Madras High Court
M.I. Ibrahim Kutty vs Indian Overseas Bank, Maruthanvode ... on 3 May, 2005
Equivalent citations: AIR2005MAD335, IV(2005)BC82, 2005(3)CTC274
Author: R. Banumathi
Bench: R. Banumathi
ORDER R. Banumathi, J.
1. This revision is preferred against the order of the Subordinate Judge, Kuzhithurai, dated 18.11.2004, made in E.P. No. 30/2004 in L.A.O.S. No. 10/2001, ordering that E.P. No. 30/2004 is to be proceeded further. The Defendant/Judgment Debtor is the Revision Petitioner.
2. The Indian Overseas Bank, Maruthanvode Branch, Edaicode Post, Kanyakumari District, is the Plaintiff. The Defendant borrowed a sum of Rs. 3,00,000 from the Plaintiff Bank on Demand Promissory Notes and Deed of Hypothecation. In security for the loan, the Defendant had also executed a Simple Mortgage Deed in respect of the properties, by deposit of Title Deeds, on 7.5.1991. Claiming Rs. 4,63,007, with subsequent interest and cost the Plaintiff Bank has filed the suit O.S. No. 10/2001. The suit was referred to Lok Adalat, Kuzhithurai. In the Lok Adalat both the Plaintiff Bank and the Defendant have agreed for a compromise and the Award was passed on 9.10.2003, in the terms of the compromise. The terms of compromise reads:
"a) Suit shall be decreed for a sum of Rs. 5,00,000 (Rupees Five Lakhs only) with interest at the rate of 12% (for Rs. 3,00,000) from the date of award till realisation. (The amount may include the legal charges as well, wherever agreed).
b) The Defendant is ready and willing to pay and the Plaintiff agrees to receive a sum of Rs. 5,00,000 with interest at the rate of 12% p.a. (for Rs. 3,00,000) p.a. till realization towards full and final satisfaction of monies owned to the Plaintiff.
c) That the aforesaid amount along with interest thereon and other charges shall be paid by instalments as per details given here under.
Particulars of instalments Rs. 2,00,000 before 25.2.2003 and Balance Rs. 3,00,0006 E.M.I. @ 12%
d) Parties further agree that in the event of Defendant fails to adhere to the terms of the award therein and/or fails to pay any one instalment the entire amount under the award shall become payable forthwith."
Sd Sd Sd
Plaintiff SubJudge/Chairman Kuzhithurai Defendant
Legal Services Authority
3. The Defendant had not paid the instalment of Rs. 2,00,000 before 25.2.2003, as agreed. Since the Defendant has not acted as per the terms of the award, the Plaintiff Bank has filed Execution Petition. In the meanwhile, O.S.No. 10/2001 came up for hearing before the Subordinate Court, Kuzhithurai. On that date, the Plaintiff/Bank was not present; Plaintiff's Advocate has not appeared in Court due to Advocate's Boycott. Hence the suit O.S. No. 10/2001 was dismissed for default on 23.4.2003. The Judgment dismissing the suit for default is as under:
"The suit is for realisation of Rs. 4,63,007 with interest.
Plaintiff called absent. Plaintiff's advocate on boycott not appeared in Court is illegal and prejudice misconduct. Defendant present. Defendant's advocate present. Suit dismissed for default on cost of Rs. 2,000 to be paid by Plaintiff's advocate alone in Court before filing any restoration Petition in this case. Plaintiff also claims any damages in Consumer Forum or Consumer Court from their advocate being on boycott not appeared vide, Ex-Capt. Harish Uppal v. Union of India and Anr., AIR 2003 SC 739."
Sd Sub Judge
4. E.P. No. 63/2003.-- This Petition was filed by the Plaintiff/Bank to execute the Lok Adalat award. The E.P. was dismissed on 22.7.2003.
5. W.P. No. 12837/2003.-- Defendant has filed this Writ Petition challenging the Securitisation Act. This Court on 29.4.2003, dismissed the Writ Petition finding that proceedings can go on under the Act and that any plea regarding the interest payable may be raised with the, Defendant.
