes directly to this forum to reach a settlement. Consequently, the law treats the resulting award as a civil court decree, rendering the outcome final, binding, and non-appealable. Finally, the court fully refunds the court fees paid if the parties settle their matter through the Lok Adalat.

The Mediation Act, 2023

The Mediation Act, 2023 gives a statutory framework for mediation, including pre-litigation mediation, community mediation and online mediation, and provides that a mediated settlement agreement is enforceable as a judgment or decree in specified conditions. Some provisions have been brought into force by notification in stages, so check which provisions are operative when you rely on it. The Act sets a period for completion of mediation, which is 120 days, extendable in some cases.

Benefits of mediation

• It is faster and cheaper than a suit.
• The parties control the outcome.
• It is confidential.
• It preserves business and family relationships.
• Settlement terms can be flexible, such as instalments, reconstruction of the contract or division of property.

When mediation may not suit

• Where urgent interim relief is needed.
• Where there is a serious allegation of fraud or a need for a legal ruling.
• Where one party is unwilling to negotiate.
• Where a time-barred claim needs to be saved. Check limitation first. See our guide on limitation period for civil suits in India.

Practical tips

• Prepare a brief note on facts, claims and documents.
• Attend with a person who has authority to settle.
• Record the settlement in a written agreement, signed by the parties, and have it recorded as a decree if a suit is pending.
• If you are a defendant who needs a defence, do not miss the deadline for the written statement. See written statement and counterclaim under Order 8 CPC.

The Acts are available on India Code.

Frequently Asked Questions

What is pre-institution mediation?

It is a process of attempting to settle a dispute through mediation before filing a suit. For commercial suits, it is mandatory under Section 12A of the Commercial Courts Act, unless urgent interim relief is sought.

What is Section 89 CPC?

It empowers the civil court to refer a dispute to arbitration, conciliation, judicial settlement including Lok Adalat, or mediation, where there are elements of a settlement.

How long does pre-institution mediation take?

Up to three months from the date of application, extendable by two months with the parties’ consent.

Is a suit invalid if I skip mediation?

For a commercial suit that does not involve urgent relief, the plaint can be rejected. The Supreme Court held Section 12A to be mandatory.

Is a Lok Adalat award appealable?

No. A Lok Adalat award is final and binding on the parties, and it is treated as a decree of a civil court.

Is the mediation settlement enforceable?

A settlement recorded by the court becomes a decree. Under the Mediation Act, a mediated settlement agreement can be enforced as a decree when the conditions of the Act are met.

Does mediation stop limitation from running?

The period of mediation under Section 12A is excluded in computing limitation for commercial suits. For other cases, take legal advice before relying on this.

Read More

• Expert Legal Representation for Property Disputes: Protecting Your Rights
• Temporary Injunction in a Civil Suit: Order 39 CPC Guide for Chennai
• Expert Counsel for Contract Disputes: Protect Your Interests
• Specific Performance of Contract in India: Specific Relief Act Guide

This article is general legal information and not a substitute for advice on your specific case. Consult an advocate before acting.