The Award of a Lok Adalat: A Decree That Cannot Be Appealed

Section 21(2): finality, and no appeal

Every award made by a Lok Adalat shall be final and binding on all the parties to the dispute, and no appeal shall lie to any court against the award.

Two expressions repay attention.

"All the parties to the dispute" is wider than "the parties to the case". It binds anybody who was party to the dispute settled.

"No appeal shall lie to any court" is absolute in its terms, and it is the strongest finality clause in this whole book. Compare section 34 of the Arbitration and Conciliation Act 1996, where an award may at least be set aside: on the seven grounds in sub-section (2), and, for a domestic award, on patent illegality under sub-section (2A) as well. A Lok Adalat award has no equivalent.

The two leading cases, and they pull in opposite directions

This is the pair to learn together. Each is incomplete without the other, and an answer that has one and not the other has half the law.

P.T. Thomas: the deeming provision is real

P.T. Thomas v. Thomas Job, AIR 2005 SC 3575, (2005) 6 SCC 478, decided 4 August 2005, Ruma Pal and Dr. AR. Lakshmanan JJ.

Facts. Two brothers partitioned their father's property, and part of a theatre run by the elder brother stood on the land allotted to the younger. The younger brother sued and got a decree for possession. While the elder brother's appeal was pending in the District Court, the dispute went to a Lok Adalat, which on 5 October 1999 made an award on agreed terms: the property was to be sold to the younger brother or his nominee after one year and within two years, on payment of Rs. 9.5 lakhs, and if the elder brother did not execute the sale deed the younger could have it executed through court. If the younger brother defaulted instead, he was to give up the right and take Rs. 3.5 lakhs.

The elder brother did not execute the deed. A lawyer's notice was returned unclaimed; a telegram followed. The younger brother applied to execute the award. The executing court gave him three days to deposit Rs. 9.5 lakhs, and he deposited it a day early. The High Court, in revision, dismissed the execution petition.

Held. Restoring the executing court's order, the Supreme Court held that the award of a Lok Adalat is fictionally deemed to be a decree of court, and therefore the courts have all the powers in relation to it that they have in relation to a decree passed by themselves, which includes the power to extend time in an appropriate case. The award of a Lok Adalat is the decision of the court itself, though arrived at by the simpler method of conciliation instead of the process of arguments in court, and the effect is the same. The High Court's view would defeat the object and purposes of the Act and render the decision of the Lok Adalat meaningless.

Why it matters. It settles what "deemed to be a decree" actually gets you. Not a label: the whole apparatus a court has over its own decrees, including the discretion to extend time. That is what makes an award worth having.

State of Punjab v. Jalour Singh: what is not an award

State of Punjab v. Jalour Singh, AIR 2008 SC 1209, (2008) 2 SCC 660, decided 18 January 2008, K.G. Balakrishnan CJ.

Facts. Amarjit Kaur, about 32, died in a road accident in March 1997. The Claims Tribunal awarded her husband and minor son Rs. 1,44,000 with interest, and they appealed to the High Court for more. The appeal went to a Lok Adalat. On 3 August 2001 the Lok Adalat wrote a reasoned order: it held the Tribunal had fixed the deceased's earning capacity too low and used too small a multiplier, recalculated compensation at Rs. 1,70,200, and granted Rs. 62,200 over and above the Tribunal's award. It then added that if the parties objected to the proposed order, they could move the High Court within two months for disposal of the appeal on merits. Punjab Roadways had never consented. Its application to set the order aside was rejected, and so was a petition under article 227.

Held. Setting the order aside, the Supreme Court held 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 arrived at by the parties and puts its seal of confirmation on it by making an award in those terms; where no settlement is reached, no award is made and the record goes back under section 20(5). No Lok Adalat has the power to hear parties and adjudicate as a court does. When the Act refers to "determination" and "award" it does not contemplate an adjudicatory judicial determination but a non-adjudicatory one based on a compromise, and the making of the award is merely the administrative act of incorporating the agreed terms into an executable order under the signature and seal of the Lok Adalat.

The order in that case had assumed a judicial role, heard the parties, ignored the absence of consensus, and arrogated to itself the appellate powers of the High Court. It was therefore not an award at all, and being contrary to law and beyond the power and jurisdiction of the Lok Adalat it was void in the eye of law.

The Court added a warning worth quoting in an answer: sitting and retired judges participating in Lok Adalats should resist the temptation to play the part of judges and should constantly strive to function as conciliators, guiding and persuading the parties by explaining the strengths and weaknesses of their respective claims.

Why it matters. It is the boundary of section 21. The finality in sub-section (2) attaches to a genuine award, meaning a record of what the parties actually agreed. An order a Lok Adalat imposes is not an award and gets none of section 21's protection. That is also the practical answer to the student's question "if no appeal lies, what if the Lok Adalat is wrong?" If it decided anything at all, it was not an award.

Govindan Kutty Menon: it works from criminal courts too

K.N. Govindan Kutty Menon v. C.D. Shaji, AIR 2012 SC 719, (2012) 2 SCC 51, decided 28 November 2011.

Facts. A complaint under section 138 of the Negotiable Instruments Act 1881, for dishonour of a cheque, was referred by the criminal court to a Lok Adalat and settled there. When the complainant tried to execute the award as a decree, the Principal Munsiff refused, and the Kerala High Court agreed: an award on a reference from a criminal court could only be an order of that criminal court, not a decree of a civil court.