6. E.P. No. 30/2004.-- This Execution Petition was filed, to executed the Lok Adalat award dated 9.1.2003. The Execution Petition was strongly resisted by the Revision Petitioner/Defendant contending that when the suit O.S. No. 10/2001 was dismissed for default, interim settlement arrived at during the pendency of the case had also not taken into effect. The Plaintiff Bank initiated steps to take possession of the mortgaged property under Ordinance No. 3/2002, which was challenged by the Revision Petitioner/Defendant in W.P. No. 12837/2003, Since the suit itself was finally dismissed on 23.4.2003, the Award cannot be executed.
7. Upon considering the rival contentions of the parties, the learned Subordinate Judge held that as per Section 21 of the Legal Services Authority Act, 1987 (herein after referred to as 'the Act'), every Award of the Lok Adalat shall be deemed to be a Decree of a Civil Court and executable and that the subsequent dismissal of the suit would not prevail against the award of the Lok Adalat. Finding that the subsequent Decree and Judgment (Exs.R-1 and R-2) have to be ignored, the learned Subordinate Judge held that the Settlement/Award is enforceable and ordered that Execution Petition is to be proceeded with accordingly. Aggrieved over the order of the Executing Court, the Defendant has preferred this revision.
8. Challenging the award the learned counsel for the Revision Petitioner has submitted that the award passed by the Lok Adalat is only an agreement, which cannot have the force of the Decree. It is contended that. Format No. 1/Award of the Taluk Legal Services Committee is only an agreement, pursuant to which subsequently an award must have been passed. Since Format No. 1, is only an agreement, the same is un-executable. It is further submitted that once the case records are sent back to the Court by the Lok Adalat, it is to be inferred that the compromise was not arrived at between the parties and that is why Under Section 20(5) of the Act, the case has been retransmitted to the Court. Assailing Format No. 1, it is contended that, there is no such statutory Form and that the Court has again got the jurisdiction since the case was not settled in the Lok Adalat. In support of his contention, the learned counsel has relied on the provisions of the Act.
9. Countering the arguments, the learned counsel for the Respondent/Plaintiff has submitted that Format No. 1 is comprehensive, which foresees the eventuality of not paying the amount also. Laying emphasis upon Section 21 of the Act, the learned counsel has submitted that the award shall be decree, which cannot be challenged by the Defendant. Submitting that since amount was not paid as per the terms of the award, the amount became due and hence the Execution Petition was filed which the Court has rightly ordered to be proceeded with. The learned counsel for the Plaintiff Bank has further submitted that, the dismissal of the suit O.S. No. 10/2001 is only inadvertent and would not in any way preclude the Plaintiff Bank from executing the award of the Lok Adalat, which is a Decree as per Section 21 of the Act. The conduct of the Revision Petitioner/Defendant is very much assailed contending that the Defendant is only trying to evade payment and defence now taken is clearly a after thought, and the same cannot be sustained.
10. Upon consideration of submissions by both parties, order of the Executing Court and other materials on record and the relevant provisions of Legal Services Authority Act, 1987, the following points arise for consideration.--
"1. Is not the Subordinate Judge/Executing Court right in holding that pursuant to Section 21 of the Act, the award has become final and executable, which cannot be challenged ?; and
2. Whether the order of the Executing Court that the Execution Petition 30/2004 could be proceeded with, suffers from any error or infirmity warranting interference ?".
11. Before adverting to the contentious points, at the, outset, one aspect needs to be pointed out. The learned Subordinate Judge, Kuzhithurai is the Chairman of Kuzhithurai Legal Services Committee. As Chairman of Taluk Legal Services Committee, the learned Subordinate Judge has signed in the Award in O.S. No. 10/2001. When the suit came up for hearing, (the same Officer has dismissed the suit for non-appearance of the Plaintiff Bank. The Plaintiff's Advocate has not appeared in the Court due to Advocate's boycott. Such dismissal of the suit is not in accordance with the provisions of the Act. The object of the Lok Adalat is to arrive at a settlement. For arriving at the settlement, as per Section 22 of the Act, the procedure vested in a Civil Court under the Code of Civil Procedure while trying a suit in respect of the matters provided there under, have been made fully applicable, apart from enabling the Lok Adalat to frame its own procedure.
