Case details

Court: Supreme Court of India
Decided: 19 May 2022
Bench: D.Y. Chandrachud
Citations: 2022 INSC 597[2022] 4 S.C.R. 162
Type: Judgment (Disposed off)

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Supreme Court of India

CANARA BANK versus G S JAYARAMA on 19 May 2022

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162

[2022] 4 S.C.R. 162

SUPREME COURT REPORTS

[2022] 4 S.C.R.

CANARA BANK

G S JAYARAMA

(Civil Appeal No. 3872 of 2022)

BMAY 19, 2022

[DR DHANANJAYA Y CHANDRACHUD ANDPAMIDIGHANTAM SRI NARASIMHA, JJ.]

Legal Services Authorities Act 1987: s. 22-C – Cognizanceof cases by Permanent Lok Adalat – Conciliation proceedings u/s.C22-C, nature of – Permanent Lok Adalat, if has adjudicatoryfunctions the under the Act – Held: Conciliation proceedings u/s.22-C are mandatory in nature – s.22-C provides a step-by-stepscheme on how a matter is to proceed – First step is filing ofapplication which ousts the jurisdiction of other civil courts –DThereafter, on parties filing requisite submissions and documents,the Permanent Lok Adalat attempts conciliation between the partiesand thereafter, draws up terms of settlement and propose them tothe parties – If parties agree thereto, the Permanent Lok Adalat hasto pass an award and if the parties do not agree, then PermanentLok Adalat may decide the disputes on merits as long as the disputeEdoes not relate to an offence – Thus, the adjudication can only bemade when the parties disagree to the terms of settlement formulatedon the basis of the conciliation proceedings – Permanent LokAdalats are not allowed to bypass the step – Main goal was theconciliation and settlement of disputes in relation to public utilities,Fwith a decision on merits being the last resort – As regards, theadjudicatory functions, the Permanent Lok Adalats are the secondtype of Lok Adalat established u/s. 22-B in respect of utility servicesto carry out both conciliatory and adjudicatory functions subjectto procedure followed u/s. 22-C – Lok Adalat constituted u/s. 19cannot perform any adjudicatory function in terms of s. 20 – OnGfacts, holding of the Single Judge and the Division Bench of theHigh Court that the Permanent Lok Adalat has no adjudicatoryfunctions, and that the Permanent Lok Adalats cannot act as aregular civil court in adjudicating the dispute between the parties,is clearly incorrect, however, the Division Bench rightly held thatHthe Permanent Lok Adalat failed to follow the mandatory conciliation162

proceedings since the award of the Permanent Lok Adalat does notindicate any attempt made by it to propose terms of settlement to theparties and their rejection – It states that once the respondent andhis guarantor did not appear, it adjudicated the dispute on meritsin favour of the respondent, and the Permanent Lok Adalat couldnot have done so and on this point the Division Bench rightly setaside the award of the Permanent Lok Adalat.

Disposing of the appeal, the Court

HELD: 1.1 Section 22- C of the Legal Services AuthoritiesAct 1987 provides a step-by-step scheme on how a matter is toproceed before the Permanent Lok Adalat. The first step is thefiling of the application which ousts the jurisdiction of other civilcourts, in accordance with sub-Sections (1) and (2). The secondstep is the parties filing requisite submissions and documentsbefore the Permanent Lok Adalat, in accordance with sub-Section(3). On the completion of the third step to its satisfaction, thePermanent Lok Adalat can move to the fourth step of attemptingconciliation between the parties, in accordance with sub-Sections(4), (5) and (6). Subsequently, in the fifth step in accordance withsub-Section (7), the Permanent Lok Adalat has to draw up termsof settlement on the basis of the conciliation proceedings, andpropose them to the parties. If the parties agree, the PermanentLok Adalat has to pass an award on the basis of the agreed uponterms of settlement. Only if the parties fail to reach an agreementon the fifth step, can the Permanent Lok Adalat proceed to thefinal step and decide the dispute on its merits. [Para 24][182-G-H; 183-A-C]

1.2 The submission that if the opposite party does not appearbefore the Permanent Lok Adalat, it can dispense with theconciliation proceedings and straightaway adjudicate the disputeunder Section 22-C(8), cannot be accepted. Even if the oppositeparty does not appear, the Permanent Lok Adalat is still boundto 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 filetheir submissions and documents, and make the best efforts tocommunicate them to the opposite party for their response. If itis satisfied that no response is forthcoming from the absentopposite party, the Permanent Lok Adalat shall still attempt to AB

Asettle the dispute through settlement under Section 22-C(4). Itis important to remember that Section 22-C(5) imposes a dutyupon the Permanent Lok Adalat to be independent and impartialin attempting to amicably settle the dispute, while Section 22-C(6) imposes a duty upon the party present before the PermanentLok Adalat to cooperate in good faith and assist the PermanentBLok Adalat. Thereafter, the Permanent Lok Adalat, based on thematerials before it, shall propose terms of settlement andcommunicate them to both parties, regardless of whether theyparticipated in the proceedings. If the party present before thePermanent Lok Adalat does not agree or if the absent party doesCnot respond in a sufficient period of time, only then can thePermanent Lok Adalat adjudicate the dispute on its merits underSection 22-C(8). Keeping in mind the principles enshrined inSection 22-D, the Permanent Lok Adalat shall once again notifythe absent party of its decision to adjudicate the dispute on itsmerits, in case it wishes to join the proceedings at that stage.D[Para 26][184-D-H; 185-A]

1.3 Section 22-C (8) is amply clear that it only comes intoeffect once an agreement under Section 22-C (7) has failed. Thecorollary of this is that the proposed terms of settlement underSection 22-C (7), and the conciliation proceedings preceding it,Eare mandatory. If Permanent Lok Adalats are allowed to bypassthis step just because a party is absent, it would be tantamount todeciding disputes on their merit ex parte and issuing awards whichwill be final, binding and will be deemed to be decrees of civilcourts. This was simply not the intention of the Parliament when Fit introduced the LSA Amendment Act. Its main goal was still theconciliation and settlement of disputes in relation to publicutilities, with a decision on merits always being the last resort.Therefore, the conciliation proceedings under Section 22-C ofthe LSA Act are mandatory in nature. [Para 27][185-B-D]

G1.4 As highlighted in the Objects and Reasons accompanyingthe LSA Amendment Act, its introduction led to the creation oftwo different types of Lok Adalats. The first is a Lok Adalatconstituted under Section 19 of the LSA Act, having noadjudicatory power, which can only conduct conciliatory H

