TaxTMI 
TaxTMI 
2022 (7) TMI 35
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.... before the Permanent Lok Adalat at Mangalore Under Section 22-C(1) of the Legal Services Authorities Act 1987^5. The application had been filed against the Respondent and his guarantor, in regard to credit facilities in the value of Rs. 2,40,583 availed by the Respondent from the Appellant. The Appellant alleged that the amount of Rs. 2,40,583 along with interest had become due on 1 October 2012, but the Respondent had not repaid it, in spite of multiple notices and requests. Hence, the Appellant prayed for the recovery of Rs. 2,40,583 with interest at the rate of 15.75 per cent and costs from the Respondent and his guarantor. 3. Notice was issued by the Permanent Lok Adalat to the Respondent on 10 January 2013, which was allegedly not claimed by the Respondent. Hence, on 12 March 2013, the Permanent Lok Adalat held the service to be complete in respect of the Respondent and adjourned the case to 6 June 2013 for reporting of settlement. Thereafter, allegedly on 22 August 2013, a counsel filed a memo of appearance on behalf of the Respondent and matter was adjourned to allow filing of vakalatnama and objections on behalf of the Respondent. On 6 February 2014, another counsel is ....
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....smissing the writ appeal, the Division Bench held: "9. The aforesaid provisions make it clear that in case the parties reach at an agreement on the settlement of the dispute they shall sign the settlement agreement and the Permanent Lok Adalat shall pass an award in terms thereof and furnish a copy of the same to each of the parties concerned at the first instance and it is only after where the parties fail to reach at an agreement Under Sub-section (7), the Permanent Lok Adalat can pass an award keeping in view the facts and circumstances of the case. In the present case, no such procedure was followed at all. There was no conciliation proceedings between the parties. As they did not appear, the question of signing the agreement does not arise. The Lok Adalat could not have acted as a regular civil Court in adjudicating the proceedings. Therefore, the learned Single Judge was justified in allowing the writ petition. This Court finds no reason to interfere with the order passed by the learned Single Judge." Thus, the Division Bench dismissed the writ appeal on two grounds: first, that the procedure for conciliation Under Section 22-C of the LSA Act was not followed, and....
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.... address these issues, it is important to understand the statutory framework of the LSA Act. Chapter VI of the LSA Act is titled "Lok Adalats". Section 19^7 provides the framework on the basis of which Lok Adalats are to be organised. Specifically, Section 19(5) provides that Lok Adalats shall have the jurisdiction to arrive at a compromise and settlement between the parties in respect of a matter: (i) pending before a court for which the Lok Adalat is organised; or (ii) not pending before a court for which the Lok Adalat is organised but falling within its jurisdiction. The proviso notes that the Lok Adalat shall have no jurisdiction in respect of a matter relating to an offence not compoundable under any law. 12. Section 20^8 outlines the type of cases whose cognisance can be taken by the Lok Adalats. Section 20(1) provides that when a case is pending before a court (in accordance with Section 19(5)(i)), the court can refer the case to a Lok Adalat for settlement if: (i) the parties agree; (ii) one party makes an application; or (iii) the court is satisfied that the matter is appropriate for a Lok Adalat. The proviso stipulates that in scenario (ii) and (iii), the court shall ....
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....opy of such record or document from any court or office; and (e) such other matters as may be prescribed. (2) Without prejudice to the generality of the powers contained in Sub-section (1), every Lok Adalat or Permanent Lok Adalat shall have the requisite powers to specify its own procedure for the determination of any dispute coming before it. (3) All proceedings before the Lok Adalat or Permanent Lok Adalat shall be deemed to be judicial proceedings within the meaning of Sections, 193, 219 and 228 of the Indian Penal Code (45 of 1860) and every Lok Adalat shall be deemed to be a civil court for the purpose of Section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974)." Sub-section (1) of Section 22 stipulates that Lok Adalats and Permanent Lok Adalats shall have the same power as civil courts under the Code of Civil Procedure 1908^10 for making their determination under the LSA Act. Sub-section (2), without prejudice to Sub-section (1), provides the Lok Adalats and Permanent Lok Adalats with the power to specify their own procedure. Sub-section (3) states that proceedings before the Lok Adalats and Permanent Lok Adalats sh....
