Holding

A Lok Adalat cannot pass an award where no compromise or settlement is arrived at; such matters must be returned to the referring court for disposal.

Summary

The respondent, a retired employee, filed a civil writ petition in the Punjab and Haryana High Court seeking a mandamus directing the employer to pay interest of 18% on delayed pension and other retirement benefits. The High Court referred the petition to a Lok Adalat for settlement, and the Lok Adalat issued an award granting 12% interest despite no compromise or settlement being reached. The employer challenged the award before the High Court, which held that although the Lok Adalat's disposal was improper, the employee was entitled to relief on merits and dismissed the challenge. On appeal, the Supreme Court examined Section 20 of the Legal Services Authorities Act, 1987 and held that a Lok Adalat can pass an award only when a compromise or settlement is actually arrived at between the parties. Since no such compromise existed, the award was impermissible and the matter must be returned to the court for disposal. Consequently, the Supreme Court set aside the impugned judgment, restored the writ petition to its original position, and directed the High Court to dispose of it within three months.

Issues considered

Whether Section 20(3) of the Legal Services Authorities Act, 1987 mandates a compromise or settlement for a Lok Adalat to pass an award.
Whether a civil writ petition can be disposed of by a Lok Adalat in the absence of any compromise or settlement.
Whether the High Court erred in affirming the Lok Adalat award despite procedural impropriety.

Legislation cited

Legal Services Authorities Act, 1987s. 20(1), s. 20(2), s. 20(3), s. 20(4), s. 20(5), s. 20(6), s. 20(7)

Subjects

Legal Services Authorities ActLok Adalatcompromisesettlementcivil writ petitionpensioninterestmandamusjurisdictionaward

Judgment

STATE OF PUNJAB AND ORS. A
v.
SHRI GANPAT RAJ

, SEPTEMBER 12, 2006

[ARIJIT PASA YAT AND LOKESHWAR SINGH PANTA, JJ.] B

Legal Services Authorities Act, 1987; Section 20:

Retiral benefits-Delay in payment-Writ petition-High Court referring
it to Lok Adalat--Lok Ada/at passing an award in favour of the employee- C
Challenged by the employer-Dismissed by High Court~On appeal, Held:
If no compromise or settlement arrived at in the mailer referred to Lok
Ada/at, no order could be passed by it-Since the case did not involve
compromise or settlement, it could not have been disposed of by the Lok
Ada/at-Though, the High Court was right in holding that the disposal of D
the case by the Lok Ada/at was nvt proper but it erred in affirming the order
of the Lok Ada/at on merit-High Court ought to have directed restoration
of the writ petition filed by the employee for disposal by itself-Civil Writ
Petition restored to its original position for disposal by the High Court-·
Directions issued.
E
Words and Phrases:

'Settlement' and 'compromise'-Meaning of in the context of Section
20 of the Legtil Services Authorities Act, 1987.

Respondent-a retired employee filed a Civil Writ Petition in the High F
Court for issuance of writ of mandamus directing the employer-appellants to
pay interest@ 18% on delayed payment of pension, its arrears and other
retirement benefits. The writ petition was sent to Lok Adalat for settlement,
and it was allowed by the Lok Adalat awarding interest@ 12% chough no
compromise arrived at between the parties. Against the award, a writ petition G
was filed by the appellants before the High Court. The High Court held that
i.. though the disposal by the Lok Ada lat was not the proper course, yet on merits
responden• ·employee was entitled to relief. Hence the present appeal.

Appellant-employee contended that the matter could not have been
25 H
26 SUPREME COURT REPORTS [2006] SUPP. 6 S.C.R.

A disposed of by the Lok Adalat in view of the specific provisions contained in
Section 20 of the Legal Services Authorities Act, 1987.

Allowing the appeal, the Court

HELD: I.I. The specific language used in sub-section (3) of the Legal
B Services Authorities Act, 1987 makes it clear that the Lok Adalat can dispose
ofa matter by way ofa compromise or ~ettlement between the parties. Two
crucial terms in sub-sections (3) and (5) of Section 20 are "compromise"
and "settlement". The former expression means settlement of differences
by mutual concessions. It is an agreement reached by adjustment of
C connicting or opposing claims by reciprocal modification of demands.
[29-A-BI

Re: NFU Development Trust Ltd., [197311 All ER 135, referred to.

1.2. A compromise is always bilateral and means mutual adjustment. '
"Settlement" is termination of legal proceedings by mutual consent. The
D instant case did not involve compromise or settlement and could not have been
disposed of by Lok Adlat. If no compromise or settlement is or could be
arrived at, no order could be passed by the Lok Adalat Therefore, the disposal
of the Civil Writ Petition by the Lok Adalat is clearly impermissible. The
High Com1 ought to have directed restoration of the writ petition for disposal
E in accordance with law. The Civil Writ Petition is restored to its original
position for disposal by the High Court f29-C-D; E; Ff ·

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4089 of2006.

From the Judgment and Order dated 14.10.2004 of the High Court of
F Punjab and Haryana at Chandigarh in C.W.P. No. 16246/2004.

H.S. Munjral and Arun K. Sinha for the Appellants.