Procedure

proceedings. The second is a Permanent Lok Adalat, establishedunder Section 22-B(1) of the LSA Act in respect of public utilityservices, which can carry out both conciliatory and adjudicatoryfunctions, subject to the procedure to be followed under Section22-C of the LSA Act. The scheme of the LSA Act makes clearthe distinction between the two types of Lok Adalats. Section 20of the LSA Act provides that the Lok Adalat shall aim to arrive ata compromise or settlement between the parties. If no suchcompromise or settlement is arrived at, then the record of thecase is returned to the court from which the Lok Adalat hadreceived the reference. The court would then proceed toadjudicate the dispute. On the other hand, Section 22-C of theLSA Act provides that a party to a dispute, prior to bringing adispute before the court, i.e., at the pre-litigation stage, can makean application to a Permanent Lok Adalat for the settlement of adispute. The Permanent Lok Adalat would first conductconciliation proceedings and attempt to reach an amicablesettlement of the dispute. However, if the parties fail to reach anagreement, it shall decide the dispute, as long as the disputedoes not relate to an offence. Section 22-D further indicates thatthe Permanent Lok Adalat is empowered to decide the disputebetween the parties on merits. The powers of the Lok Adalatconstituted under Section 19 of the LSA Act are to bedistinguished from the nature of powers granted to a PermanentLok Adalat established under Section 22-B of the LSA Act. It isin the context of interpreting the jurisdiction of Lok Adalatsconstituted under Section 19 of the LSA Act, it is held that theLok Adalat cannot perform any adjudicatory function in terms ofSection 20 of the LSA Act. [Paras 28 and 31][185-E-H; 186-A-B;188-D-E]

1.5 The Single Judge of the High Court observed that thePermanent Lok Adalat has no adjudicatory function. This findingof the Single Judge was upheld by the Division Bench of the HighCourt in its impugned judgement where it observed that thePermanent Lok Adalat cannot act as a regular civil court inadjudicating the dispute between the parties. Based on theanalysis of the LSA Act and precedents of this Court, such anunderstanding is clearly incorrect. Therefore, these observations ABC

DEF

Aof the Single Judge and Division Bench of the High Court wereincorrect. At the same time, the Division Bench in its impugnedjudgement also noted that the Permanent Lok Adalat failed tofollow the mandatory conciliation proceedings in the instant case.This observation is correct since the award of the PermanentLok Adalat does not indicate any attempt made by it to proposeBterms of settlement to the parties and their rejection. It statesthat once the respondent and his guarantor did not appear, itadjudicated the dispute on merits in favour of the respondent.For the reasons mentioned earlier in this judgment, thePermanent Lok Adalat could not have done so. Therefore, theCfinal judgment of the Division Bench setting aside the award ofthe Permanent Lok Adalat is upheld. The observations of theDivision Bench in the impugned judgment in respect of theadjudicatory powers of the Permanent Lok Adalats were incorrect,while upholding its ultimate conclusion since the Permanent LokAdalat failed to follow the mandatory conciliation proceedings inDthe instant case. [Para 32, 33 & 34][188-F-G; 189-A-D]

Bar Council of India v. Union of India (2012) 8 SCC243 : [2012] 6 SCR 1094; United India Assurance Co.Ltd. v. Ajay Sinha & Ors. (2008) 7 SCC 454 : [2008] 8SCR 509; Inter Globe Aviation v. N Satchidanand (2011)E7 SCC 463 : [2011] 6 SCR 1116; Life InsuranceCorporation of India v. Suresh Kumar (2011) 7 SCC491; State of Punjab v. Jalour Singh & Ors. (2008) 2SCC 660 : [2008] 1 SCR 922; Estate Officer v. ColonelHV Mankotia (2021) SCC OnLine SC 898; New OkhlaFIndustrial Development Authority v. Yunus and Ors.(2022) SCC OnLine SC 138 – referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3872of 2022.

From the Judgment and Order dated 06.03.2021 of the High Courtof Karnataka at Bengaluru in Writ Appeal No. 514 of 2020 (GM-RES).

Rajesh Kumar Gautam, Anant Gautam, Nipun Sharma, SachinSingh, Advs. for the Appellant.

The Judgment of the Court was delivered by DR 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 adjudicatoryfunctions ........................................................................... 25*D Conclusion ........................................................................ 29*

A Introduction

1. This appeal arises from a judgment dated 6 March 2021 of aDivision Bench of the High Court of Karnataka. The Single Judge by ajudgment dated 3 July 2019 allowed the writ petition[1] instituted by therespondent, and set aside an award of the Permanent Lok Adalat dated19 November 2014. The Division Bench dismissed the writ appeal[2] bythe appellant and upheld the judgment of the Single Judge.

2. The dispute arises from an application[3] filed by the SyndicateBank[4] on 31 December 2012 before the Permanent Lok Adalat atG

*Denotes the pagination in the original judgment.

1 Writ Petition No 27778 of 2019 (GM-RES)

2 Writ Appeal No 514 of 2020 (GM-RES)

3 PLD No 69 of 2013

4 With effect from 1 April 2020, it has since been merged with the appellant through anotification dated 4 March 2020 issued by the Central Government in consultationHwith Reserve Bank of India in exercise of its powers under Section 9 of Banking AMangalore under Section 22-C(1) of the Legal Services Authorities Act1987[5]. The application had been filed against the respondent and hisguarantor, in regard to credit facilities in the value of Rs 2,40,583 availedby the respondent from the appellant. The appellant alleged that theamount of Rs 2,40,583 along with interest had become due on 1 October2012, but the respondent had not repaid it, in spite of multiple notices andBrequests. Hence, the appellant prayed for the recovery of Rs 2,40,583with interest at the rate of 15.75 per cent and costs from the respondentand his guarantor.

3. Notice was issued by the Permanent Lok Adalat to therespondent on 10 January 2013, which was allegedly not claimed by theCrespondent. Hence, on 12 March 2013, the Permanent Lok Adalat heldthe service to be complete in respect of the respondent and adjournedthe case to 6 June 2013 for reporting of settlement. Thereafter, allegedlyon 22 August 2013, a counsel filed a memo of appearance on behalf ofthe respondent and matter was adjourned to allow filing of vakalatnamaDand objections on behalf of the respondent. On 6 February 2014, anothercounsel 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 behalfof the respondent, the appellant filed its final affidavit on 17 NovemberE2014, when the Permanent Lok Adalat reserved the matter for its award.In its award dated 19 November 2014, the Permanent Lok Adalat notedthat the respondent “appeared through an advocate, but did notparticipate in the proceedings” while his guarantor “though servedwith notices…did not participate in the proceedings”. Further, it alsonoted that no conciliation was reported. Hence, the Permanent Lok AdalatFallowed the application filed by the appellant based on the documentaryevidence adduced by them and directed the respondent and his guarantorto pay the appellant an amount of Rs 2,40,583 with interest at the rate of9 per cent till the date of realization. The appellant filed a petition[6] forexecution of the award of the Permanent Lok Adalat before the CivilGJudge and Judicial Magistrate First Class, Sullia, Dakshina Kannada.

