1. Recovery of dues — Application before Permanent Lok Adalat under Section 22-C, Legal Services Authorities Act — Award passed on merits due to non-participation of respondent. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 )
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2022 Supreme(SC) 480
SUPREME COURT OF INDIA
DHANANJAYA Y. CHANDRACHUD, PAMIDIGHANTAM SRI NARASIMHA, JJ.
Canara Bank - Appellant
Versus
G.S. Jayarama - Respondent
Civil Appeal No.3872 of 2022
Decided on : 19-05-2022
Important Points
IMPORTANT POINT
Lok Adalat cannot perform any adjudicatory function in terms of Section 20 of LSA Act – Permanent Lok Adalat would proceed to adjudication of a dispute on its merits only after attempting and failing to generate a settlement between parties.
Lok Adalat cannot perform any adjudicatory function in terms of Section 20 of LSA Act – Permanent Lok Adalat would proceed to adjudication of a dispute on its merits only after attempting and failing to generate a settlement between parties.
Subject
Judgement - PRE-LITIGATION CONCILIATION AND SETTLEMENT
Act Referred
Headnote
(A) Legal Services Authorities Act, 1987 – Section 22-C – Powers of Permanent Lok Adalat – If parties agree, Permanent Lok Adalat has to pass an award on the basis of agreed upon terms of settlement – Permanent Lok Adalats would proceed to adjudication of a dispute on its merits only after attempting and failing to generate a settlement between parties. (Paras 24 and 25)
(B) Legal Services Authorities Act, 1987 – Sections 19 and 22-B – Powers of Lok Adalat and Permanent Lok Adalat – Powers of Lok Adalat constituted under Section 19 of LSA Act are to be distinguished from nature of powers granted to a Permanent Lok Adalat established under Section 22-B of LSA Act – Lok Adalat cannot perform any adjudicatory function in terms of Section 20 of LSA Act – Permanent Lok Adalat’s role mutates from that of a conciliatory body to an adjudicatory body, if parties fail to reach an agreement, where it can decide dispute between parties. (Paras 29 and 31)
Facts of the case:
Dispute arises from an application3 filed by the Syndicate Bank on 31st December 2012 before the Permanent Lok Adalat at Mangalore under Section 22-C(1) of the Legal Services Authorities Act 1987. Division Bench dismissed the writ appeal on two grounds: first, that procedure for conciliation under Section 22-C of the LSA Act was not followed, and hence, award under Section 22-C(8) was a nullity; and second, the Permanent Lok Adalat could not have acted as a regular civil court in adjudicating the proceedings.
Findings of Court:
Observations of the Division Bench in 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 present case.
Result : Appeal disposed of.
Legal Category Hierarchy
Advocates:
Advocate Appeared:
For the Appellant(s) : Mr. Rajesh Kumar Gautam
Advocate Appeared:
For the Appellant(s) : Mr. Rajesh Kumar Gautam
Table of Contents
2. Whether conciliation proceedings are mandatory under Section 22-C — Whether Permanent Lok Adalats possess adjudicatory functions or are limited to conciliation. (Para 8 )
3. Permanent Lok Adalats differ from Lok Adalats; they possess adjudicatory powers under Section 22-C(8) but must strictly follow the mandatory pre-adjudication conciliation process. (Para 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 )
4. Conciliation proceedings under Section 22-C of the Legal Services Authorities Act are mandatory; adjudication on merits is a last resort after failed conciliation. (Para 24 , 27 )
5. Award set aside due to failure to follow mandatory conciliation proceedings; observations regarding lack of adjudicatory power of Permanent Lok Adalats held incorrect. (Para 32 , 33 , 34 )
6. Do Permanent Lok Adalats have the power to adjudicate disputes on merits?
Yes. Unlike Lok Adalats under Section 19, Permanent Lok Adalats established under Section 22-B can perform both conciliatory and adjudicatory functions. Under Section 22-C(8), they are empowered to decide a dispute on merits if the parties fail to reach an agreement through conciliation. (Para 28 , 29 , 30 , 31 )
7. Are conciliation proceedings mandatory before a Permanent Lok Adalat decides a dispute on merits?
Yes. Section 22-C prescribes a mandatory step-by-step procedure. Adjudication under Section 22-C(8) can only occur after the Permanent Lok Adalat attempts conciliation and proposes terms of settlement under Section 22-C(7) which the parties fail to agree upon. (Para 24 , 25 , 27 )
8. Can a Permanent Lok Adalat skip conciliation and adjudicate immediately if a party fails to appear?
No. Even if a party is absent, the Permanent Lok Adalat must follow the Section 22-C procedure: requiring submissions, attempting conciliation, and proposing settlement terms. Adjudication is only permissible if the absent party does not respond to these efforts within a sufficient period. (Para 26 , 27 )
JUDGMENT :
Dhananjaya Y. Chandrachud, J.
This judgment has been divided into sections to facilitate analysis. They are:
A. Introduction ...................................................................................................... 3
B. Submissions of Counsel .................................................................................. 6
C. Analysis ........................................................................................................... 8
C.1 Legislative Framework of Legal Services Act 1987 .................................. 8
C.2 Mandatory nature of conciliation proceedings ........................................ 22
C.3 Whether Permanent Lok Adalat has adjudicatory functions ................... 25
D. Conclusion ..................................................................................................... 29
A Introduction
1. This appeal arises from a judgment dated 6 March 2021 of a Division Bench of the High Court of Karnataka. The Single Judge by a judgment dated 3 July 2019 allowed the writ petition1[Writ Petition No 27778 of 2019 (GM-RES)] instituted by the respondent, and set aside an award of the Permanent Lok Adalat dated 19 November 2014. The Division Bench dismissed the writ appeal2[Writ Appeal No 514 of 2020 (GM-RES)] by the appellant and upheld the judgment of the Single Judge.
2. The dispute arises from an application3[PLD No 69 of 2013] filed by the Syndicate Bank4[With effect from 1 April 2020, it has since been merged with the appellant through a notification dated 4 March 2020 issued by the Central Government in consultation with Reserve Bank of India in exercise of its powers under Section 9 of Banking Companies (Acquisition & Transfer of Undertakings) Act 1970. Hence, it is also referred to as “appellant” in this judgment.] on 31 December 2012 before the Permanent Lok Adalat at Mangalore under Section 22- C(1) of the Legal Services Authorities Act 19875[“LSA Act”]. 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 alleged to have filed a vakalatnama on behalf of the respondent, and the case was adjourned once again.
4. Since no one thereafter participated in the proceedings on behalf of the respondent, the appellant filed its final affidavit on 17 November 2014, when the Permanent Lok Adalat reserved the matter for its award. In its award dated 19 November 2014, the Permanent Lok Adalat noted that the respondent “appeared through an advocate, but did not participate in the proceedings” while his guarantor “though served with notices…did not participate in the proceedings”. Further, it also noted that no conciliation was reported. Hence, the Permanent Lok Adalat allowed the application filed by the appellant based on the documentary evidence adduced by them and directed the respondent and his guarantor to pay the appellant an amount of Rs 2,40,583 with interest at the rate of 9 per cent till the date of realization. The appellant filed a petition6[Ex No 9 of 2019] for exe
