Legal Guide

What is the Procedure for Out-of-Court Settlement?

by Bhavya Choudhary · 4 min read

out of court settlement

Court settlement

To get the matter settled in Court, the parties have to go through various procedures. It takes a lot of time and energy from the parties. In order to save time and energy, the parties decide to settle the matter outside the Court. The Court, nowadays, encourages the parties to settle the matter outside the Court as they are already overburdened with the cases. Therefore, out-of-court settlement is the best idea to settle the matter without getting into the nitty-gritty of the court procedure.

Cases in which we can undergo out of court settlement

Both civil and criminal matters can be settled outside the Court. The complexities of civil matters are relatively very less when compared to criminal matters. In Criminal matters, only those cases go for out-of-court settlement that is not grave in nature. But in the case of civil matters, almost all the matters can be settled outside the Court.

Out of Court settlement is also seen in matters that involve family disputes, motor vehicle claims, Industrial disputes, and others. Legal notice must be given before opting for this method of settlement of the dispute. 

Legal validity of out of court settlements

Out of court settlement in civil matters

The law provides that out-of-court settlement can be done through the Alternative Dispute Mechanism. The new tools of the justice dispensing system are Mediation, Conciliation, Lok Adalat. The law permits the withdrawal of the suit when the parties agree to go for an out of court settlement.

Following is the checklist if thinking of out of court settlement in civil matters:

  • The intention of the parties must be clear.
  • Under special circumstances, the out of court proceeding can be quashed by the Court. 
  • The litigants are barred from bringing a fresh suit for the matter withdrawn if the out-of-court settlement does not work.
  • Out-of-court proceedings can be quashed by the court. The court can do this only under special circumstances.

Court Settlement in criminal matters

In criminal law, out of Court settlement is termed as compoundable offenses. The law provides for a list of offenses that are compoundable. Except those, in other cases, compounding of offenses is not allowed. Compounding of offenses can be done in two ways; one with the consent of the Court and the other one is without the consent of the Court. Only those offenses are compoundable in nature and are not grave. If the offense is of grave nature that is affecting the society at large, compounding of offenses in a criminal case is not permitted. 

Alternative Dispute Resolution

The concept of Alternative dispute resolution comes to the rescue of those who want to settle the matter outside the Court. It is the need of the hour as it saves time and energy for the parties. It becomes more convenient for the parties to settle the matter outside the court in a regulated mechanism than in the Court of law. Legal notice must be given to the opposite party in case the other party opts for one of the methods of alternative dispute resolution. 

The types of Alternative Dispute Resolution are as follows:

1. Arbitration

2. Conciliation

3. Mediation

4. Neutral Evaluation One of the ADR mechanisms, Arbitration is mostly used as a mechanism by corporate entities. To settle family disputes, Mediation is used to settle the matter. Conciliation is also a type of Arbitration but it is not as formal as Arbitration. It is a process that amicably resolves the dispute between the parties. In 2007, Neutral Evaluation was added as a new mode of dispute settlement outside the Court.

Need of permission of the court to do out of court settlement

In civil suits, out of Court settlement can be done at any stage of the suit. But it should only be done by a compromise agreement between the parties to formalize the settlement. 

In criminal cases, the offenses that are compoundable can be compounded without the consent of the Court. But when the offense is non-compoundable in nature, prior consent of the Court is required. However, the Court has discretionary power in such matters. It can cancel the settlement if it wants. 

What if the parties do not follow the agreement and out of court settlement does not work?

In civil matters, only those settlements that involve the element of fraud or coercion or are mala- fide can be set aside. If any of the parties to the settlement retract to perform whatever was decided, the other party can approach the appropriate Court for the grant of specific performance of the compromise agreement. 

Out of court settlement in cases of Property Disputes

Property disputes can be settled outside the Court by a compromise agreement. Generally, it is seen that in property matters, the Court takes years to settle the matter. So, the parties opt for the alternative dispute resolution mechanism to settle the dispute outside the Court. The only condition for the same is that all the parties must agree to an out of Court settlement. 

Conclusion

Out of Court settlement is one of the best mechanisms to settle the matter without the interference of the Court. Settlement of the matter in the Court takes a lot of time and it becomes hectic for the parties to continue the case. This mechanism will also release the burden of the Court as the Indian Courts are already overburdened with the cases at hand. Expert legal advice must be taken while drafting the compromise agreement as it helps the parties save time and energy. 

Whether it be civil matter or criminal matter, read on to find out the procedure of out of court settlement and the compromise agreement.

Bhavya Choudhary

Written by

Bhavya Choudhary

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