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.

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