12. Under Section 21 of the Act, an award of Lok Adalat shall be deemed to be a Decree of a Civil Court and the same shall be final and binding on all the parties and no appeal shall be against the said award. Therefore, the award is enforceable as a Decree and it is final. In all fours, the endeavour is only to see that the disputes are narrowed down and make the final settlement so that the parties are not again driven to further litigation or any dispute. Though the award of a Lok Adalat is not a result of a contest on merits, just as a regular suit by a Court on a regular trial, however, it is as equal and on par with a Decree on compromise and will have the same binding effect and conclusive. Just as the Decree passed on compromise cannot be challenged in a regular appeal, the award of Lok Adalat being akin to the same, cannot be challenged by any regular remedies available under law including invoking Article 226 of the Constitution of India challenging the correctness of the award.
13. It is relevant to note that the Defendant has not challenged the award either before the trial Court or in the Appellate forum. The Defendant has only waited till the hearing of the suit in the Court. When the suit came up for hearing before the Court, the Defendant has appeared along with his counsel. The Plaintiff Bank was not present and its Advocate has also not attended the Court due to boycott. On 23.4.2003, when the Defendant was present in the Court; he has not expressed his unwillingness for the award, though the same officer was the Presiding Officer in the Court, nor the Defendant has brought to the notice of the Court about the settlement in the Lok Adalat. Cunningly, the Defendant has allowed the suit to be dismissed for default. Later, trying to take advantage of the same, Decree on dismissal for default was produced in the writ proceedings in W.P. No. 12837 of 2003. The, conduct of the Defendant in not bringing it to the notice of the Court about the Settlement/Award is not appreciable. Equally inappreciable is the conduct of the Plaintiff Bank in not appearing before the Court and informing the Court about the Settlement. The Plaintiff Bank having filed the suit for a huge claim of Rs. 4,63,007 ought to have been more vigilant in getting along with the suit.
14. Though there had been lack of vigilance on the part of the Plaintiff Bank, that cannot be an impediment to the finality of the award passed by the Lok Adalat. Idea in settling the dispute in Lok Adalat is to see that the litigation comes to an end by way of mutual conciliation and negotiations. It is in that context, Section 21, is incorporated, which states that the award passed by the Lok Adalat shall be deemed to be a Decree of the Civil Court and that the same cannot be challenged by way of filing appeal. Thus the award shall be final and binding upon all parties to the case. If the submission of the learned counsel for the Revision Petitioner is accepted, then no finality shall be attached to the award made by the Lok Adalats. The tenor of Format No. 1 clearly indicates that the parties have arrived at a consensus and that the parties have agreed for the settlement and out of Rs. 5,00,000; Rs. 2,00,000 is payable before 25.2.2003 and balance of Rs. 3,00,000 in six equal monthly instalments with interest at the rate of 12% p.a. It is to be noted that the Plaintiff, the Defendant and the Chairman, Kuzhithurai Legal Services Committee/Sub Judge Kuzhithurai, have signed in the award.
15. In the light of the rival submissions canvassed and argued by both the parties, it is necessary to, advert to the relevant provisions of the Act for arriving at proper decision.
16. Section 19 of the Act deals with organisations of Lok Adalats. The jurisdiction of Lok Adalat is explicitly stated in Sub-section 5 of Section 19:
"A Lok Adalat shall have jurisdiction to determine and to arrive at a compromise or settlement 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 organized.
Provided that Lok Adalat shall have no jurisdiction in respect of any case or matter relating to an offence not compoundable under any law."
Under this provision, the Lok Adalat is vested with jurisdiction in respect of any case pending before a Court or any matter which is not before the Court.
