May 20, 2022 In

SUPREME COURT OBSERVES THAT EVEN IN THE ABSENCE OF THE OPPOSITE PARTY, THE PERMANENT LOK ADALAT IS BOUND TO FOLLOW STEP BY STEP PROCEDURE

A Two Judge Bench of the Hon’ble Supreme Court of India comprising of Justice Dr. Dhananjaya Y Chandrachud and Justice Pamidighantam Sri Narasimha in the matter of Canara Bank vs. G.S Jayarama Civil Appeal No. 3872 of 2022 passed a Judgment dated 19th May, 2022 and held that even if the opposite party does not appear for the conciliation proceedings, the Permanent Lok Adalat is bound to follow step by step procedure laid down in Section 22-C (Cognizance of cases by Permanent Lok Adalat) of the Legal Services Authorities Act, 1987 (LSA Act)

FACTS

The Present dispute arose from an application (PLD No. 69 of 2013) filed by the Syndicate Bank (Originally the case was Syndicate Bank vs. G S Jayarama but on 1st April,2020, Syndicate bank merged with Canara Bank. The case is now addressed as Canara bank vs. G S Jayarama) on 31st December, 2012 before the Permanent Lok Adalat at Mangalore under Section 22C (1) of the Legal Services Authorities Act, 1987 (LSA Act). The application was filed against the Respondent and his guarantor in relation to credit facilities obtained by the Respondent from the Appellant in the amount of Rs 2,40,583. The Appellant claimed that the amount of Rs. 2,40,583 plus interest became due on October 1, 2012, but the Respondent failed to repay it despite multiple notices. As a result, the Appellant prayed that the Respondent and his guarantor ought to repay Rs. 2,40,583 plus 15.75 percent interest and costs.

The Permanent Lok Adalat issued a notice to the Respondent on 10th January 2013, which the Respondent allegedly did not claim. As a result, on 12th March 2013, the Permanent Lok Adalat ruled that the Respondent’s service had been complete and adjourned the case to 6th June 2013 for reporting of settlement. Thereafter allegedly on 22nd August 2013, a Counsel filed a memo of appearance on behalf of the Respondent, and the matter was adjourned to allow the Respondent to file a vakalatnama and objections.

The Appellant filed its final Affidavit on 17th November, 2014 and on 19th November, 2014, the Permanent Lok Adalat noted that the Respondent appeared through an advocate but did not participate in the proceedings. Hence, the Permanent Lok Adalat allowed the application filed by the Appellant and directed the Respondent and his guarantor to pay 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 Petition (Ex No. 9 of 2019) for execution of the award of the Permanent Lok Adalat before the Civil Judge and Judicial Magistrate First Class.

On 1 July 2019, the Respondent filed a writ petition before the Karnataka High Court under Article 226 of the Constitution, challenging the award of the Permanent Lok Adalat dated 19th November 2014. The Single Judge allowed the writ petition and set aside award dated 19th November,2014 in a Judgement dated 3 July 2019, without issuing notice to the Appellant.

The Appellant filed a Writ Petition before the Karnataka High Court and by the Judgment dated 6th March, 2021, the Division Bench of the Karnataka High Court dismissed the Appeal on two grounds – first, that the procedure for conciliation under Section 22-C of the LSA Act was not followed, and hence, the award was null; and second, that the Permanent Lok Adalat could not have acted as a regular civil court in adjudicating the proceedings.

That the learned counsel for the Appellant submitted that sufficient opportunity was given to the Respondent to participate in the conciliation proceedings. The learned counsel also submitted that Under Section 22-E (Award of Permanent Lok Adalat to be final) of the LSA Act, an award passed by the Permanent Lok Adalat is deemed to be a decree of a civil court and such award is final and cannot be called into question in any original suit, application or execution proceedings. The object and purpose behind introducing Chapter VI-A to the LSA Act would be frustrated if the Permanent Lok Adalat is denied the power of adjudicating a dispute if a party deliberately avoids appearing and participating in the conciliation proceedings, even after receipt of notice from the Permanent Lok Adalat and after having appeared through an advocate on a previous occasion.

JUDGMENT

The two issues that arise in the present Appeal are :

  1. Whether under Section 22-C of the LSA Act conciliation proceedings are mandatory; and
  2. Whether the Permanent Lok Adalats have adjudicatory functions under the LSA Act.

The Supreme Court while addressing the first and second issue, observed that:

27. Section 22-C(8) is amply clear that it only comes into effect once an agreement under Section 22-C(7) has failed. The corollary of this is that the proposed terms of settlement under Section 22-C(7), and the conciliation proceedings preceding it, are mandatory. If Permanent Lok 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 and issuing awards which will be final, binding and will be deemed to be decrees of civil courts. This was simply not the intention of the Parliament when it introduced the LSA Amendment Act. Its main goal was still the conciliation and settlement of disputes in relation to public utilities, with a decision on merits always being the last resort. Therefore, we hold that conciliation proceedings under Section 22-C of the LSA Act are mandatory in nature.

28. The second issue which is in contention before this Court is whether the Permanent Lok Adalat has any adjudicatory function. As highlighted in the Objects and Reasons accompanying the LSA Amendment Act, its introduction led to the creation of two different types of Lok Adalats. The first is a Lok Adalat constituted under Section 19 of the LSA Act, having no adjudicatory power, which can only conduct conciliatory proceedings. The second is a Permanent Lok Adalat, established under Section 22-B(1) of the LSA Act in respect of public utility services, which can carry out both conciliatory and adjudicatory functions, subject to the procedure to be followed under Section 22-C of the LSA Act.

 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.

Hence, based on the aforesaid observations, the Supreme Court upheld the final Judgment of the Division Bench setting aside the Award dated 19th November, 2014 and held that even if the opposite party does not appear for the conciliation proceedings, the Permanent Lok Adalat is bound to follow step by step procedure laid down in Section 22-C.

 

Priyanshi Pandey

Associate

The Indian Lawyer & Allied Services

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