Mayor Marion Barry and five D.C. City Council members denounced a referendum drive in the District yesterday that is aimed at restoring mandatory no-fault insurance -- a campaign being orchestrated by a public relations firm that employs the mayor's wife, Effi Barry.

Neither Barry would comment yesterday on the unusual arrangement that puts them on opposite sides of the political fence.

Effi Barry is a vice president of JAM Corp., which has been hired to provide public relations and marketing services to the Yes on No-Fault Committee, a group seeking the necessary 13,000 petition signatures that would trigger a special election on the issue sometime this summer.

Jeanne Clarke Harris, president of JAM Corp., said the mayor's wife would not be involved in the campaign. "Her responsibility with this company is to market private sector business, nothing related to political issues or city business," she said.

At a District Building news conference, Mayor Barry and the five council members vigorously urged citizens not to sign petitions that would force the referendum election. In November, the City Council amended the city's auto insurance law, effectively eliminating mandatory no-fault insurance and replacing it with mandatory liabilty insurance. The referendum proponents are seeking to restore the law, which was passed in 1982, to its original form.

"We are urging persons first of all not to sign the petition," said Barry, who led the effort to repeal mandatory no-fault insurance. Declaring that the new law "gives the citizens the choice," he said opponents of no-fault insurance would make "all-out efforts" to block the referendum drive.

Council member Nadine P. Winter (D-Ward 6), a former supporter of no-fault insurance who cast a decisive vote in November to repeal the law, castigated "greedy insurance companies" for their backing of the drive.

While insurance companies have supported no-fault insurance, trial lawyers in the District have led the charge against the concept, which permits injured persons to collect insurance without establishing who was at fault in an accident and reduces litigation.

Council member John Ray (D-At Large), a longtime opponent of no-fault insurance, called it "a kooky idea" promoted by "outsiders." Ray added that he had heard the referendum supporters were preparing to spend up to $500,000 on the campaign.

Other council members appearing in opposition to the referendum were Frank Smith (D-Ward 1), William Spaulding (D-Ward 5) and Wilhelmina Rolark (D-Ward 8).

Larry Mirel, legal counsel to the Yes on No-Fault Committee, said the $500,000 figure was "a little high" and characterized Ray's reference to outsiders as "incredible." He confirmed that insurance companies, which have favored no-fault insurance, would be providing most of the financing but said that consumer and civic groups would taking the brunt of organizing and running the campaign.

Council member Betty Ann Kane (D-At Large), a supporter of no-fault insurance, said Barry's news conference was an attempt to mislead the public.

"The no-fault bill the council had in effect is probably the best pieceof consumer legislation we ever did," she said. "It was a disgrace when it was repealed."

The pro-referendum forces must gather 13,000 District residents' signatures within 15 legislative working days after Congress resumes its session, which is scheduled to be Jan. 21. The D.C. Board of Elections then has 30 days to certify the referendum and, if it does so, a special election must be held within 54 to 114 days after that, according to Mirel.