Reportable IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.7282-7283 OF 2008 (Arising out of SLP [C] Nos.28691-28692 of 2008)

B. P. Moideen Sevamandir & Anr. ____Appellants Vs. A. M. Kutty Hassan ____Respondent

O R D E R  R.V.RAVEENDRAN, J.

Leave  granted.  Mr.  A.  Raghunath,  learned  counsel accepts notice for the sole respondent. Heard by consent.  2. The  appellants  were  the  defendants  in  a  suit  for declaration  and  mandatory  injunction.  Having  lost  before the  trial  court  and  the  first  appellate  court,  the appellants filed a second appeal before the High Court of Kerala on 6.2.2005. The appeal was admitted and an interim stay  of  execution  was  granted  in  the  said  appeal  on 1.6.2005. The pending second appeal was referred to the Lok Adalat organized by the Kerala High Court Legal Services Committee  on  25.5.2007.  Before  the  Lok  Adalat,  parties apparently  arrived  at  a  tentative  settlement.  The  Lok

Adalat consisting of two retired Judges of the High Court purported to pass the following ‘award’ dated 25.5.2007 in the appeal :

AWARD “Counsel  for  the  parties  and  the  appellants  and respondent present.  The parties have settled the dispute and  agreed to file a memorandum  of settlement before the High Court to obtain orders for disposal of this appeal and for refund of court fee.  A plan of the property is produced by the appellant and it is received. The plan used will  form part of this order. The appellant will vacate the buildings in plot A to the respondent on or before 31st July, 2007. On such surrender, plot B will belong to the appellant and ……….…  A compromise deed to this effect will be drawn by the parties and file before the court.” Post before the court on or before 31st July, 2007”  

[emphasis supplied]

3. The  appellants  allege  that  the  parties  could  not finalise the terms of settlement as it was found that there was no access to the portion to which they had to move, and therefore no compromise petition was drawn up or filed. As the settlement was not reported, the High Court, by order dated 10.4.2008 made a second reference to the Lok Adalat. The parties and counsel again appeared before Lok Adalat. Further negotiations were unsuccessful and the Lok Adalat sent  the  following  failure  report  dated  3.4.2008  to  the court :  

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“We have discussed the matter with the counsel and their  parties  and  considering  the  nature  of  demand made  by  the  appellants,  there  is  no  chance  of settlement.”

[emphasis supplied]

4. The second appeal was thereafter listed for the final hearing on 19.8.2008 before a learned Single Judge. When the matter reached hearing in the post-lunch session, an advocate attached to the office of the appellants’ counsel submitted that the appeal was to be argued by his colleague Mrs. Sarita, that due to personal inconvenience she could not be present during that session, and that therefore the matter may be adjourned to the next day. The learned Single Judge rejected the request and dismissed the appeal. The operative portion of the order dated 19.8.2008 is extracted below :  

“I see  no reason why any further adjournment is to be granted in the appeal of 2005  when the parties are willfully abstaining from arriving at any settlement despite an award passed at the Adalath on agreement. In the result, I dismiss this appeal for default.”  

(emphasis supplied)

5. The  very  next  day,  that  is  on  20.8.2008,  an application  was  filed  for  restoration  of  the  appeal supported by the affidavit of the counsel (Mrs. Saritha) giving the following reason for her absence at the post- lunch session on 19.8.2008 :

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“I  am  an  advocate  attached  to  the  office  of  the counsel for the petitioner. I was entrusted to argue the aforementioned second appeal and I was prepared for the same since the matter was listed. The case was taken up as item no.504 in Court I-C in the afternoon session on 19.8.2008. I was present in the court in the  forenoon  session  and  unfortunately  I  developed severe ear pain and had to leave the court. I had entrusted my colleague to appear before the Hon’ble Court and requested a day’s adjournment on account of this personal inconvenience and he had submitted the same.”

