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of <h1>Mandatory conciliation before Lok Adalat dispute resolution; court clarifies process</h1> <h3>Canara Bank Versus GS Jayarama</h3> The Supreme Court held that conciliation proceedings under Section 22-C of the Legal Services Authorities Act are mandatory before a Permanent Lok Adalat ... Award of the Permanent Lok Adalat - conciliation proceedings mandatory under Section 22-C of the Legal Services Act 1987 (LSA) or not - adjudicatory functions of Permanent Lok Adalats under the LSA Act. Whether the conciliation proceedings before the Permanent Lok Adalats are mandatory? - HELD THAT:- This issue is clearly resolved from a bare reading of Section 22-C. Section 22-C provides a step-by-step scheme on how a matter is to proceed before the Permanent Lok Adalat. The first step is the filing of the application which ousts the jurisdiction of other civil courts, in accordance with Sub-sections (1) and (2). The second step is the parties filing requisite submissions and documents before the Permanent Lok Adalat, in accordance with Sub-section (3). On the completion of the third step to its satisfaction, the Permanent Lok Adalat can move to the fourth step of attempting conciliation between the parties, in accordance with Sub-sections (4), (5) and (6). Subsequently, in the fifth step in accordance with Sub-section (7), the Permanent Lok Adalat has to draw up terms of settlement on the basis of the conciliation proceedings, and propose them to the parties. If the parties agree, the Permanent Lok Adalat has to pass an award on the basis of the agreed upon terms of settlement. Only if the parties fail to reach an agreement on the fifth step, can the Permanent Lok Adalat proceed to the final step and decide the dispute on its merits. The Permanent Lok Adalat, based on the materials before it, shall propose terms of settlement and communicate them to both parties, regardless of whether they participated in the proceedings. If the party present before the Permanent Lok Adalat does not agree or if the absent party does not respond in a sufficient period of time, only then can the Permanent Lok Adalat adjudicate the dispute on its merits Under Section 22-C(8). Keeping in mind the principles enshrined in Section 22-D, the Permanent Lok Adalat shall once again notify the absent party of its decision to adjudicate the dispute on its merits, in case it wishes to join the proceedings at that stage. Section 22-C(8) is amply clear that it only comes into effect once an agreement Under Section 22-C(7) has failed. The corollary of this is that the proposed terms of settlement Under Section 22-C(7), and the conciliation proceedings preceding it, are mandatory. If Permanent Lok Adalats are allowed to bypass this step just because a party is absent, it would be tantamount to deciding disputes on their merit ex parte and issuing awards which will be final, binding and will be deemed to be decrees of civil courts. This was simply not the intention of the Parliament when it introduced the LSA Amendment Act. Its main goal was still the conciliation and settlement of disputes in relation to public utilities, with a decision on merits always being the last resort - It is thus held that conciliation proceedings Under Section 22-C of the LSA Act are mandatory in nature. Whether Permanent Lok Adalat has adjudicatory functions? - HELD THAT:- As highlighted in the Objects and Reasons accompanying the LSA Amendment Act, its introduction led to the creation of two different types of Lok Adalats. The first is a Lok Adalat constituted Under Section 19 of the LSA Act, having no adjudicatory power, which can only conduct conciliatory proceedings. The second is a Permanent Lok Adalat, established Under Section 22-B(1) of the LSA Act in respect of public utility services, which can carry out both conciliatory and adjudicatory functions, subject to the procedure to be followed Under Section 22-C of the LSA Act. The scheme of the LSA Act makes clear the distinction between the two types of Lok Adalats. Section 20 of the LSA Act provides that the Lok Adalat shall aim to arrive at a compromise or settlement between the parties. If no such compromise or settlement is arrived at, then the record of the case is returned to the court from which the Lok Adalat had received the reference. The court would then proceed to adjudicate the dispute - The Permanent Lok Adalat would first conduct conciliation proceedings and attempt to reach an amicable settlement of the dispute. However, if the parties fail to reach an agreement, it shall decide the dispute, as long