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Issues: Whether the High Court was justified in dismissing the second appeal for default and refusing restoration on the basis of the parties' conduct before the Lok Adalat and the request for adjournment.
Analysis: A Lok Adalat functions only as a conciliatory forum and can make an award only when a final compromise or settlement has been reached; it cannot make a hybrid order directing the parties on the merits while simultaneously requiring them to execute a compromise later. If no settlement is concluded, the proper course is to return the record with a failure report. Conduct during Lok Adalat proceedings cannot be used to prejudice the court when the matter returns for adjudication, and a party cannot be denied a hearing on merits because settlement efforts failed. The statutory scheme also preserves the right of a party, when settlement fails, to have the matter continued before the court and decided on merits.
Conclusion: The dismissal of the appeal and the refusal to restore it were unjustified; the appellants were entitled to have the second appeal heard on merits.
Final Conclusion: The impugned orders were set aside and the second appeal was restored to the High Court for disposal in accordance with law.
Ratio Decidendi: A failed or tentative Lok Adalat settlement cannot be treated as a concluded compromise, and a litigant cannot be denied adjudication on merits or penalized for conduct before the Lok Adalat when no final settlement was reached.
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