Companies (Acquisition & Transfer of Undertakings) Act 1970. Hence, it is also referredto as “appellant” in this judgment.

5 “LSA Act”H6 Ex No 9 of 2019

5. While the appellant’s execution petition was pending and uponthe issuance of an arrest notice, the respondent filed a writ petition underArticle 226 of the Constitution before the Karnataka High Court on1 July 2019, for challenging the award of the Permanent Lok Adalatdated 19 November 2014. The Single Judge allowed the writ petition bya judgment dated 3 July 2019, without issuing notice to the appellant.While setting aside award dated 19 November 2014, the Single Judgeheld:

“6. In view of the fact that the Lok Adalath (sic) has no adjudicatoryfunction as per the [Legal Services Authorities Act, 1987], theimpugned order dated 19.11.2014 is hereby quashed and set aside.

7. Accordingly, the writ petition is disposed of with a liberty to therespondent to take recourse to such remedy as may be availableto them under the law.”

6. Relying upon the judgment of the Single Judge of KarnatakaHigh Court dated 3 July 2019, the appellant’s execution petition wasdismissed on 22 July 2019. The appellant alleges that this is when theybecame aware of the Single Judge’s judgment, and thereafter filed awrit appeal.

7. By its impugned judgment dated 6 March 2021, the DivisionBench of the Karnataka High Court dismissed the writ appeal. Whiledismissing the writ appeal, the Division Bench held:

“9. The aforesaid provisions make it clear that in case the partiesreach at an agreement on the settlement of the dispute they shallsign the settlement agreement and the Permanent Lok Adalatshall pass an award in terms thereof and furnish a copy of thesame to each of the parties concerned at the first instance and itis only after where the parties fail to reach at an agreement undersub-Section (7), the Permanent Lok Adalat can pass an awardkeeping in view the facts and circumstances of the case. In thepresent case, no such procedure was followed at all. There wasno conciliation proceedings between the parties. As they did notappear, the question of signing the agreement does not arise. TheLok Adalat could not have acted as a regular civil Court inadjudicating the proceedings. Therefore, the learned Single Judgewas justified in allowing the writ petition. This Court finds no reasonto interfere with the order passed by the learned Single Judge.”

AThus, the Division Bench dismissed the writ appeal on two grounds:first, that the procedure for conciliation under Section 22-C of the LSAAct was not followed, and hence, the award under Section 22-C(8) wasa nullity; and second, the Permanent Lok Adalat could not have actedas a regular civil court in adjudicating the proceedings.

BB Submissions of Counsel

8. Mr Rajesh Kumar Gautam, learned counsel appearing on behalfof the appellant has made the following submissions:

(i) The impugned judgement is contrary to the provisionscontained in Chapter – VI-A of the LSA Act and theCdecision of this Court in Bar Council of India v. Union ofIndia[7] in as much as the High Court held that PermanentLok Adalats have no adjudicatory function;

(ii) Sufficient opportunity was given to the respondent toparticipate in the conciliation proceedings; D

(iii) If the parties fail to participate in the conciliationproceedings, the Permanent Lok Adalat has no option butto proceed to decide the dispute and pass an award underSection 22-C of the LSA Act;

(iv) Under Section 22-E of the LSA Act, an award passed byEthe Permanent Lok Adalat is deemed to be a decree of acivil court and such award is final and cannot be called intoquestion in any original suit, application or executionproceedings;

(v) The object and purpose behind introducing Chapter VI-AFto the LSA Act would be frustrated if the Permanent LokAdalat is denied the power of adjudicating a dispute if aparty deliberately avoids appearing and participating in theconciliation proceedings, even after receipt of notice fromthe Permanent Lok Adalat and after having appearedGthrough an advocate on a previous occasion; and

(vi) The conclusion of the conciliation proceedings is not acondition precedent to the exercise of Permanent Lok CANARA BANK v. G S JAYARAMA[DR DHANANJAYA Y CHANDRACHUD, J.]

Adalat’s adjudicatory function if a party fails to appear forthe conciliation proceedings.

9. Notice was served upon the respondent by the usual mode ofservice as well as Dasti. While an AD card duly signed by the respondentwas received by the Supreme Court’s Registry, no one entered anappearance on behalf of the respondent.

C Analysis

10. Two issues arise in the present appeal:

(i) Whether under Section 22-C of the LSA Act conciliationproceedings are mandatory; and

(ii) Whether the Permanent Lok Adalats have adjudicatory functions under the LSA Act.

C.1 Legislative Framework of Legal Services Act 1987

11. To address these issues, it is important to understand thestatutory framework of the LSA Act. Chapter VI of the LSA Act istitled “Lok Adalats”. Section 19[8 ]provides the framework on the basis of 8 “19. Organisation of Lok Adalats.—(1) Every State Authority or District Authorityor the Supreme Court Legal Services Committee or every High Court Legal ServicesCommittee or, as the case may be, Taluk Legal Services Committee may organise LokAdalats at such intervals and places and for exercising such jurisdiction and for suchareas as it thinks fit.

(2) Every Lok Adalat organised for an area shall consist of such number of—(a) serving or retired judicial officers; and(b) other persons, of the area as may be specified by the State Authority or the District Authority or theSupreme Court Legal Services Committee or the High Court Legal Services Committee,or, as the case may be, the Taluk Legal Services Committee, organising such Lok Adalat.(3) The experience and qualifications of other persons referred to in clause (b) of sub-section (2) for Lok Adalats organised by the Supreme Court Legal Services Committeeshall be such as may be prescribed by the Central Government in consultation with theChief Justice of India.

(4) The experience and qualifications of other persons referred to in clause (b) of sub-section (2) for Lok Adalats other than referred to in sub-section (3) shall be such as maybe prescribed by the State Government in consultation with the Chief Justice of theHigh Court.

(5) A Lok Adalat shall have jurisdiction to determine and to arrive at a compromise orsettlement between the parties to a dispute in respect of—(i) any case pending before; or

(ii) any matter which is falling within the jurisdiction of, and is not brought before,any court for which the Lok Adalat is organised:Provided that the Lok Adalat shall have no jurisdiction in respect of any case or matterrelating to an offence not compoundable under any law.”

Awhich Lok Adalats are to be organised. Specifically, Section 19(5)provides that Lok Adalats shall have the jurisdiction to arrive at acompromise 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 butfalling within its jurisdiction. The proviso notes that the Lok Adalat shallBhave no jurisdiction in respect of a matter relating to an offence notcompoundable under any law.

12. Section 20[9] outlines the type of cases whose cognisance canbe taken by the Lok Adalats. Section 20(1) provides that when a case is 9 “20. Cognizance of cases by Lok Adalats.—(1) Where in any case referred to inCclause (i) of sub-section (5) of Section 19,

(i) (a) the parties thereof 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 faciesatisfied that there are chances of such settlement; or

(ii) the court is satisfied that the matter is an appropriate one to be taken cognizance ofDby 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 beingheard to the parties.