as the dispute does not relate to an offence. Section 22-D further indicates that the Permanent Lok Adalat is empowered to decide the dispute between the parties on merits. In United India Assurance Co. Ltd. v. Ajay Sinha and Ors. [2008 (5) TMI 745 - SUPREME COURT], this Court held that the Permanent Lok Adalat performs an adjudicatory role if the conciliation between the parties fails - Likewise, in INTERGLOBE AVIATION LTD. VERSUS N. SATCHIDANAND [2011 (7) TMI 1025 - SUPREME COURT], this Court observed that the Permanent Lok Adalat's role mutates from that of a conciliatory body to an adjudicatory body, if the parties fail to reach an agreement, where it can decide the dispute between the parties. Thus, the powers of the Lok Adalat constituted Under Section 19 of the LSA Act are to be distinguished from the nature of powers granted to a Permanent Lok Adalat established Under Section 22-B of the LSA Act. It is in the context of interpreting the jurisdiction of Lok Adalats constituted Under Section 19 of the LSA Act, that this Court has held that the Lok Adalat cannot perform any adjudicatory function in terms of Section 20 of the LSA Act. The observations of the Division Bench in the impugned judgment in respect of the adjudicatory powers of the Permanent Lok Adalats were incorrect, while upholding its ultimate conclusion since the Permanent Lok Adalat failed to follow the mandatory conciliation proceedings in the present case - Application disposed off. Issues Involved:1. Whether conciliation proceedings under Section 22-C of the Legal Services Authorities Act (LSA Act) are mandatory.2. Whether Permanent Lok Adalats have adjudicatory functions under the LSA Act.Issue-wise Detailed Analysis:1. Mandatory Nature of Conciliation Proceedings:The Supreme Court examined whether conciliation proceedings under Section 22-C of the LSA Act are mandatory before a Permanent Lok Adalat can decide a dispute on its merits. The Court noted that Section 22-C provides a step-by-step scheme, starting from the filing of an application, which ousts the jurisdiction of other civil courts. The subsequent steps involve parties filing submissions and documents, followed by conciliation proceedings. The Permanent Lok Adalat must propose terms of settlement based on the conciliation proceedings. If the parties fail to reach an agreement, only then can the Permanent Lok Adalat decide the dispute on its merits under Section 22-C(8).The Court emphasized that even if the opposite party does not appear, the Permanent Lok Adalat must still follow the procedure laid down in Section 22-C. This includes attempting to communicate submissions to the absent party and proposing terms of settlement. Only if these steps fail can the Permanent Lok Adalat adjudicate the dispute on its merits. The Court held that conciliation proceedings under Section 22-C are mandatory in nature.2. Adjudicatory Functions of Permanent Lok Adalats:The Court analyzed whether Permanent Lok Adalats have adjudicatory functions. The LSA Act distinguishes between Lok Adalats constituted under Section 19, which have no adjudicatory power and can only conduct conciliatory proceedings, and Permanent Lok Adalats established under Section 22-B, which can carry out both conciliatory and adjudicatory functions.The Court referred to the decision in Bar Council of India v. Union of India, which upheld the constitutionality of Chapter VI-A of the LSA Act, indicating that Permanent Lok Adalats can adjudicate disputes on merits if conciliation efforts fail. The Court also cited United India Assurance Co. Ltd. v. Ajay Sinha and Ors. and Inter Globe Aviation v. N. Satchidanand, which affirmed the adjudicatory role of Permanent Lok Adalats if conciliation fails.The Court concluded that Permanent Lok Adalats have adjudicatory functions, as they can decide disputes on merits if the parties fail to reach an agreement during conciliation.Conclusion:The Supreme Court held that the observations of the Karnataka High Court's Single Judge and Division Bench, stating that Permanent Lok Adalats have no adjudicatory function, were incorrect. However, the Court upheld the Division Bench's conclusion that the Permanent Lok Adalat failed to follow mandatory conciliation proceedings in the present case, as the award did not indicate any attempt to propose terms of settlement.The Supreme Court clarified that it did not make any observations on the merits of the dispute between the parties, keeping all rights and contentions open. There was no order as to costs, and any pending applications were disposed of.
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