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....ts in case parties fail to arrive at any compromise or settlement, this problem can be tackled to a great extent. Further, the cases which arise in relation to public utility services such as Mahanagar Telephone Nigam Limited, Delhi Vidyut Board, etc. need to be settled urgently so that people get justice without delay even at pre-litigation stage and thus most of the petty cases which ought not to go in the regular courts would be settled at the pre-litigation stage itself which would result in reducing the workload of the regular courts to a great extent. It is, therefore, proposed to amend the Legal Services Authorities Act, 1987 to set up Permanent Lok Adalats for providing compulsory pre-litigative mechanism for conciliation and settlement of cases relating to public utility services." (emphasis supplied) The Statement of Objects and Reasons indicates that Chapter VI-A was introduced to the LSA Act to primarily create alternative dispute resolution bodies, in the form of Permanent Lok Adalats, to decide disputes on merits if the parties fail to arrive at a compromise or settlement. 17. Section 22-B of the LSA Act provides for the establishment of Permanent Lok Adalats....
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.... make an application to the Permanent Lok Adalat for the settlement of dispute: Provided that the Permanent Lok Adalat shall not have jurisdiction in respect of any matter relating to an offence not compoundable under any law: Provided further that the Permanent Lok Adalat shall also not have jurisdiction in the matter where the value of the property in dispute exceeds ten lakh rupees: Provided also that the Central Government, may, by notification, increase the limit of ten lakh rupees specified in the second proviso in consultation with the Central Authority. (2) After an application is made Under Sub-section (1) to the Permanent Lok Adalat, no party to that application shall invoke jurisdiction of any court in the same dispute. (3) Where an application is made to a Permanent Lok Adalat Under Sub-section (1), it-- (a) shall direct each party to the application to file before it a written statement, stating therein the facts and nature of dispute under the application, points or issues in such dispute and grounds relied in support of, or in opposition to, such points or issues, as the case may be, and such party may....
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.... accordance with Section 22-B) can approach the Permanent Lok Adalat before approaching a court. The proviso notes two exceptions to this: (i) the dispute shall not be in respect of any matter relating to an offence not compoundable under any law; and (ii) the value of the property in dispute shall not exceed Rs. 10 lakhs. However, the third proviso stipulates that the Central Government may, in consultation with the Central Authority, increase this amount through a notification. Indeed, by a notification dated 20 March 2015^13 this amount has been since raised to Rs. 1 crore. Under Sub-section (2), once an application is made to the Permanent Lok Adalat Under Sub-section (1) in respect of a dispute, no court shall have jurisdiction over it. In accordance with Sub-section (3), once the Permanent Lok Adalat receives an application Under Sub-section (1), it can direct both parties to file detailed submission outlining their factual submissions, issues raised and arguments advanced. To support their submissions, the parties will be permitted to attach documentary evidence. Further, the Permanent Lok Adalat can direct the parties to file additional submissions. It shall also communicat....
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.... and shall not be called in question in any original suit, application or execution proceeding. (5) The Permanent Lok Adalat may transmit any award made by it to a civil court having local jurisdiction and such civil court shall execute the order as if it were a decree made by that court." Sub-section (1) of Section 22-E stipulates that the award of the Permanent Lok Adalat, whether arising out of a settlement agreement or after deciding the merits of the dispute, shall be final and binding on all parties and any persons claiming under them. Sub-section (2) provides that the award of the Permanent Lok Adalat shall be deemed to be a decree of a civil court. Sub-section (3) provides that every award of the Permanent Lok Adalat shall be decided by a majority of its constituent members. Sub-section (4) reiterates that the award shall be final and shall not be called in question in any original suit, application or execution proceeding. Finally, Sub-section (5) stipulates that the Permanent Lok Adalat may transmit an award made by it to a civil court having local jurisdiction, and such civil court shall execute the order as if it were a decree made by that court. 21. The ....
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....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. 25. Such an interpretation is also supported by the decision of a two-....