(2) Notwithstanding anything contained in any other law for the time being in force, theAuthority or Committee organising the Lok Adalat under sub-section (1) of Section 19Emay, on receipt of an application from any one of the parties to any matter referred toin clause (ii) of sub-section (5) of Section 19 that such matter needs to be determined bya 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 reasonableopportunity of being heard to the other party.

(3) Where any case is referred to a Lok Adalat under sub-section (1) or where a referencehas been made to it under sub-section (2) the Lok Adalat shall proceed to dispose of theFcase or matter and arrive at a compromise or settlement between the parties.(4) Every Lok Adalat shall, while determining any reference before it under this Act, actwith utmost expedition to arrive at a compromise or settlement between the parties andshall be guided by the principles of justice, equity, fair play and other legal principles.(5) Where no award is made by the Lok Adalat on the ground that no compromise orsettlement could be arrived at between the parties, the record of the case shall beGreturned by it to the court, from which the reference has been received under sub-section (1) for disposal in accordance with law.(6) Where no award is made by the Lok Adalat on the ground that no compromise orsettlement could be arrived at between the parties, in a matter referred to in sub-section(2), that Lok Adalat shall advise the parties to seek remedy in a court.

(7) Where the record of the case is returned under sub-section (5) to the court, suchcourt shall proceed to deal with such case from the stage which was reached before suchHreference under sub-section (1).”

pending before a court (in accordance with Section 19(5)(i)), the courtcan 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 thematter is appropriate for a Lok Adalat. The proviso stipulates that inscenario (ii) and (iii), the court shall only make its decision after givingthe parties a reasonable opportunity of being heard. Section 20(2) providesthat when an Authority or a Committee organising a Lok Adalat receivesan application (in accordance with Section 19(5)(ii)), it shall determinewhether to refer it to the Lok Adalat. The proviso stipulates that it shallonly make its determination after giving parties a reasonable opportunityof being heard. Section 20(3) indicates that when a case is referred to aLok Adalat under Section 20(1) and (2), it shall proceed to dispose of thecase and arrive at a compromise or settlement between the parties.Section 20(4) provides that in disposing of a case, the Lok Adalat shallbe guided by the principles of justice, equity, fair play and other legalprinciples. In case the Lok Adalat is unable to reach a settlement betweenthe parties and no award is made, it shall: (i) return the case to the courtif it was received under Section 20(1) (in accordance with Section 20(5)),which shall resume hearing it from the stage where it was referred tothe Lok Adalat (in accordance with Section 20(7)); or (ii) advise theparties to approach the court if it was received under Section 20(2) (inaccordance with Section 20(6)).

13. Section 21[10] stipulates that the awards of Lok Adalats shall bedeemed to be a decree of a civil court or, as the case may be, an orderof any other court. These awards shall be final and binding on all theparties to the dispute, and no appeal shall lie to any court against theaward. Further, when a settlement is arrived at by a Lok Adalat in acase referred to it under Section 20(1), the parties shall be refundedtheir court fee.

14. Section 22 outlines the powers of the Lok Adalats andPermanent Lok Adalats. Section 22 is extracted below:

10 “21. Award of Lok Adalat.—(1) Every award of the Lok Adalat shall be deemed to bea decree of a civil court or, as the case may be, an order of any other court and where acompromise or settlement has been arrived at, by a Lok Adalat in a case referred to itunder sub-section (1) of Section 20, the court-fee paid in such case shall be refunded inthe manner provided under the Court Fees Act, 1870 (7 of 1870).(2) Every award made by a Lok Adalat shall be final and binding on all the parties to thedispute, and no appeal shall lie to any court against the award.”

ABCD

A“22. Powers of Lok Adalats.—(1) The Lok Adalat or PermanentLok Adalat shall, for the purposes of holding any determinationunder this Act, have the same powers as are vested in a civilcourt under the Code of Civil Procedure, 1908 (5 of 1908) whiletrying a suit in respect of the following matters, namely:—

B(a) the summoning and enforcing the attendance of any witnessand examining him on oath; (b) the discovery and production of any document;

(c) the reception of evidence on affidavits; C(d) the requisitioning of any public record or document or copy ofsuch 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 insub-section (1), every Lok Adalat or Permanent Lok Adalat shallDhave the requisite powers to specify its own procedure for thedetermination of any dispute coming before it.

(3) All proceedings before the Lok Adalat or Permanent Lok Adalatshall be deemed to be judicial proceedings within the meaning ofSections, 193, 219 and 228 of the Indian Penal Code (45 of 1860)Eand every Lok Adalat shall be deemed to be a civil court for thepurpose of Section 195 and Chapter XXVI of the Code of CriminalProcedure, 1973 (2 of 1974).”

Sub-Section (1) of Section 22 stipulates that Lok Adalats andPermanent Lok Adalats shall have the same power as civil courts underFthe Civil Procedure Code 1908[11] for making their determination underthe LSA Act. Sub-Section (2), without prejudice to sub-Section (1),provides the Lok Adalats and Permanent Lok Adalats with the power tospecify their own procedure. Sub-Section (3) states that proceedingsbefore the Lok Adalats and Permanent Lok Adalats shall be deemed tobe judicial proceedings.G

15. These provisions demonstrate that the power of the Lok Adalatis limited, even though it may have some powers of the civil courts andthe proceedings before it have some trappings of a judicial proceeding.A Lok Adalat shall only attempt to reach a compromise or settlement 11 “CPC”H

between the parties whose case is before it. If a compromise or settlementis reached, the Lok Adalat shall issue it as its award, and the statutedeems it to be equivalent to the decree of a court, against which noappeal shall lie. On the other hand, if it fails to reach a compromise orsettlement, the Lok Adalat shall return the case to the court or advisethe parties to approach the court.

16. On the other hand, Permanent Lok Adalats are constitutedunder Chapter VI-A of the LSA Act titled “Pre-Litigation Conciliationand Settlement”. The chapter was added to the LSA Act by The LegalServices Authorities (Amendment) Act 2002[12]. It is necessary to analysethe rationale for introducing such an institutional mechanism for resolvingdisputes when Lok Adalats constituted under Section 19 of the LSA Actwere already in existence. The Statement of Objects and Reasons ofthe LSA Amendment Act reads as follows:

“(1) The Legal Services Authorities Act, 1987 was enacted toconstitute legal services authorities for providing (sic) andcompetent legal services to the weaker sections of the society toensure that opportunities for securing justice were not denied toany citizen by reason of economic or other disabilities and toorganise Lok Adalats to ensure that the operation of the legalsystem promoted justice on a basis of equal opportunity. The systemof Lok Adalat, which is an innovative mechanism for alternatedispute resolution, has proved effective for resolving disputes in aspirit of conciliation outside the courts.