 The said application was dismissed by the learned Single Judge on 29.8.2008. The relevant portion of the said order is extracted below :  

“The order passed on 25.5.2007 by the mediators show that the parties and already settled the dispute and they only wanted to file a memorandum of settlement before this Court to obtain orders disposing of the appeal  refunding  court  fee  and  it  is  after  having agreed  to  the  terms  as  stated  in  the  award  that untenable  and  unreasonable  contentions  are  advanced now and that too coming forward with a petition to restore  the  appeal  when  the  appeal  itself  was dismissed for reason of absence of counsel. I see no reason to allow the MJC in the circumstances, so as to enable a cantankerous litigant to continue protracting the litigation even after an award is passed at the Adalat.”

(emphasis supplied)

6. The said orders dated 19.8.2008 and 29.8.2008 of the High  Court  are  challenged  in  these  appeals  by  special leave. We have heard Sri P.Krishna Murthy, learned senior counsel for appellants and Sri C.S.Rajan, learned senior counsel for respondent.  

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7. It is unfortunate that the learned members of the Lok Adalat and the learned Single Judge totally lost sight of the purpose and scope of Lok Adalats. We may conveniently recall  what  this Court has  said about the  scope of Lok Adalats, (after referring to the relevant provisions of the Legal Services Authorities Act, 1987), in  State of Punjab vs. Jalour Singh [2008 (2) SCC 660] :-   

“8. It is evident from the said provisions that Lok Adalats have no  adjudicatory or judicial functions. Their functions relate purely to conciliation. A Lok Adalat  determines  a  reference  on  the  basis  of  a compromise or settlement between the parties at its instance, and put its seal of confirmation by making an award in terms of the compromise or settlement. When  the  Lok  Adalat  is  not  able  to  arrive  at  a settlement or compromise, no award is made and the case record is returned to the court from which the reference  was  received,  for  disposal  in  accordance with  law.  No  Lok  Adalat  has  the  power  to  "hear" parties  to  adjudicate  cases  as  a  court  does.  It discusses  the  subject  matter  with  the  parties  and persuades  them  to  arrive  at  a  just  settlement.  In their conciliatory role, the Lok Adalats are guided by principles of justice, equity, fair play. When the LSA Act refers to 'determination' by the Lok Adalat and 'award'  by  the  Lok  Adalat,  the  said  Act  does  not contemplate  nor  require  an  adjudicatory  judicial determination,  but  a  non-adjudicatory  determination based on a compromise or settlement, arrived at by the parties,  with  guidance  and  assistance  from  the  Lok Adalat. The 'award' of the Lok Adalat does not mean any independent verdict or opinion arrived at by any decision making process. The making of the award is merely  an  administrative  act  of  incorporating  the terms of settlement or compromise agreed by parties in the presence of the Lok Adalat, in the form of an executable order under the signature and seal of the Lok Adalat.  

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8. When  a  case  is  referred  to  the  Lok  Adalat  for settlement,  two  courses  are  open  to  it  :  (a)  if  a compromise  or  a  settlement  is  arrived  at  between  the parties, to make an award, incorporating such compromise or settlement   (which  when  signed  by  the  parties  and countersigned by the members of the Lok Adalat, has the force of a decree); or (b) if there is no compromise or settlement, to return the record with a failure report to the court. There can be no third hybrid order by the Lok Adalat containing directions to the parties by way of final decision, with a further direction to the parties to settle the case in terms of such directions. In fact, there cannot be an ‘award’ when there is no settlement. Nor can there be any  ‘directions’  by  the  Lok  Adalat  determining  the rights/obligations/title  of  parties,  when  there  is  no settlement. The settlement should precede the award and not vice versa. When the Lok Adalat records the minutes of a proceeding  referring  to  certain  terms  and  directs  the parties  to  draw  a  compromise  deed  or  a  memorandum  of settlement  and  file  it  before  the  court,  it  means  that there  is  no  final  or  concluded  settlement  and  the  Lok Adalat is only making tentative suggestions for settlement; and such a proceeding recorded by the Lok Adalat, even if

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it is termed as an ‘award’, is not an ‘award of the Lok Adalat’.  