17. Now let us advert and elaborate upon the legal aspect of taking of cognizance of a case by Lok Adalat.
18. Section 20 of the Act deals with cognizance of a case by Lok Adalat. We may usefully refer to Section 20 which reads:
"20. Cognizance of cases by Lok Adalats.--
(1) Wherein any case referred to in Clause (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 cases to the Lok Adalat for settlement and if such Court is prima facie satisfied that there are chances of such settlement; or
(ii) the Court is satisfied that the matter is an appropriate one to be taken cognizance of by 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) or Clause (i) or Clause (ii) by such Court except after giving a reasonable opportunity of being heard to the parties:
(2) Notwithstanding anything contained in any other law for the time being in force, the Authority or Committee organising the Lok Adalat under Sub-section (1) of Section 19 may, on receipt of an application from any one of the parties to any matter referred to in Clause (ii) of Sub-section (5) of Section 19 that such matter needs to be determined by a 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 reasonable opportunity of being heard to the other party.
(3) Where any case is referred to a Lok Adalat under Sub-section (1) or where a reference has been made to it under Sub-section (2), the Lok Adalat shall proceed to dispose of the case 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, act with utmost expedition to arrive at a compromise or settlement between the parties and shall 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 or settlement could be arrived at between the Parties, the record of the case shall be returned 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 to made by the Lok Adalat on the ground that no compromise or settlement 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, such Court shall proceed to deal with such case from the stage which was reached before such reference under Sub-section (1)."
19. Section 20, makes it crystal clear that a Lok Adalat can and has to take cognizance of a case only when it is received by it from the Court on a reference made in the manner provided under Sub-section (1) of Section 20; or when the case has been referred to it by the concerned Authority or Committee organizing the Lok Adalat, in the manner prescribed by Sub-section (2) of Section 20 and in no other, manner. It has no power to take cognizance of a case and decide it, at the instance of any party thereto, independently of the references specified in Sub-sections (1) and (2) of Section 20. The approach and practice to be followed by it in dealing with/or disposal of such a case or matter is prescribed by Sub-section (4).
20. In cases referred by the Court under Section 20 Sub-section 1, when the case is not settled and Lok Adalat is not in a position to make any award, the case referred to by the Court have to be returned by it to the concerned Court for disposal in accordance with law. In matter referred to Lok Adalat under Sub-section 2 of Section 20, [i.e., the case not before the Court referred to as per Clause (ii) to Section 19(5)], if Lok Adalat is not in a position to bring out any compromise or settlement, the Lok Adalat shall advise the parties to seek remedy in an appropriate Court. Section 20(6) deals with the cases not before the Court referred to by the Court [as per Section 19(5)(ii)].
21. We are concerned with the case referred to Lok Adalat by the Court concerned Under Section 20(1). Lok Adalat could take cognizance of the case only where there is reference to the Court. In this case, the Subordinate Judge, Kuzhithurai, must have referred the case to the Lok Adalat only on being agreed by the parties. On such reference, award was passed. As noted earlier, Section 21 of the Act declares, every award of the Lok Adalat is deemed to be a Decree of a civil Court. The executability of the Decree passed by the Lok Adalat cannot successfully be challenged by the Defendant in the Execution Proceedings.
22. Provisio to Section 20 Sub-section (2) states that no case shall be referred to Lok Adalat by the Court except after giving a reasonable opportunity of being heard to the parties. The aim of Rules of natural justice being incorporated in proviso to Section 20(2) is to prevent miscarriage of justice so that the parties may no raise objection for the matter being referred to the Lok Adalat. The object being to create consent of the parties in Bank cases, particularly the Defendant, for such reference.
23. It is not the case of the Defendant that no opportunity was afforded to him before referring the case to Lok Adalat. Nor is his case that the Subordinate Judge, has referred the matter without complying with the proviso to Section 20(2) of the Act. By the very fact, that the case has been, referred to Lok Adalat and settled in the Lok Adalat, the parties having signed in the award, it is clear that the Defendant was willing to compromise and that the matter had been compromised as per the award.