Held. The Supreme Court held that interpretation erroneous and set both orders aside, laying down four propositions:

1. In view of the unambiguous language of section 21, every award of a Lok Adalat is deemed to be a decree of a civil court and is executable by that court.
2. The Act makes no distinction between a reference made by a civil court and one made by a criminal court.
3. There is no restriction on a Lok Adalat's power to make an award on a compromise in cases referred by any court, tribunal, family court, rent control court, consumer redressal forum, motor accidents claims tribunal or other forum of similar nature.
4. Even where the matter comes from a criminal court under section 138 of the Negotiable Instruments Act, the deeming provision makes the award a decree capable of execution by a civil court.

Why it matters. Cheque cases are the single largest category of matter settled in Lok Adalats in India, so this is the most practically consequential of the three. It is also a good illustration of how wide the definition of "court" in section 2(1)(aaa) really is.

The three cases in a table

A worked example

Nikhil sued Sameer for Rs. 4,00,000 in the City Civil Court at Bombay and paid court fee on that amount. The suit was referred to a Lok Adalat under section 20(1)(i)(a), both parties agreeing. At the Lok Adalat they settled at Rs. 3,20,000, payable in four instalments, and the bench recorded the terms and made an award.

Can Sameer appeal because he thinks he agreed to too much? No. Section 21(2) is absolute: the award is final and binding on all the parties to the dispute and no appeal lies to any court.

What does Nikhil get back? The court fee paid in the suit, under section 21(1) read with the Court Fees Act 1870, because this was a case referred under section 20(1).

Sameer pays two instalments and stops. What does Nikhil do? He executes. Section 21(1) makes the award a deemed decree of a civil court, so he applies to the executing court. He does not sue on the settlement.

Sameer asks the executing court for more time on the last instalment. That is P.T. Thomas exactly. Because the award is deemed a decree, the court has the powers it has over its own decrees, including the power to extend time in an appropriate case.

Now change the facts. Suppose Sameer had refused to agree to anything, and the bench, exasperated, wrote an order saying that having heard both sides it considered Rs. 3,20,000 just and reasonable and directed him to pay it. That is not an award. On Jalour Singh it is an adjudication the Lok Adalat had no power to make, it is void, and section 21 does not touch it. The correct course was for the Lok Adalat to make no award and return the record under section 20(5).

What beginners get wrong

"No appeal" does not mean no remedy at all in every circumstance. Where what happened was not an award, as in Jalour Singh, the order is void and can be challenged. And the Supreme Court in Bar Council of India v. Union of India pointed to articles 226 and 227 as the route against a Permanent Lok Adalat award, which is chapter 150.

The refund of court fee is not automatic in every Lok Adalat matter. Section 21(1) attaches it to a case referred under section 20(1). A pre-litigation matter has no court fee to refund.

An award is not a judgment and contains no findings. Jalour Singh calls the making of it an administrative act of recording agreed terms. A Lok Adalat award that reads like a judgment is a warning sign, not a good one.

A Lok Adalat award from a criminal reference is still executable as a civil decree, per Govindan Kutty Menon. Do not repeat the Kerala High Court's reasoning that this case overruled.

Quick revision

• Section 21(1): every award is deemed to be a decree of a civil court, or an order of any other court; and the court fee is refunded under the Court Fees Act 1870 where the case was referred under section 20(1).
• Section 21(2): every award is final and binding on all the parties, and no appeal lies to any court.
• P.T. Thomas (2005) 6 SCC 478: the deeming provision carries the court's full powers over its own decrees, including extension of time.
• Jalour Singh (2008) 2 SCC 660: no adjudicatory function; an imposed order is not an award and is void; making an award is an administrative act of recording the agreed terms.
• Govindan Kutty Menon (2012) 2 SCC 51: the same deeming provision applies to references from criminal courts, including section 138 cheque cases, and the award is executable by a civil court.

Test yourself

1. What are the two effects of section 21? Sub-section (1) deems every award to be a decree of a civil court, or an order of any other court, and provides for refund of court fee where the case was referred under section 20(1). Sub-section (2) makes every award final and binding on all the parties, with no appeal to any court.

2. A Lok Adalat hears both sides, finds one of them right and directs payment. Is that award final under section 21(2)? No. On State of Punjab v. Jalour Singh a Lok Adalat has no adjudicatory function, so what it made is not an award at all. Being beyond its power and jurisdiction, it is void, and section 21 does not apply to it.

3. Can an executing court extend the time fixed by a Lok Adalat award? Yes. P.T. Thomas holds that because the award is fictionally deemed to be a decree, the court has all the powers in relation to it that it has in relation to its own decrees, which includes the power to extend time in appropriate cases.

4. A cheque case under section 138 is settled in a Lok Adalat and the accused does not pay. Is the award executable as a civil decree? Yes. K.N. Govindan Kutty Menon holds that the Act draws no distinction between references from civil and criminal courts, and that by virtue of the deeming provision the award is a decree capable of execution by a civil court.

5. Does every Lok Adalat settlement carry a refund of court fee? No. Section 21(1) provides for the refund where a compromise has been arrived at in a case referred under section 20(1), that is, a pending case in which court fee was paid. In a pre-litigation matter under section 20(2) no fee was paid and none is refunded.