Brig, M.L. Khatter, Debasis Misra, Sunil Varma and Balraj Mallick for the
Respondent.

G The Judgment of the Court was delivered by

ARIJIT PASAYAT, J. Leave granted.

As noted by this Court in State of Punjab and Ors. v. Phu/an Rani
and Anr., [2004] 7 SCC 555, a simple matter has unnecessarily been complicated
H as a result of which there has been inordinate delay in disposing of the matter.
STATE Of PUNJABv. GANPATRAJ [PASA YAT, J.] 27
Respondent filed Civil Writ Petition no. 943 of 2000 in the Punjab and A
Haryana High Court praying, infer alia, to issue a writ in the nature of
mandamus directing the present appellants to pay interest @ 18% on delayed

- payment of pension, arrears of pension, DGRC, computation of pension and
arrears ofGPF arrears and other retirement benefits. The writ petition was sent
to Lok Adalat for settlement being a pension matter and the matter was
allowed on 4.3.2003 without any settlement compromise between the parties.
B
It is to be noted that the appellants contested the claim and filed written
statement to the writ petition. Lok Adalat awarded 12% interest for the
delayed payments. A writ petition was filed by the appellants before the
Punjab and Haryana High Court challenging the order dated 4.2.2003 assessed
by the Lok Adalat in Civil No.943 of2000. The same was dismissed holding C
that the petition was misconceived. Though the High Court accepted that
the disposal by the Lok Adalat was not the proper course, yet it was held
that on merits respondent was ~ntitled to relief.

In support of the appeal, learned counsel for the appellant submitted
that the matter could not have been disposed of by the Lok Adalat in view D
of the specific provisions contained in Section 20 of The Legal Services
Authorities Act, 1987 (in short the 'Act').

Per conlra learned counsel for the respondent submitted that the High
Court has rightly proceeded on the basis that even if the matter could not E
have been disposed of by the Lok Adalat, there is nothing wrong, in the
ultimate result holding that the respondent was entitled to relief. The matters
which can be taken up by the Lok Adalat for disposal are enumerated in
Section 20 of the Act which reads as follows:

"20. Cognizance of cases by Lok Adalats:-
F
(I) Where in 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, G
for referring the case 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,
H
28 SUPREME COURT REPORTS (2006) SUPP. 6 S.C.R.

A 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) of clause (i) or clause (ii) by such Court except after
giving a reasonable opportunity of being heard to the parties. t
...
(2) Notwithstanding anything contained in any other law for the time
B being in force, the Authority or Committee organizing the Lok
Adalat under sub-section (I~ 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
c 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 (I)
D 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
E compromise or settlement between the parties and shall be guided
by the principles of justice, equity, fair play and other legal
princiµles.
(5) Where no award is made by the Lok Adalat on the ground that
no compromise or settlement could be arrived at between the
F parties, the record of the case shall be returned by it to the Court,
from which the reference has been received under sub-section (I)
for disposal in accordance with law.
(6) Where no award is made by the Lok Adalat on the ground that
no compromise or settlement could be arrived at between the
G parties, in a matter referred to in sub-section (2), that Lok Adalat
shall advice 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
H sub-section (I)."
STATEOFPUNJABv. GANPATRAJ [PASA YAT. J.] 29
The specific language used in sub-section (3) of Section 20 makes it A
clear that the Lok Adalat can dispose of a matter by way of a compromise
or settlement between the parties. Two crucial terms in sub-sections (3) and
(5) of Section 20 are "compromise" and "settlement". The former expression
means settlement of differences by mutual concessions. Lt is an agreement
reached by adjustment of conflicting or opposing claims by reciprocal B
modification of demands. As per Termes de la Ley, "compromise is a mutual
promise of two or more parties that are at controversy. As per Bouvier, it is
"an agreement between two or more persons, who, to avoid a law suit,
amicably settle their differences, on such terms as they can agree upon". The
word "compromise" implies some element of accommodation on each side. It
is not apt to describe total surrender. (See Re NFU Development Trust ltd., C
(1973] I All ER 135(Ch.D). A compromise is always bilateral and means
mutual adjustment. "Settlement" is termination of legal proceedings by mutual
consent. The case at hand did not involve compromise or settlement and
' could not have been disposed of by Lok Adalat. If no compromise or
settlement is or could be arrived at, no order can be passed by the Lok Adalat.
Therefore, the disposal of the Civil Writ Petition No. 943 of 2000 filed by D
respondent is clearly impermissible.

What was challenged in Writ Petition 16246 of2004 to which this appeal
relates related to the powers 'of disposal of cases by the Lok Adalat. Jn view
of findings recorded that matter could not have been disposed of by the Lok E
Adalat, High Court ought to have directed restoration of writ petition filed by
respondent i.e. Civil Writ Petition No. 943 of2000 for disposal in accordance
with law.

The inevitable result is that appeal has to be allowed. The impugned
judgment is set aside. It cannot be lost sight of that the matter is pending F
for long. Let Civil Writ Petition 943 of2000 be restored to its original position.
The High Court is requested to dispose of the writ petition wit~in a period
of three months from the date of receipt of this order. The appeal is allowed
in the aforesaid. terms with no order as to costs.

S.K.S. Appeal allowed. G