24. The Defendant has signed in the award agreeing to pay the amount of Rs. 2,00,000 before 25.2.2003; balance of Rs. 3,00,000 is payable with interest at the rate of 12% p.a. with equal monthly instalments. It is not the case of the Defendant that he was unwilling to arrive at a compromise or settlement. Having agreed for reference, and also signed in the award, the Defendant is estopped from challenging the finality of the award. As noted earlier, when the suit came up for hearing in the Court, the Defendant ought to have brought it to the notice of the Court about the settlement arrived at in the Lok Adalat. Fair play requires that at least the counsel for the Defendant to have informed the Court about the settlement in the Lok Adalat. Having signed in the award and allowed the Lok Adalat to pass the award, it is not open to the Defendant turn around and challenge the award.
25. Submitting that the award passed by the Lok Adalat is only an agreement for compromise and that the same cannot be termed a award, within the meaning of Section 21 of the Act to be deemed to be a Decree to have a finality, the learned counsel for the Revision Petitioner has drawn the attention of the Court to the definition of the term "award" in the Law Lexicon. The word "Award" is defined:
"The act by which parties refer any matter between them to the private decision of another party, (whether one person or more) is called a Submission; the party to whom the reference is made, an Arbitrator or Arbitrators; when the reference is made to more than one, provision made, that in case they shall disagree, another shall decide, that other is called an Umpire. The Judgment given or determination made by an arbitrator or arbitrators is termed an Award; that by an umpire an Umpirage, or less correctly an award."
26. It is further contended that Format No. 1 is only "For passing award in case of pending suits" and is only an agreement to arrive at the compromise and Format No. 1 by itself is not an award or a final order. By a careful reading of the terms in the award, it is clear that it contains the terms of the award. It also foresees the eventuality of default i.e., in the event when the Defendant fails to adhere to the terms of the award ... the entire amount would become payable forthwith. Though it is not a result of a contest, the award passed by the Lok Adalat is equal on par with the Decree. Notwithstanding the expressions employed in the award, as per Section 21 of the Act, the award shall be deemed to be a Decree of the Civil Court. If it is allowed to be challenged, it would defeat the very object of the Act.
27. The award is therefore, assailed contending that Format No. 1 is not a statutorily prescribed Format. This contention does not merit acceptance. Section 7 of the Act deals with the functions of the State Authority. Sub-section 1 of Section 7, says that the State Authority shall give effect to the policy and the directions of the Central Authority. Apart from the functions specified in Section 7(2) of the Act, the State Authority coordinates the acts of District Legal Services Authority.
28. The District Legal Services Authority headed by the Principal District Judge deals with the functions stated in Section 10. The District Authority shall perform such functions of the State Authority in the District. As per Sub-section (2) of Section 10 of the Act, the District Authority shall coordinate the activities of the Taluk Legal Services Committee and other Legal Services in the District. For passing award in the Lok Adalat, format is adopted either as prescribed by the Stats Legal Services Authority or by each District Legal Services Authority. No doubt, there is no statutorily prescribed format either under State Legal Services Rules or the District Legal Services Rules. It has to be noted that the District Legal. Services Authority coordinates the acts of Taluk Legal Services Committee and they adopt the formats for passing awards either in accordance with the directions and circulars issued by the State Legal Services Authority or each District Legal Services Authority adopt theirs own format for passing award, depending upon the nature of cases, either Bank cases, Motor Accident Claims, Matrimonial dispute and such other matters. In this regard, it may be pointed out that it is desirable that the State Legal Services Authority sees that there is a standard format for all types of cases likely to be settled in the Lok Adalat.
