Permanent Lok Adalats have both conciliatory and adjudicatory powers: Supreme Court

In a significant ruling, the Supreme Court on Thursday held that Permanent Lok Adalats have both conciliatory and adjudicatory powers [Canara Bank v. G S Jayarama]. .A Bench of Justices DY Chandrachud and PS Narasimha held that while dealing with a case, Permanent Lok Adalats have to first try to settle the dispute, and only if there isn't any agreement between the parties can it proceed to decide the matter on merits."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 judgment stated..The Court was hearing a plea challenging a judgment of the Karnataka High Court dated March 6, 2021, by which it was held that the Permanent Lok Adalat (PLA) doesn't have adjudicatory powers.While dealing with the case, referred to the provisions of the Legal Services Act, 1987 under which the Lok Adalats and also the PLAs are constituted and their functions and roles are defined..As per the facts of the case, the appellant bank had filed an application before the Lok Adalat seeking to settle the dispute against the respondents, who defaulted in repaying loan amount of ₹2.40 lakh. However, the respondents didn't participate in the proceedings before the Lok Adalat, and thus an ex-parte order was passed asking them to pay the amount along with an interest of 9 per cent.The award was challenged before the Karnataka High Court, which allowed the respondent's writ petition. The bank challenged the said decision before a Division Bench, which dismissed the appeal with a similar finding that the PLA doesn't have adjudicatory powers.The Division Bench had also noted that the PLA in this case didn't follow conciliation proceedings and directly jumped to adjudicating the dispute..While deciding the appeal against this verdict, the Supreme Court said that the High Court's findings were incorrect. Distinguishing between the powers of a Lok Adalat and a Permanent Lok Adalat, the Court said,"The Act indicates that there are similarities between Lok Adalats and Permanent Lok Adalats: (i) they can both attempt conciliation proceedings with the parties before them, and can pass awards recording the terms of settlement agreed upon by the parties (ii) in doing so, they are both bound by principles of justice, equity, fair play and other legal principles and (iii) their awards, deemed to be decrees of courts, will be final and cannot be challenged in an appeal. Yet, despite these similarities, there are crucial differences under the statute," the judges noted. It was further held that despite the similarities in power, the PLA has wider powers than the Lok Adalat. If there isn't any settlement arrived at between the parties, the PLA should still make attempts to settle the dispute and even help in drafting the terms of settlement, the Court noted. If the party present before the PLA does not agree or if the absent party does not respond in a sufficient period of time, only then can the PLA adjudicate the dispute on its merits under Section 22-C(8) of the Legal Services Act, it held."The PLA would first conduct conciliation proceedings and attempt to reach an amicable settlement of the dispute. However, if the parties fail to reach an agreement, it shall decide the dispute, as long as the dispute does not relate to an offence. Section 22-D further indicates that the PLA is empowered to decide the dispute between the parties on merits."The judgment went on to state that the conciliation proceedings under the Act are mandatory and that the PLA cannot bypass this step..Accordingly, the Bench held that the High Court was incorrect in holding that the PLA doesn't have adjudicatory powers, and was correct only to the extent wherein it noted that the PLA in the present case didn't follow the conciliation proceedings and directly jumped to deciding the matter on merits..Advocate Rajesh Kumar Gautam appeared for Canara Bank. .[Read Judgment]