This is the provision of section 89B(1) of the code which provides that if the parties to a suit, at any stage of the proceeding, apply to the Court for withdrawal of the suit on ground that they will refer the dispute or disputes in the suit to arbitration for settlement, 

the Code of Civil Procedure 1908 gives power to the court to refer the matter to the alternate dispute resolution methods when it appears to the court that there exists an element of settlement which may be acceptable to the parties then the court may formulate such settlement or propose a tentative settlement and refer the parties to an alternate means of setting the dispute such as arbitration, conciliation, Lok Adalat or mediation.

Mediation: Mediation under this section shall mean flexible, informal, non-binding, confidential, non-adversarial and consensual dispute resolution process in which the mediator shall facilitate compromise of disputes in the suit between the parties without directing or dictating the terms of such compromise.

Arbitration: The Arbitration settle the dispute amicably by negotiating between the parties. It is the general perception that the Arbitration Law is a separate Law and complete in itself but the Civil Procedure Code is applicable in the Arbitration Matters referred before the Civil Courts under the Arbitration and Conciliation Act 1908.