9. Although the members of Lok Adalats have been doing a commendable  job,  sometime  they  tend  to  act  as  Judges, forgetting  that  while  functioning  as  members  of  Lok Adalats, they are only statutory conciliators and have no judicial role. Any overbearing attitude on their part, or any  attempt  by  them  to  pressurize  or  coerce  parties  to settle matters before the Lok Adalat (by implying that if the litigant does not  agree for settlement before the Lok Adalat, his case will be prejudiced when heard in court), will  bring  disrepute  to  Lok  Adalats  as  an  alternative dispute resolution process (for short ‘ADR process’) and will also tend to bring down the trust and confidence of the public in the Judiciary.  

10. In this case the proceedings dated 25.5.2007 is termed as  an  ‘award’.  It  is  also  described  as  an  ‘order’  and ‘directs’ the appellant to vacate certain buildings on or before  31.7.2007  and  further  directs  that  on  such surrender, another portion shall belong to the appellants. Such an ‘award’ could have been made by the Lok Adalat only when there was a final settlement between the parties. The

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procedure  adopted  by  the  Lok  Adalat  on  25.5.2007,  was clearly erroneous and illegal. The learned counsel for the respondent  stated  that  the  Lok  Adalat  followed  the  said procedure  of  passing  an  ‘Award’  dated  25.5.2007  and directing parties to file a compromise in the court, only to enable the appellants to get refund of court fee. We fail to understand how the question of refund of court fee can have any bearing on the compliance with the statutory requirements relating to a settlement and award by a Lok Adalat.  

11. Such strange orders by Lok Adalats are the result of lack of appropriate rules or guidelines. Thousands of Lok Adalats  are  held  all  over  the  country  every  year.  Many members of Lok Adalats are not judicially trained. There is no  fixed  procedure  for  the  Lok  Adalats  and  each  Adalat adopts  its  own  procedure.  Different  formats  are  used  by different Lok Adalats when they settle the matters and make awards. We have come across Lok Adalats passing ‘orders’, issuing ‘directions’ and even granting declaratory relief, which  are  purely  in  the  realm  of  courts  or  specified Tribunals,  that  too  when  there  is  no  settlement.  As  an award  of  a  Lok  Adalat  is  an  executable  decree,  it  is necessary for the Lok Adalats to have an uniform procedure,

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prescribed Registers and standardized formats of awards and permanent record of the awards, to avoid misuse or abuse of the  ADR  process.  We  suggest  that  the  National  Legal Services Authority as the apex body, should issue uniform guidelines  for  the  effective  functioning  of  the  Lok Adalats. The principles underlying following provisions in the  Arbitration  and  Conciliation  Act,  1996  relating  to conciliators, may also be treated as guidelines to members of  Lok  Adalats,  till  uniform  guidelines  are  issued  : section  67  relating  to  role  of  conciliators;  section  75 relating to confidentiality; and  section 86 relating to admissibility of evidence in other proceedings.  

12. Lok Adalats should also desist from the temptation of finding  fault  with  any  particular  litigant,  or  making  a record  of  the  conduct  of  any  litigant  during  the negotiations,  in  their  failure  report  submitted  to  the court, lest it should prejudice the mind of the court while hearing  the  case.  For  instance,  the  observation  in  the failure report dated 3.4.2008 of the Lok Adalat in this case (extracted in para 3 above) that there is no chance of settlement on account of the “nature of demands made by the appellants”,  implied  that  such  demands  by  the  appellant were unreasonable. This apparently affected the mind of the

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learned Single Judge who assumed that the appellants were cantankerous, when the second appeal and application for restoration came up for hearing before the court.  