(2) However, the major drawback in the existing schemeof organisation of the Lok Adalats under Chapter VI of thesaid Act is that the system of Lok Adalats is mainly basedon compromise or settlement between the parties. If theparties do not arrive at any compromise or settlement, thecase is either returned to the court of law or the parties areadvised to seek remedy in a court of law. This causesunnecessary delay in the dispensation of justice. If LokAdalats are given power to decide the cases on merits incase parties fail to arrive at any compromise or settlement,this problem can be tackled to a great extent. Further, thecases which arise in relation to public utility services such as A

AMahanagar Telephone Nigam Limited, Delhi Vidyut Board, etc.need to be settled urgently so that people get justice without delayeven at pre-litigation stage and thus most of the petty cases whichought not to go in the regular courts would be settled at the pre-litigation stage itself which would result in reducing the workloadof the regular courts to a great extent. It is, therefore, proposedBto amend the Legal Services Authorities Act, 1987 to setup Permanent Lok Adalats for providing compulsory pre-litigative mechanism for conciliation and settlement of casesrelating to public utility services.”

The Statement of Objects and Reasons indicates that ChapterVI-A was introduced to the LSA Act to primarily create alternativedispute resolution bodies, in the form of Permanent Lok Adalats, to decidedisputes on merits if the parties fail to arrive at a compromise or settlement.

D17. Section 22-B of the LSA Act provides for the establishmentof Permanent Lok Adalats. Section 22-B stipulates thus:

“22-B. Establishment of Permanent Lok Adalats.—(1)Notwithstanding anything contained in Section 19, the CentralAuthority or, as the case may be, every State Authority shall, byEnotification, establish Permanent Lok Adalats at such places andfor exercising such jurisdiction in respect of one or more publicutility services and for such areas as may be specified in thenotification.

(2) Every Permanent Lok Adalat established for an area notifiedFunder sub-section (1) shall consist of—(a) a person who is, or has been, a district Judge or additionaldistrict Judge or has held judicial office higher in rank than that ofa district Judge, shall be the Chairman of the Permanent LokAdalat; and G(b) two other persons having adequate experience in public utilityservice to be nominated by the Central Government or, as thecase may be, the State Government on the recommendation ofthe Central Authority or, as the case may be, the State Authority, appointed by the Central Authority or, as the case may be, theHState Authority, establishing such Permanent Lok Adalat and the other terms and conditions of the appointment of the Chairmanand other persons referred to in clause (b) shall be such as maybe prescribed by the Central Government.”

Sub-Section (1) of Section 22-B stipulates that the Central or StateAuthority under the LSA Act shall establish Permanent Lok Adalats inrespect of one or more public utility services (defined under Section 22-A(b)[13]) and for specific areas. Sub-Section (2) provides the membershipof the Permanent Lok Adalat to be appointed by the Central or StateAuthority, which shall include: (i) its Chairperson, who is a person whois, or has been, a District Judge or an Additional District Judge or hasheld judicial office higher in rank than that of a District Judge; and (ii)two other persons who have adequate experience in the public utilityservices, to be nominated by Central or State Government on therecommendation of Central or State Authority, as the case maybe.

18. Section 22-C of the LSA Act stipulates the instances in whichPermanent Lok Adalats can take cognisance of cases. Section 22-Cprovides as follows:

“—22-C. Cognizance of cases by Permanent Lok Adalat.(1) Any party to a dispute may, before the dispute is brought beforeany court, make an application to the Permanent Lok Adalat forthe settlement of dispute:

Provided that the Permanent Lok Adalat shall not have jurisdictionin respect of any matter relating to an offence not compoundableunder any law:

13 “22-A. Definitions.—In this Chapter and for the purposes of Sections 22 and 23,unless the context otherwise requires,—

[…]

(b) “public utility service” means any—

(i) transport service for the carriage of passengers or goods by air, road or water; or

(ii) postal, telegraph or telephone service; or

(iii) supply of power, light or water to the public by any establishment; or

(iv) system of public conservancy or sanitation; or

(v) service in hospital or dispensary; or

(vi) insurance service,

and includes any service which the Central Government or the State Government, asthe case may be, may, in the public interest, by notification, declare to be a publicutility service for the purposes of this Chapter.”

Provided further that the Permanent Lok Adalat shall also nothave jurisdiction in the matter where the value of the property indispute exceeds ten lakh rupees:

Provided also that the Central Government, may, by notification,increase the limit of ten lakh rupees specified in the second provisoBin consultation with the Central Authority.

(2) After an application is made under sub-section (1) to thePermanent Lok Adalat, no party to that application shall invokejurisdiction of any court in the same dispute.

(3) Where an application is made to a Permanent Lok AdalatCunder sub-section (1), it—

(a) shall direct each party to the application to file before it awritten statement, stating therein the facts and nature of disputeunder the application, points or issues in such dispute and groundsrelied in support of, or in opposition to, such points or issues, asDthe case may be, and such party may supplement such statementwith any document and other evidence which such party deemsappropriate in proof of such facts and grounds and shall send acopy of such statement together with a copy of such documentand other evidence, if any, to each of the parties to the application; E(b) may require any party to the application to file additionalstatement before it at any stage of the conciliation proceedings;

(c) shall communicate any document or statement received by itfrom any party to the application to the other party, to enable suchother party to present reply thereto.

(4) When statement, additional statement and reply, if any, havebeen filed under sub-section (3), to the satisfaction of the PermanentLok Adalat, it shall conduct conciliation proceedings between theparties to the application in such manner as it thinks appropriatetaking into account the circumstances of the dispute.

(5) The Permanent Lok Adalat shall, during conduct of conciliationproceedings under sub-section (4), assist the parties in their attemptto reach an amicable settlement of the dispute in an independentand impartial manner.

(6) It shall be the duty of every party to the application to cooperateHin good faith with the Permanent Lok Adalat in conciliation of the dispute relating to the application and to comply with the directionof the Permanent Lok Adalat to produce evidence and otherrelated documents before it.

(7) When a Permanent Lok Adalat, in the aforesaid conciliationproceedings, is of opinion that there exist elements of settlementin such proceedings which may be acceptable to the parties, itmay formulate the terms of a possible settlement of the disputeand give to the parties concerned for their observations and incase the parties reach at an agreement on the settlement of thedispute, they shall sign the settlement agreement and the PermanentLok Adalat shall pass an award in terms thereof and furnish acopy of the same to each of the parties concerned.

(8) Where the parties fail to reach at an agreement under sub-section (7), the Permanent Lok Adalat shall, if the dispute doesnot relate to any offence, decide the dispute.”

