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  • In recent years, the judiciary is encouraging individuals to endeavour settlement of disputes, instead of relying absolutely on litigation.
  • It is an age-old concept that has gained a lot of importance and manifested in the form of various statutes like the Arbitration and Conciliation Act.
  • The Code of Civil Procedure also makes provision for settlement of disputes outside the court by reaching a compromise that benefits both parties.
  • The Criminal Procedure Code also provides for the compounding of offences at the discretion of the injured party.
  • While opting for such alternate mechanisms for dispute resolution the advantages and disadvantages ought to be considered.
  • Even under International law, a diplomatic approach is preferred over an arbitral or judicial approach.


The concept of settlement and compromise under the legal framework is a mechanism that is made available to the parties to a dispute, to amicably resolve their problems and extinguish the matter without any further litigation.

Since the inception of Jurisprudence, it is constantly reiterated by the Courts that litigation is not the answer for every problem or dispute and must be relied upon only if the parties are unable to reach a conflict-free decision.

Even in India, the public policy is in favour of the settlement of disputes in order to avoid seemingly never-ending lawsuits. Compromise or settlement can be employed in matters of civil and criminal disputes, matrimonial cases, Labour issues, etc.


Great leaders like Mahatma Gandhi and Abraham Lincoln advocated and supported the concept of settlement of disputes. As a result, the subject of Alternate Dispute Resolution has gained widespread acceptance among both the general public and the legal profession.

Bearing that in mind, the Arbitration Act, 1996 was passed with the intention to provide for the settlement of disputes and to limit judicial intervention.

The most learned Jurists in the world have always opined that litigation is damaging, time-consuming and also very expensive. Hence, if there is any possibility to settle a matter or to reach a compromise then such a method shall be preferred.


This provision was inserted by the CPC (Amendment) Act of 1999 and it provided for settlement of disputes outside the court. This Section puts an obligation on the Court to encourage the parties to settle the dispute if it appears that settlement is viable and favourable.

This provision is merely an attempt by the court to resolve conflict, minimize the cost, and reduce the burden of courts. Its main objective is to promote non-judicial alternate resolution mechanisms and bring them within the periphery of the Indian judicial system.

Under this, the Court formulates the terms of the settlement. After the observation on this is received from the parties, the court shall refer the same for either arbitration, conciliation, mediation or Lok Adalat. Also, under Order 23 Rule 3, if the Court is satisfied with the settlement agreement entered into by the parties, it can pass a decree in accordance with that.


An alternate mechanism for dispute resolution is mediation, under which an impartial and neutral mediator facilitates the disputing parties in reaching a settlement. Disputants may mediate disputes in a variety of domains, such as commercial, diplomatic, workplace, community, and family matters, etc.

One important benefit of mediation in India is that it is a completely private method of dispute resolution. It also encourages the active participation of the parties in the resolution activity. Mediation has become a more peaceful and internationally accepted solution to end the conflict. It is expeditious, cost-efficient, flexible and peaceful.


To compound means to settle a matter. In criminal law, the power to compound the offence is with the victim. Section 320 of CrPC makes provision for the compounding of offences. Its main objective is to promote friendliness so that peace is restored between the parties.

A criminal offence is a wrong against society. Any compromise between the accused and the victim should not exculpate or discharge the accused from criminal responsibility. However, under Section 320 of CrPC, some offences are made compoundable if they are not quite serious and are of a private nature, thereby facilitating settlement and compromise.


A Peaceful settlement of disputes is the fundamental principle under international law. It is formulated under Article 2 Paragraph 3 of the UN Charter and developed under UNGA Resolution on Principles of International Law concerning Friendly Relations and Co-operation among States.

The UN General Assembly while adopting the 1982 Manila Declaration specifically emphasized that efforts ought to be made by the member States to peacefully settle their conflicts. Chapter VI containing Articles 33-38 and Articles 11 and 99 of the UN Charter, expressly makes provisions under which the Security Council makes recommendations to the parties to put an end to the dispute.


In the case of Shiv Dayal Singh V. The State of U.P., it was held that the court can compound a non-compoundable offence if the parties have reached a settlement. There are many divorce cases where the Court has encouraged and sometimes even mandated that parties must seek a settlement before pursuing a trial.

However, in the landmark judgement Gian Singh V. State of Punjab, the apex court held that in heinous offences like murder, rape, dacoity, corruption by a public servant, etc, the court must not allow settlement, even if the offender and the victim have reached a compromise.


The main advantage of outside court settlement is that it saves time and money which would otherwise be spent if the parties pursue litigation. Also, settlement is a contract that involves a consideration. Hence, both parties would have a guaranteed benefit in some way. It also gives them privacy which would otherwise be violated if the trial goes public.

On the other hand, if a matter is settled, the victim will lose its right to take further legal action. Also, in most cases, the injured party does not get enough compensation compared to what they could have received had the matter gone into litigation.


If we broadly look at the laws relating to the settlement of disputes and the compromise therewith, we can easily deduce that the concept is imperative in this society that is perpetually changing.

In light of the surge in pending cases in Indian courts, the need for settlement of disputes outside the court has become indispensable. As a result, the provision for the compounding of offences has been provided. However, Which offences should or should not be made compoundable has always remained an enigma for lawmakers.

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