13. We may now turn to the role of courts with reference to  Lok  Adalats.  Lok  Adalats  is  an  alternative  dispute resolution mechanism. Having regard to section 89 of Code of Civil Procedure, it is the duty of court to ensure that parties have recourse to the Alternative Dispute Resolution (for short ‘ADR’) processes and to encourage litigants to settle  their  disputes  in  an  amicable  manner.  But  there should be no pressure, force, coercion or threat to the litigants to settle disputes against their wishes. Judges also require some training in selecting and referring cases to Lok Adalats or other ADR processes. Mechanical reference to  unsuited  mode  of  ADR  process  may  well  be  counter productive.  A  plaintiff  who  comes  to  court  alleging unlawful encroachment by a neighbour may well ask what kind of settlement he should have with an encroacher in a Lok Adalat. He cannot obviously be asked to sacrifice a part of his  land  for  purposes  of  amicable  settlement  thereby perpetuating the illegality of an encroachment. A plaintiff alleging fraud and forgery of documents against a defendant may well ask what settlement he can have with a fraudster

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or forger through ADR process as any settlement may mean yielding to or accepting fraud or forgery.        14. When a case is to be heard and decided on merits by a court, the conduct of the party before the Lok Adalat or other  ADR  fora,  howsoever  stubborn  or  unreasonable,  is totally irrelevant. A court should not permit any prejudice to  creep  into its judicial  mind, on account  of what it perceives as unreasonable conduct of a litigant before the Lok  Adalat.  Nor  can  its  judgment  be  ‘affected’  by  the cantankerous conduct of a litigant. It cannot carry ‘ill- will’ against a litigant, because he did not settle his case. It is needless to remind the oath of office, which a Judge takes when assuming office. He is required to perform his duties without fear or favour, affection or ill-will. Any settlement before the Lok Adalat should be voluntary. No  party  can  be  punished  for  failing  to  reach  the settlement before the Lok Adalat. Section 20(5) of the Act statutorily recognizes the right of a party whose case is not  settled  before  the  Lok  Adalat  to  have  his  case continued before the court and have a decision on merits. Any admission made,  any tentative agreement reached, or any concession made during the negotiation process before the Lok Adalat cannot be used either in favour of a party

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or against a party when the matter comes back to the court on failure of the settlement process. To deny hearing to a party  on  the  ground  that  his  behaviour  before  the  Lok Adalat  was  cantankerous  or  unreasonable  would  amount  to denial of justice. When deciding a matter on merits of a case, if a court carries any prejudice against a party on account of his conduct before an ADR forum, it will violate the  inviolable  guarantee  against  prejudice  or  bias  in decision  making  process.  Such  conduct  can  neither  be permitted  nor  be  tolerated  and  requires  to  be  strongly deprecated.  Every  Judge  should  constantly  guard  against prejudice, bias and prejudging, in whatever form. Judges should  not  only  be  unbiased,  but  seem  to  be  unbiased. Judiciary can serve the nation  only on the trust, faith and  confidence  of  the  public  in  its  impartiality  and integrity.  

15. When a counsel who is ready in the pre-lunch session, seeks accommodation in the post-lunch session on the ground of a sudden illness or physical ailment, the court cannot refuse a short accommodation and dismiss the appeal on the ground that his client was cantankerous and unreasonable before the Lok Adalat. The two issues have no relation to each other and such dismissal can only be attributed to

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prejudice.  The  observation  by  the  High  Court  that  the parties  having  arrived  at  a  settlement  before  the  Lok Adalat, could not refuse to file a compromise petition in court, is also erroneous. If there was a final settlement before the Lok Adalat, there would have been an award and there was no need for the matter to come before the court for further hearing. If parties state that before the Lok Adalat that they will enter into an agreement and file it before  the  court,  it  only  means  that  there  was  only  a tentative settlement before the Lok Adalat.  

16. In view of the above, the appeals are allowed. The impugned orders of the High Court are set aside. The second appeal is restored to the file of the High Court for being disposed of on merits in accordance with law. We request the Hon. Chief Justice to assign the appeal to some other learned Judge of the High Court. Whatever is stated above is  not  intended  to  be  a  reflection  on  the  judicial integrity of the learned Judge, nor intended to impute any personal prejudice or bias.  

_________________J [R. V. Raveendran]

__________________J [D. K. Jain]

New Delhi;

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December 12, 2008.  

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