29. As per Section 20(5), when no compromise or settlement could be arrived between the parties, the record of the case shall be returned to the concerned Court for disposal in accordance with law. Where the record of the case is returned Under Section 20(5) of the Act, the Court shall proceed to deal with such cases from the stage it was reached before such reference was made in Section 20(10. Pointing out that in this case, records of the case were sent back to the Court, the learned counsel for the Revision Petitioner urges the Court to infer that there was no compromise/settlement lest the records would not have been sent back to the Court. No doubt Section 20(5) states that when the Lok Adalat is not in a position to arrive at a compromise or settlement, the records of the case are to be returned to the concerned Court for disposal in accordance with law. But the converse is not true. It is a matter of experience that the case referred to Lok Adalat whether settled or not settled, the case records are sent back to the concerned Court. Reason being, the Lok Adalat nor the Legal Services Authority have the infrastructure (like Court record room, etc.) and man power to retain and maintaining the case records.
30. Of course, Section 20 does not specifically state as to what would happen to the case records if matter is settled in the Lok Adalat. Section 20(5) only contemplates the situation where Lok Adalat is not in a position to arrive at a compromise or settlement. That does not mean that whenever records are sent back to the Court, it leads to an inference that the matter was not settled. For instance, if in a case of equitable mortgage where there is deposit of title deeds, if the matter has been referred to the Lok Adalat and the matter is settled after payment of amount the documents of title are to be returned to the Defendant. Such function of return of documents is to be performed only by the concerned Court. Hence it is a matter of reasonableness and experience that whether the case is being settled or not, case records are to be necessarily sent back to the Courts concerned. The contention of the Defendant that from the circumstances that records are being sent back to the concerned Court, urging the Court to draw inference of non settlements, has no force.
31. This Court is constrained to express its disapproval in the manner in which the suit was dismissed for default. As noted earlier, the same Subordinate Judges has referred to case to Lok Adalat. Sitting as Chairman of Legal Services Committee, the same officer settled the matter and has also signed in the award. Again when the suit came up before the Court, the same officer, has dismissed the suit for default. No doubt, it may not have been brought to the notice of the Court that the suit was settled in the Lok Adalat. This situation could have been avoided if reference to the Lok Adalat has been recorded in the Notes Paper/Order Sheet. To avoid such events in the future, and restraining the parties from challenging the finality of the award and to give effect to the award, as per the letter and spirit of the Act, it is necessary to issue certain guidelines to the Subordinate Counts in referring the cases to the Lok Adalat.
32. To give effects to the object of the Act and executing the awards passed by the, Lok Adalat in its letter and spirit, the following guidelines are issued to the Subordinate Courts for compliance:--
1. Whenever the case/matter has been referred to the Lok Adalat, Notes Paper/Order Sheet must clearly show that in compliance of provision 20 i.e., the parties have been given reasonable opportunity in referring the matter to Lot Adalat;
2. When the Court refers the matter to Lok Adalat, it is to be specifically recorded in the Notes Paper that the matter had been referred to the Lok Adalat under Section 20(1). If possible, (in cases other than Motor Accident Case), format may be maintained in the Court which contains the satisfaction of the Court and also that the parties are agreeable to refer the matter to Lok Adalat and such format being signed by the parties and also by the Presiding officer;
3. If the matter is settled, or receipt of records, the Presiding Officer should record the settlement in the Notes Paper/Order Sheet and also state that the suit has been ordered in terms of the award passed by the Lok Adalat;
4. When the case has not been settled and case records, are sent back to the Court Under Section 20(5), for disposal in accordance with law, the Court shall record the same in the Notes Paper/Order Sheet that the matter has not been settled and then proceed to deal with the case from the stage which Was reached before such reference.
33. The learned Subordinate Judge/Executing Court has rightly referred to Section 21 of the Act in holding that the award has become final and it cannot be challenged. The order is well balanced and the same cannot be assailed. This revision has no merits and is bound to fail.
34. Therefore, the order of the Subordinate, Judge/Executing Court dated 18.11.2004 made in E.P. No. 30/2004 in L.A.O.S. No. 10/2001 is confirmed and this revision is dismissed. The learned Subordinate Judge is directed to expedite the further proceedings in E.P. No. 30/2004 and dispose of the same in accordance with law. In the circumstances of the case, there is no order as to costs.