Lok Adalat jurisdiction is limited to compromise or settlement; absent settlement, it cannot decide a referred dispute on merits.

A Lok Adalat under the Legal Services Authorities Act, 1987 may dispose of a referred matter only by compromise or settlement. If the parties do not settle, the Lok Adalat must return the case to the referring court for disposal in accordance with law and cannot decide the dispute on merits. The Supreme Court therefore held that a writ petition could not be dismissed on merits by the Lok Adalat in the absence of settlement, and the order was liable to be quashed. The matter was required to be restored to the High Court for decision on merits.

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Issues: Whether a Lok Adalat, in the absence of a compromise or settlement between the parties, can decide a pending writ petition on merits instead of returning the matter to the referring court.

Analysis: The jurisdiction of a Lok Adalat under the Legal Services Authorities Act, 1987 is confined to determining disputes by way of compromise or settlement. When a reference is made and no settlement is reached, the statutory scheme requires the Lok Adalat to return the case to the referring court for disposal in accordance with law. The Act does not confer power on the Lok Adalat to adjudicate the controversy on merits once compromise fails.

Conclusion: The Lok Adalat had no jurisdiction to dismiss the writ petition on merits in the absence of a settlement, and its order was liable to be quashed. The matter was required to be restored to the High Court for decision on merits.

Ratio Decidendi: A Lok Adalat can dispose of a referred matter only by compromise or settlement; if no settlement is reached, it must return the case to the referring court and cannot adjudicate the dispute on merits.

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