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....lied) 26. The Appellant's argument, however, is that if the opposite party does not appear before the Permanent Lok Adalat, it can dispense with the conciliation proceedings and straightaway adjudicate the dispute Under Section 22-C(8). We are unable to accept this submission. Even if the opposite party does not appear, the Permanent Lok Adalat is still bound to follow the step-by-step procedure laid down by Section 22-C. Under Section 22-C(3), it would require the party before it to file their submissions and documents, and make the best efforts to communicate them to the opposite party for their response. If it is satisfied that no response is forthcoming from the absent opposite party, the Permanent Lok Adalat shall still attempt to settle the dispute through settlement Under Section 22-C(4). It is important to remember that Section 22-C(5) imposes a duty upon the Permanent Lok Adalat to be independent and impartial in attempting to amicably settle the dispute, while Section 22-C(6) imposes a duty upon the party present before the Permanent Lok Adalat to cooperate in good faith and assist the Permanent Lok Adalat. Thereafter, the Permanent Lok Adalat, based on the materia....
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....hat 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. On the other hand, Section 22-C of the LSA Act provides that a party to a dispute, prior to bringing a dispute before the court, i.e., at the pre-litigation stage, can make an application to a Permanent Lok Adalat for the settlement of a 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. 29. In United India Assurance Co. Ltd. v. Ajay Sinha and Ors. (2008) 7 SCC 454, this Court held that the Permanent Lok Adalat performs an adjudicatory role if the conciliation between the parties fails. Elucidating on the power of the Permanent Lok Adala....
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....anent Lok Adalats only if the process of conciliation and settlement fails. The emphasis is on settlement in respect of disputes concerning public utility services through the medium of Permanent Lok Adalat. It is for this reason that Sub-section (1) of Section 22-C states in no unambiguous terms that any party to a dispute may before the dispute is brought before any court make an application to the Permanent Lok Adalat for settlement of dispute. Thus, settlement of dispute between the parties in matters of public utility services is the main theme. However, where despite the endeavours and efforts of the Permanent Lok Adalat the settlement between the parties is not through and the parties are required to have their dispute determined and adjudicated, to avoid delay in adjudication of disputes relating to public utility services, Parliament has intervened and conferred power of adjudication upon the Permanent Lok Adalat. 27. Can the power conferred on Permanent Lok Adalats to adjudicate the disputes between the parties concerning public utility service up to a specific pecuniary limit, if they do not relate to any offence, as provided Under Section 22-C(8), be said to be....
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....made by it to propose terms of settlement to the parties and their rejection. It states that once the Respondent and his guarantor did not appear, it adjudicated the dispute on merits in favour of the Respondent. For the reasons mentioned earlier in this judgment, the Permanent Lok Adalat could not have done so. Therefore, on this point only, we uphold the final judgment of the Division Bench setting aside the award dated 19 November 2014 of the Permanent Lok Adalat. 34. Consequently, we hold that 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. We make it clear that we have not made any observations on the merits of the dispute between the parties, and all rights and contentions of the parties are kept open. 35. In the circumstances of the case, there shall be no order as to costs. 36. Pending application(s), if any, stand disposed of. ---- ^1Writ Petition No. 27778 of 2019 (GM-RES) ^2Writ Appeal No. 514 of 2020 (GM-RES) ....
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....hereof agree; or (b) one of the parties thereof makes an application to the court, for referring the case to the Lok Adalat for settlement and if such court if prima facie satisfied that there are chances of such settlement; or (ii) the court is satisfied that the matter is an appropriate one to be taken cognizance of by the Lok Adalat, the court shall refer the case to the Lok Adalat: Provided that no case shall be referred to the Lok Adalat under sub-clause (b) of clause (i) or clause (ii) by such court except after giving a reasonable opportunity of being heard to the parties. (2) Notwithstanding anything contained in any other law for the time being in force, the Authority or Committee organising the Lok Adalat Under Sub-section (1) of Section 19 may, on receipt of an application from any one of the parties to any matter referred to in clause (ii) of Sub-section (5) of Section 19 that such matter needs to be determined by a Lok Adalat, refer such matter to the Lok Adalat, for determination: Provided that no matter shall be referred to the Lok Adalat except after giving a reasonable opportunity of being heard to the other party. (3) Where any case is referre....