Supreme Court Overturns High Court Ruling: Writ Petition is Sole Remedy to Challenge Fraudulent Lok Adalat Decrees

In a significant ruling on the enforceability and challenges to Lok Adalat awards, the Supreme Court of India has held that executing courts cannot set aside such awards, even on grounds of fraud, and that the exclusive remedy lies in writ proceedings under Articles 226 and 227 of the Constitution. The decision, delivered in Dilip Mehta v. Rakesh Gupta & Ors. (Civil Appeal No. of 2025 arising from SLP (C) No. 27806 of 2023), remands the matter back to the High Court of Madhya Pradesh for fresh consideration, emphasizing the statutory finality of Lok Adalat decisions under the Legal Services Authorities Act, 1987 (LSA Act).

Case Background and Timeline

The dispute centers on a piece of immovable property in Jabalpur, originally owned by Smt. Siya Bai. In 2008, a power of attorney was allegedly executed in favor of Virendra Patel (Respondent No. 3), leading to a 2009 agreement to sell the property to Rakesh Gupta and Neeraj Jain (Respondents No. 1 and 2). This transaction sparked multiple legal battles, including civil suits for declaration of nullity and injunctions filed by Smt. Siya Bai in 2013, and a criminal FIR in 2011 alleging impersonation and forgery against Respondent No. 3.

Following Smt. Siya Bai's death, her husband, Shri Bhagwan Patel, sold the property via a registered sale deed dated February 17, 2016, to Dilip Mehta's proprietary concern, M/s Rajul Builders, for approximately ₹4.2 crores. Mehta claims continuous possession since then. Meanwhile, Respondents No. 1 and 2, relying on their 2009 agreement, filed a suit for specific performance (R.C.S. No. 229-A/2022) against Respondent No. 3 alone, excluding Mehta and the original owner's heirs.

The suit culminated in a compromise under Order XXIII Rule 3 CPC, verified by the Lok Adalat, Jabalpur, which passed an award and decree on May 14, 2022, directing specific performance. A sale deed was executed in favor of Respondents No. 1 and 2 on July 22, 2022, followed by execution proceedings (Execution Case No. EX-A/40/2022) seeking possession.

Mehta, learning of these developments only during police enforcement of possession warrants, filed objections under Order XXI Rule 101 CPC on September 19, 2022, alleging fraud and seeking to set aside the decree. He simultaneously filed a writ petition (No. 22367/2022) in the Madhya Pradesh High Court under Articles 226 and 227, challenging the award as fraudulent and collusive. The Single Judge dismissed the writ on February 27, 2023, directing Mehta to pursue execution remedies, a view affirmed by the Division Bench on November 6, 2023. This led to the Supreme Court appeal.

Arguments Presented by Both Sides

Mehta's counsel, Siddharth Bhatnagar, argued that the 2022 Lok Adalat decree was vitiated by fraud, based on an allegedly ante-dated, unregistered 2009 agreement involving cash payments, executed without impleading necessary parties. As a bona fide purchaser in possession, Mehta contended that Section 22E of the LSA Act bars collateral challenges but mandates writ petitions as the sole remedy for setting aside awards, even for third parties, citing State of Punjab v. Jalour Singh (2008) 2 SCC 660 and Bhargavi Constructions v. Kothakapu Muthyam Reddy (2018) 13 SCC 480. He emphasized that his execution objections were merely defensive and that the executing court lacks jurisdiction to annul the award.

Respondents' counsel, Ravindra Srivastava, countered that as a third party not involved in the original suit or compromise, Mehta's challenge falls outside the writ-exclusive regime for parties to the award. They highlighted Mehta's prior invocation of execution proceedings—where he explicitly sought to set aside the decree on fraud grounds—as an elected alternative remedy under Order XXI Rules 97, 99, and 101 CPC, barring parallel writs. Disputed facts, including title and fraud allegations amid ongoing civil and criminal cases (e.g., FIR No. 041/2023 on the forged agreement), were better suited for civil courts, not supervisory jurisdiction.

Legal Precedents and Principles Applied

The Supreme Court reaffirmed the principles from State of Punjab v. Jalour Singh , where it held that Lok Adalat awards based on settlements are final, binding, and executable as civil decrees under Section 21 of the LSA Act, with no appeal allowed. Challenges, limited to grounds like fraud or jurisdictional error, must proceed via writ petitions, not civil suits or execution proceedings. In Bhargavi Constructions , the Court struck down a suit to set aside a Lok Adalat award as barred, reinforcing writ exclusivity.

Distinguishing the instant case, the Bench clarified that Section 22E(4)'s bar on questioning awards in suits, applications, or executions applies universally, including to third parties, without expanding executing courts' powers. Order XXI CPC provisions allow incidental execution queries (e.g., enforceability against possessors) but not re-adjudication of the award's validity, which would undermine the LSA Act's finality intent.

A pivotal excerpt from the judgment underscores this: "The award may be executed as a decree, but its validity cannot be reopened through an ordinary civil suit or by treating some other civil proceeding as a vehicle for setting it aside. The only recognised avenue of challenge is the constitutional jurisdiction of the High Court, which is supervisory and exceptional in nature."

The Court also referenced Jalour Singh to caution against "impos[ing] the views of the Lok Adalats on the parties," ensuring awards remain consensual and fraud-free.

Court's Final Decision and Implications

Allowing the appeal, the Supreme Court set aside the High Court's orders and remanded the writ petition for fresh adjudication on merits, including fraud and collusion claims. It directed Mehta to withdraw his execution objections within four weeks and maintained status quo on possession until final disposal.

This ruling clarifies that Lok Adalat awards enjoy robust statutory protection, with writ petitions as the sole bulwark against invalidity, preventing forum-shopping and preserving alternative dispute resolution's efficiency. For third parties like bona fide purchasers, it underscores the need for vigilant participation in underlying suits to avoid ex parte awards. The decision may prompt reviews of similar execution challenges nationwide, reinforcing constitutional oversight in ADR mechanisms while leaving factual disputes open.

The Bench expressed no opinion on merits like title or limitation, leaving them for the High Court. No costs were imposed, and pending applications were disposed of.