Sub-Section (1) of Section 22-C provides that any party to a dispute(covered under the jurisdiction of the Permanent Lok Adalat in accordancewith Section 22-B) can approach the Permanent Lok Adalat beforeapproaching a court. The proviso notes two exceptions to this: (i) thedispute shall not be in respect of any matter relating to an offence notcompoundable under any law; and (ii) the value of the property in disputeshall not exceed Rs 10 lakhs. However, the third proviso stipulates thatthe Central Government may, in consultation with the Central Authority,increase this amount through a notification. Indeed, by a notificationdated 20 March 2015[14] this amount has been since raised to Rs 1 crore.Under sub-Section (2), once an application is made to the PermanentLok Adalat under sub-Section (1) in respect of a dispute, no court shallhave jurisdiction over it. In accordance with sub-Section (3), once thePermanent Lok Adalat receives an application under sub-Section (1), it 14 “Noti. No. S.O. 803(E), dated March 20, 2015.—In exercise of the powers conferredby the third proviso to sub-section (1) of Section 22-C of the Legal Services AuthoritiesAct, 1987 (39 of 1987) and in supersession of the Government of India, Ministry ofLaw and Justice (Department of Legal Affairs), Notification Number S.O. 2083(E),dated the 15th September, 2011, published in the Gazette of India, Extraordinary, PartII, Section 3, sub-section (ii), dated the 15th September, 2011, the Central Government,in consultation with the Central Authority, hereby increases the limit of the value of theproperty in dispute for the purpose of determining the jurisdiction of Permanent LokAdalat to “one crore rupees” with effect from the date of publication of this notificationin the Official Gazette.”

Acan direct both parties to file detailed submission outlining their factualsubmissions, issues raised and arguments advanced. To support theirsubmissions, the parties will be permitted to attach documentaryevidence. Further, the Permanent Lok Adalat can direct the parties tofile additional submissions. It shall also communicate any submissions ordocuments received by one party to the other, in order to enable them toBrespond. Once the procedure under sub-Section (3) is completed, thePermanent Lok Adalat, in accordance with sub-Section (4), shall conductconciliation proceedings between parties in a manner it sees fit keepingin mind the nature of the dispute. During the conciliation proceedingsunder sub-Section (4), sub-Section (5) imposes a duty on the PermanentCLok Adalat to assist the parties in reaching an amicable resolution totheir dispute in an independent and impartial manner. On the other hand,sub-Section (6) imposes a duty on the parties to cooperate with thePermanent Lok Adalat in good faith and produce any evidence/documentsrequired for the resolution of the dispute. Sub-Section (7) empowers thePermanent Lok Adalat, when it is of the opinion that a settlement existsDbetween the parties, to formulate the terms of such settlement and presentit to the parties. If the parties are agreeable to the terms of the settlement,the Permanent Lok Adalat shall pass an award incorporating those termsand provide a copy to each party. Finally, if the parties fail to reach anagreement under sub-Section (7), the Permanent Lok Adalat can decideEthe dispute on merits under sub-Section (8), if the dispute does not relateto any offence.

19. Section 22-D[15] stipulates that while conducting conciliationproceedings or deciding the dispute on its merits, the Permanent LokAdalat shall “be guided by the principles of natural justice, Fobjectivity, fair play, equity and other principles of justice” andshall not be bound by the CPC and the Indian Evidence Act 1872.20. Section 22-E relates to the award of the Permanent Lok Adalat,and provides that:

“22-E. Award of Permanent Lok Adalat to be final.—(1) EveryGaward of the Permanent Lok Adalat under this Act made either 15 “22-D. Procedure of Permanent Lok Adalat.—The Permanent Lok Adalat shall,while conducting conciliation proceedings or deciding a dispute on merit under this Act,be guided by the principles of natural justice, objectivity, fair play, equity and otherprinciples of justice, and shall not be bound by the Code of Civil Procedure, 1908 (5 ofH1908) and the Indian Evidence Act, 1872 (1 of 1872).”

on merit or in terms of a settlement agreement shall be final andbinding on all the parties thereto and on persons claiming underthem.

(2) Every award of the Permanent Lok Adalat under this Actshall be deemed to be a decree of a civil court.

(3) The award made by the Permanent Lok Adalat under this Actshall be by a majority of the persons constituting the PermanentLok Adalat.

(4) Every award made by the Permanent Lok Adalat under thisAct shall be final and shall not be called in question in any originalsuit, application or execution proceeding.

(5) The Permanent Lok Adalat may transmit any award made byit to a civil court having local jurisdiction and such civil court shallexecute the order as if it were a decree made by that court.”

Sub-Section (1) of Section 22-E stipulates that the award of thePermanent Lok Adalat, whether arising out of a settlement agreementor after deciding the merits of the dispute, shall be final and binding on allparties and any persons claiming under them. Sub-Section (2) providesthat the award of the Permanent Lok Adalat shall be deemed to be adecree of a civil court. Sub-Section (3) provides that every award of thePermanent Lok Adalat shall be decided by a majority of its constituentmembers. Sub-Section (4) reiterates that the award shall be final andshall not be called in question in any original suit, application or executionproceeding. Finally, sub-Section (5) stipulates that the Permanent LokAdalat may transmit an award made by it to a civil court having localjurisdiction, and such civil court shall execute the order as if it were adecree made by that court.

21. The above survey of the provisions of the LSA Act indicatesthat there are similarities between Lok Adalats and Permanent LokAdalats: (i) they can both attempt conciliation proceedings with the partiesbefore them, and can pass awards recording the terms of settlementagreed upon by the parties (Section 20(3) and 22-C(7)); (ii) in doing do,they are both bound by principles of justice, equity, fair play and otherlegal principles (Section 20(4) and 22-D); and (iii) their awards, deemedto be decrees of courts, will be final and cannot be challenged in anappeal (Section 21 and 22-E). Yet, despite these similarities, there arecrucial differences under the statute.

A22. While the jurisdiction of the Permanent Lok Adalat is limitedto disputes regarding public utility services, crucially, its powers are widerthan the Lok Adalat in many respects:

(i) Parties can approach Permanent Lok Adalats directly underSection 22-C(1), while Lok Adalats are sent their cases byBcourts where the dispute is pending (under Section 20(1))or by the Authority or Committee organising the Lok Adalatunder Section 19(1) after they receive it from the parties(under Section 20(2)). Indeed, an application made to thePermanent Lok Adalat ousts the jurisdiction of a civil court(under Section 22-C(2)); C

(ii) Permanent Lok Adalats can direct the parties to submitwritten submissions, replies, evidence and documents(Section 22-C(3));

(iii) Other then attempting conciliation with parties, thePermanent Lok Adalats can also decide a dispute on itsmerits if the settlement fails (Section-C(7)); and D

(iv) Permanent Lok Adalats can transmit an award made to acivil court having local jurisdiction, and such civil court shallexecute the order as if it were a decree made by that court(Section 22-E(5)).

