By: Sakunjay Vyas
Published on: May, 22, 2022 at 11:20 IST
The Two Judge Bench of Justice DY Chandrachud and Justice PS Narasimha of the Supreme Court upheld the final conclusion of the Division Bench of the High Court of Karnataka, in which The Single Judge by a judgment dated 3 July 2019 allowed the writ petition instituted by the respondent, and set aside an award of the Permanent Lok Adalat dated 19 November 2014. The Division Bench dismissed the writ appeal by the appellant and upheld the judgment of the Single Judge.
Contentions from the side of the Appellant:
1. That if the opposite party does not appear before the Permanent Lok Adalat, it can dispense with the conciliation proceedings and straightaway adjudicate the dispute under Section 22-C (8) of the Legal Services Authorities Act, 1987 (“LSA Act”). On the other hand, Respondent vehemently opposed Appellant’s contentions.
The Apex Court stated that the issue in hand is the issues raised before the Apex Court in the appeal are:
(i) Whether under Section 22-C of the LSA Act conciliation proceedings are mandatory; and
(ii) Whether the Permanent Lok Adalats have adjudicatory functions under the LSA Act.?
The Apex Court, while stating two different types of Lok Adalats, stated that:
(1) Lok Adalat constituted under Section 19 of the LSA Act, having no adjudicatory power, which can only conduct conciliatory proceedings.
(2) 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.
The Apex Court stated the following on the difference between these two types of Lok Adalats:
That according to Section 20 of the LSA Act, the Lok Adalat ought to aim to reach an agreement or compromise between the parties. Whenever a compromise or settlement cannot be reached, the case is returned to the court that referred it to Lok Adalat. The court would then proceed to adjudicate the dispute.
That whereas, according to Section 22-C of the LSA Act, Parties may apply to a Permanent Lok Adalat for the settlement of their disputes prior to involving a court, that is, at the pre-litigation stage.
“Section 20 of the LSA Act provides that the Lok Adalat shall aim to arrive at a compromise or settlement between 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 Lok Adalat had received the reference. The court would then proceed to adjudicate the dispute. On the other hand, Section 22-C of the LSA Act provides that a party to a dispute, prior to bringing a dispute before the court, i.e., at the pre-litigation stage, can make an application to a Permanent Lok Adalat for the settlement of a dispute.”, the Court said.
The Apex Court while referring to the Section 22C of the LSA Act, stated a step-by-step scheme on how a matter is to proceed before the Permanent Lok Adalat, which is:
1. The first step is the filing of the application following sub-Sections (1) and (2).
2. The second step is the parties filing requisite submissions and documents before the Permanent Lok Adalat, following sub-Section (3).
3. On the completion of the third step to its satisfaction, the Permanent Lok Adalat can move to the fourth step of attempting conciliation between the parties, following sub-Sections (4), (5) and (6).
4. Subsequently, in the fifth step following sub-Section (7), the Permanent Lok Adalat has to draw up terms of settlement based on the conciliation proceedings, and propose them to the parties.
If the parties agree, the Permanent Lok Adalat has to pass an award based on the agreed-upon terms of a settlement.
That only if the parties fail to reach an agreement on the fifth step, can the Permanent Lok Adalat proceed to the final step and decide the dispute on its merits.
The Apex Court stated that the Permanent Lok Adalat has to follow the step-by-step procedure stipulated by Section 22-C of the LSA Act, even if the opposite party does not appear.
That following the provisions of Section 22-C (3), a party before the court would have to submit materials to the court and communicate them to the other party for their response.
That 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.
That if it is satisfied that no response is forthcoming from the
absent opposite party, the Permanent Lok Adalat shall still attempt to settle the dispute through a settlement under Section 22-C (4).
That it is important to remember that Section 22-C (5) imposes a duty upon the Permanent Lok Adalat to be independent and impartial in attempting to amicably settle the dispute, while Section 22-C (6) imposes a duty upon the party present before the Permanent Lok Adalat to cooperate in good faith and assist the Permanent Lok Adalat.
That if the party present before the Permanent Lok Adalat does not agree or if the absent party does not respond in a sufficient period of time, only then can the Permanent Lok Adalat adjudicate the dispute on its merits under Section 22-C (8) of the LSA Act.
That keeping in mind the principles enshrined in Section 22-D of the LSA Act, the Permanent Lok Adalat shall once again notify the absent party of its decision to adjudicate the dispute on its merits, in case it wishes to join the proceedings at that stage.
“Even if the opposite party does not appear, the Permanent Lok Adalat is still bound to 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 file their submissions and documents, and make the best efforts to communicate them to the opposite party for their response.”, The Court Said.
The Apex Court further stated that if Permanent Lok Adalats avoid this step for no other reason than an absent party is absent, that would be tantamount to them deciding disputes on their merit ex parte and issuing awards that would be legal binding, and should be regarded as civil court judgments. Parliament did not intend this when it introduced the LSA Amendment Act.
That Parliament’s main objective was still to settle disputes involving public utilities by conciliation and arbitration, with a merits-based decision only as a last resort. Accordingly, we hold conciliation under Section 22-C of the LSA Act to be 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.”
As a result, the Apex Court upheld the final conclusion of the Division Bench of the High Court of Karnataka by stating that 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.