The entrustment of wider powers to the Permanent Lok Adalat issupported by its membership, comprising of a District Judge or AdditionalDistrict Judge or someone who has held judicial office higher in rankthan that of a District Judge (as compared to only judicial officers in LokFAdalats).

C.2 Mandatory nature of conciliation proceedings

23. We must now address the first issue, i.e., whether theconciliation proceedings before the Permanent Lok Adalats aremandatory before it can decide a dispute on its merits.

24. This issue is clearly resolved from a bare reading of Section22-C. Section 22-C provides a step-by-step scheme on how a matter isto proceed before the Permanent Lok Adalat. The first step is the filingof the application which ousts the jurisdiction of other civil courts, inaccordance with sub-Sections (1) and (2). The second step is the partiesHfiling requisite submissions and documents before the Permanent Lok Adalat, in accordance with sub-Section (3). On the completion of thethird step to its satisfaction, the Permanent Lok Adalat can move to thefourth step of attempting conciliation between the parties, in accordancewith sub-Sections (4), (5) and (6). Subsequently, in the fifth step inaccordance with sub-Section (7), the Permanent Lok Adalat has to drawup terms of settlement on the basis of the conciliation proceedings, andpropose them to the parties. If the parties agree, the Permanent LokAdalat has to pass an award on the basis of the agreed upon terms ofsettlement. Only if the parties fail to reach an agreement on the fifthstep, can the Permanent Lok Adalat proceed to the final step and decidethe dispute on its merits.

25. Such an interpretation is also supported by the decision of atwo-Judge Bench of this Court in Bar Council of India (supra), wherethe constitutionality of Chapter VI-A of the LSA Act was upheld.Speaking for the Bench, Justice R M Lodha highlighted that the PermanentLok Adalats would proceed to adjudication of a dispute on its meritsonly after attempting and failing to generate a settlement between theparties:

“22. Chapter VI-A inserted by the 2002 Amendment Act in the1987 Act, as its title suggests, provides for pre-litigation conciliationand settlement procedure…The disputes in relation to publicutility service need urgent attention with focus on theirresolution at the threshold by conciliation and settlementand if for any reason such effort fails, then to have such disputesadjudicated through an appropriate mechanism as early as maybe possible…

23. The Statement of Objects and Reasons itself spells out thesalient features of Chapter VI-A. By bringing in this law, thelitigation concerning public utility service is sought to benipped in the bud by first affording the parties to suchdispute an opportunity to settle their dispute through theendeavours of the Permanent Lok Adalat and if such effortfails then to have the dispute between the parties adjudicatedthrough the decision of the Permanent Lok Adalat…

[…]

26. It is necessary to bear in mind that the disputes relatingto public utility services have been entrusted to Permanent AB

SUPREME COURT REPORTS

ALok Adalats only if the process of conciliation andsettlement fails. The emphasis is on settlement in respectof disputes concerning public utility services through themedium of Permanent Lok Adalat. It is for this reason thatsub-section (1) of Section 22-C states in no unambiguous termsthat any party to a dispute may before the dispute is brought beforeBany court make an application to the Permanent Lok Adalat forsettlement of dispute. Thus, settlement of dispute betweenthe parties in matters of public utility services is the maintheme. However, where despite the endeavours and efforts ofthe Permanent Lok Adalat the settlement between the parties isCnot through and the parties are required to have their disputedetermined and adjudicated, to avoid delay in adjudication ofdisputes relating to public utility services, Parliament has intervenedand conferred power of adjudication upon the Permanent LokAdalat.”

26. The appellant’s argument, however, is that if the opposite partydoes not appear before the Permanent Lok Adalat, it can dispense withthe conciliation proceedings and straightaway adjudicate the dispute underSection 22-C(8). We are unable to accept this submission. Even if theEopposite party does not appear, the Permanent Lok Adalat is still boundto follow the step-by-step procedure laid down by Section 22-C. UnderSection 22-C(3), it would require the party before it to file theirsubmissions and documents, and make the best efforts to communicatethem to the opposite party for their response. If it is satisfied that noresponse is forthcoming from the absent opposite party, the PermanentFLok Adalat shall still attempt to settle the dispute through settlementunder 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 andimpartial in attempting to amicably settle the dispute, while Section 22-C(6) imposes a duty upon the party present before the Permanent LokGAdalat to cooperate in good faith and assist the Permanent Lok Adalat.Thereafter, 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 partypresent before the Permanent Lok Adalat does not agree or if the absentparty does not respond in a sufficient period of time, only then can theH

Permanent Lok Adalat adjudicate the dispute on its merits under Section22-C(8). Keeping in mind the principles enshrined in Section 22-D, thePermanent Lok Adalat shall once again notify the absent party of itsdecision to adjudicate the dispute on its merits, in case it wishes to jointhe proceedings at that stage.

27. Section 22-C(8) is amply clear that it only comes into effectonce an agreement under Section 22-C(7) has failed. The corollary ofthis is that the proposed terms of settlement under Section 22-C(7), andthe conciliation proceedings preceding it, are mandatory. If PermanentLok 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 andissuing awards which will be final, binding and will be deemed to bedecrees of civil courts. This was simply not the intention of the Parliamentwhen it introduced the LSA Amendment Act. Its main goal was still theconciliation and settlement of disputes in relation to public utilities, with adecision on merits always being the last resort. Therefore, we hold thatconciliation proceedings under Section 22-C of the LSA Act aremandatory in nature.

C.3 Whether Permanent Lok Adalat has adjudicatoryfunctions

28. The second issue which is in contention before this Court iswhether the Permanent Lok Adalat has any adjudicatory function. Ashighlighted in the Objects and Reasons accompanying the LSAAmendment Act, its introduction led to the creation of two differenttypes of Lok Adalats. The first is a Lok Adalat constituted under Section19 of the LSA Act, having no adjudicatory power, which can only conductconciliatory proceedings. The second is a Permanent Lok Adalat,established under Section 22-B(1) of the LSA Act in respect of publicutility services, which can carry out both conciliatory and adjudicatoryfunctions, subject to the procedure to be followed under Section 22-C ofthe LSA Act. The scheme of the LSA Act makes clear the distinctionbetween the two types of Lok Adalats. Section 20 of the LSA Act providesthat the Lok Adalat shall aim to arrive at a compromise or settlementbetween 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 LokAdalat had received the reference. The court would then proceed toadjudicate the dispute. On the other hand, Section 22-C of the LSA Actprovides that a party to a dispute, prior to bringing a dispute before the A

Acourt, i.e., at the pre-litigation stage, can make an application to aPermanent Lok Adalat for the settlement of a dispute. The PermanentLok Adalat would first conduct conciliation proceedings and attempt toreach an amicable settlement of the dispute. However, if the parties failto reach an agreement, it shall decide the dispute, as long as the disputedoes not relate to an offence. Section 22-D further indicates that theBPermanent Lok Adalat is empowered to decide the dispute between theparties on merits.

29. In United India Assurance Co. Ltd. v. Ajay Sinha &Ors.[16], this Court held that the Permanent Lok Adalat performs anadjudicatory role if the conciliation between the parties fails. ElucidatingCon the power of the Permanent Lok Adalat, this Court observed asfollows:

“25. Chapter VI-A stands independently. Whereas the heading ofthe Chapter talks of pre-litigation, conciliation and settlement,Section 22-C(8) of the Act speaks of determination. It createsDanother adjudicatory authority, the decision of which by a legalfiction would be a decision of a civil court. It has the right todecide a case. The term “decide” means to determine; to form adefinite opinion; to render judgment. (See Advanced Law Lexicon,3rd Edn., 2005 at p. 1253.) Any award made by the PermanentELok Adalat is executable as a decree. No appeal thereagainstshall lie. The decision of the Permanent Lok Adalat is final andbinding on the parties. Whereas on the one hand, keeping in viewthe parliamentary intent, settlement of all disputes throughnegotiation, conciliation, mediation, Lok Adalat and judicialsettlement are required to be encouraged, it is equally well settledFthat where the jurisdiction of a court is sought to be taken away,the statutory provisions deserve strict construction. A balance isthus required to be struck. A court of law can be created under astatute. It must have the requisite infrastructure therefor.Independence and impartiality of Tribunal being a part of humanGright is required to be taken into consideration for construction ofsuch a provision. When a court is created, the incumbents mustbe eligible to determine the lis.

[…]

…the Permanent Lok Adalat does not simply adopt the role of anarbitrator whose award could be the subject-matter of challengebut also the role of an adjudicator. Parliament has given theauthority to the Permanent Lok Adalat to decide the matter. Ithas an adjudicating role to play.”

Likewise, in Inter Globe Aviation v. N Satchidanand[17], thisCourt observed that the Permanent Lok Adalat’s role mutates from thatof a conciliatory body to an adjudicatory body, if the parties fail to reachan agreement, where it can decide the dispute between the parties.

30. In Bar Council of India (supra), this Court held that thepower of the Permanent Lok Adalat to adjudicate disputes at a pre-litigation stage in terms of Section 22-C(8) is constitutional. This Courtobserved thus:

“26. It is necessary to bear in mind that the disputes relating topublic utility services have been entrusted to Permanent Lok Adalatsonly if the process of conciliation and settlement fails. Theemphasis is on settlement in respect of disputes concerning publicutility services through the medium of Permanent Lok Adalat. Itis for this reason that sub-section (1) of Section 22-C states in nounambiguous terms that any party to a dispute may before thedispute is brought before any court make an application to thePermanent Lok Adalat for settlement of dispute. Thus, settlementof dispute between the parties in matters of public utility servicesis the main theme. However, where despite the endeavoursand efforts of the Permanent Lok Adalat the settlementbetween the parties is not through and the parties arerequired to have their dispute determined and adjudicated,to avoid delay in adjudication of disputes relating to publicutility services, Parliament has intervened and conferredpower of adjudication upon the Permanent Lok Adalat.

27. Can the power conferred on Permanent Lok Adalats toadjudicate the disputes between the parties concerningpublic utility service up to a specific pecuniary limit, if theydo not relate to any offence, as provided under Section 22-C(8), be said to be unconstitutional and irrational? We thinknot. It is settled law that an authority empowered to A

DEF

188SUPREME COURT REPORTS

Aadjudicate the disputes between the parties and act as atribunal may not necessarily have all the trappings of thecourt. What is essential is that it must be a creature ofstatute and should adjudicate the dispute between theparties before it after giving reasonable opportunity to themconsistent with the principles of fair play and natural justice.BIt is not a constitutional right of any person to have thedispute adjudicated by means of a court only. Chapter VI-Ahas been enacted to provide for an institutional mechanism, throughthe establishment of Permanent Lok Adalats for settlement ofdisputes concerning public utility service before the matter isCbrought to the court and in the event of failure to reach anysettlement, empowering the Permanent Lok Adalat to adjudicatesuch dispute if it does not relate to any offence.”

31. We reiterate that the powers of the Lok Adalat constitutedDunder Section 19 of the LSA Act are to be distinguished from the natureof powers granted to a Permanent Lok Adalat established under Section22-B of the LSA Act. It is in the context of interpreting the jurisdiction ofLok Adalats constituted under Section 19 of the LSA Act, that this Courthas held that the Lok Adalat cannot perform any adjudicatory functionEin terms of Section 20 of the LSA Act[18].

D Conclusion

32. The Single Judge of the Karnataka High Court in the orderdated 3 July 2019 observed that the Permanent Lok Adalat has noadjudicatory function. This finding of the Single Judge was upheld by theFDivision Bench of the Karnataka High Court in its impugned judgementdated 6 March 2021 where it observed that the Permanent Lok Adalatcannot act as a regular civil court in adjudicating the dispute betweenthe parties. Based on our analysis of the LSA Act and precedents of thisCourt, such an understanding is clearly incorrect. Therefore, we holdGthat these observations of the Single Judge and Division Bench of theKarnataka High Court were incorrect.

18 Life Insurance Corporation of India v. Suresh Kumar (2011) 7 SCC 491; Stateof Punjab v. Jalour Singh & Ors. (2008) 2 SCC 660; Estate Officer v. Colonel HVMankotia (2021) SCC OnLine SC 898; and New Okhla Industrial DevelopmentHAuthority v. Yunus and Ors. (2022) SCC OnLine SC 138

33. At the same time, the Division Bench in its impugned judgementalso noted that the Permanent Lok Adalat failed to follow the mandatoryconciliation proceedings in the present case. This observation is correctsince the award of the Permanent Lok Adalat does not indicate anyattempt made by it to propose terms of settlement to the parties andtheir rejection. It states that once the respondent and his guarantor didnot appear, it adjudicated the dispute on merits in favour of the respondent.For the reasons mentioned earlier in this judgment, the Permanent LokAdalat could not have done so. Therefore, on this point only, we upholdthe final judgment of the Division Bench setting aside the award dated19 November 2014 of the Permanent Lok Adalat.

34. Consequently, we hold that the observations of the DivisionBench in the impugned judgment in respect of the adjudicatory powersof the Permanent Lok Adalats were incorrect, while upholding its ultimateconclusion since the Permanent Lok Adalat failed to follow the mandatoryconciliation proceedings in the present case. We make it clear that wehave not made any observations on the merits of the dispute betweenthe 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 tocosts.

36. Pending application(s), if any, stand disposed of.

Nidhi Jain(Assisted by : Shashwat Jain, LCRA)

Appeal disposed of.