Patna High Court
Sri Praveen Anand vs The Asst. General Manager on 6 August, 2024
Bench: Chief Justice, Partha Sarthy
IN THE HIGH COURT OF JUDICATURE AT PATNA
Letters Patent Appeal No.1688 of 2019
In
Civil Writ Jurisdiction Case No.19502 of 2016
======================================================
Sri Praveen Anand S/o Late Balram Anand, C-71, 7th Floor, Krishna
Apartment, Boring Road, P.S.-Srikrishna Puri, Patna.
... ... Appellant/s
Versus
1. The Asst. General Manager State Bank of India, Atressed Assets Recovery
Branch, (SARB), Patna at 2nd Floor, SBI Patna Main Branch Building, West
Gandhi Maidan, Patna.
2. Union of India through Presiding Officer, Debt Recovery Tribunal, Wings A
and B, 2nd Floor, Karpuri Thakur Sadan, GPOA, Near Rajeev Nagar, P.S.
Ashiana Digha Road, Patna-800025.
... ... Respondent/s
======================================================
Appearance :
For the Appellant/s : Mr. Arbind Kumar Jha, Advocate
Mr. Vijay Kumar Verma, Advocate
For the Respondent/s : Mr. Kaushlendra Kumar Sinha, Advocate
======================================================
CORAM: HONOURABLE THE CHIEF JUSTICE
and
HONOURABLE MR. JUSTICE PARTHA SARTHY
CAV JUDGMENT
(Per: HONOURABLE THE CHIEF JUSTICE)
Date : 06-08-2024
The writ petitioner is the appellant, who is
aggrieved by the refusal of the learned Single Judge to interfere
with the proceedings initiated by the Bank, against the order of
the Lok Adalat before the Debts Recovery Tribunal (hereinafter
referred to as 'DRT'), passed under Section 19(25) of the
Recovery of the Debts and Bankruptcy Act, 1993 (hereinafter
referred to as 'RDB Act'). The petitioner was also aggrieved
Patna High Court L.P.A No.1688 of 2019 dt.06-08-2024
2/17
with the recovery proceedings initiated against him de hors the
settlement arrived at, in the Lok Adalat. The order of the Lok
Adalat is produced as Annexure-7 in the writ petition and the
order of the DRT interfering with the same is produced as
Annexure-13.
2. The learned Single Judge found that initially a
settlement of Rs.27 lakhs was arrived at and despite the
petitioner having not complied with that, the DRT had in
Miscellaneous Applications filed before it, granted further time
to the petitioner; which was not permissible. The time granted
by the DRT also was without noticing the recovery proceedings
already initiated, based on the earlier orders of the DRT, which
was passed, on the writ petitioner not complying with the earlier
order of the Lok Adalat. The last of such orders in a
Miscellaneous Application, which granted further time to the
petitioner was pending before the appellate authority. The
certificate of recovery already issued by the DRT was still valid.
The order of the Lok Adalat impugned in the writ petition was
clearly a case of misrepresentation, wherein the Bank's dues
were recorded as Rs.96,134/- when the total outstanding
amount, as per the recovery certificate stood at Rs.52,07,624/-
as on 30.11.2014.
Patna High Court L.P.A No.1688 of 2019 dt.06-08-2024
3/17
3. The decisions referred to by the DRT were also
looked into, to find that since the impugned award was passed
on misrepresentation of facts; which ground did not exist in the
various decisions cited by the writ petitioner, the DRT was
perfectly within its jurisdiction to interfere with the award. It
was held that the decision in Indian Banks v. Blue Jaggers
Estates Limited and Others; (2010) 8 SCC 129 applied
squarely to the facts of the present case. Though, a settlement
has been entered into by an Officer of the Bank; the Bank being
the custodian of public money, the settlement having been
clearly demonstrated to be on misrepresentation of facts, the
Bank was perfectly justified in approaching the DRT against the
order of the Lok Adalat, was the finding.
4. Before us, the learned Counsel for the appellant
placed reliance on Bhargavi Constructions and Another v.
Kothakapu Muthyam Reddy and Others; (2018) 13 SCC 480.
Following a three Judge Bench judgment, in State of Punjab
and Another v. Jalour Singh and Others; (2008) 2 SCC 660,
the Hon'ble Supreme Court had categorically laid down that the
challenge to an order of Lok Adalat can only be raised before
the High Court under Article 226/227. The impugned order is
totally without jurisdiction, is the argument raised.
Patna High Court L.P.A No.1688 of 2019 dt.06-08-2024
4/17
5. The learned Counsel appearing for the
respondent-Bank, however, asserted that when fraud and
misrepresentation of facts are alleged, it vitiates the settlement
arrived at before the Lok Adalat. The Officer of the respondent-
Bank for some reason; probably not being apprised of the facts
fully, agreed for the settlement, for a paltry sum when already
recovery certificate for humongous amounts was pending
realization against the writ petitioner-borrower. Reliance was
placed on R. Janakiammal v. S.K. Kumarsamy and Others;
(2021) 9 SCC 114 to contend that the compromise decree if
alleged to be void or voidable, a party to the said consent
decree, for challenging the same, has to approach the same
Court, which recorded the compromise. The DRT had recorded
the compromise in the Lok Adalat and it was perfectly in order
that the Bank had approached the DRT against the compromise.
6. At the outset, we have to observe that the
conduct of the appellant, the borrower, is suspect, for reason of
the earlier Lok Adalat order having not been complied with and
then approaching the Tribunal multiple times for extension of
time to comply with the compromise entered into at the Lok
Adalat. However, legal issues, especially of jurisdiction or lack
of it, cannot be decided merely on the suspect conduct of the
Patna High Court L.P.A No.1688 of 2019 dt.06-08-2024
5/17
borrower or on the trite principle that Banks deal with public
money and the Courts would be slow in interfering with the
legal proceedings initiated for recovery of such public money,
from unscrupulous defaulting borrowers, on purely technical
issues.
7. We have to detail the checkered history of the
proceedings before the DRT. The Bank initially filed Original
Application No.24 of 2008 before the DRT, Patna, for
realization of a sum of Rs.34,01,934.21 with interest and costs.
In a Special Lok Adalat, constituted at the DRT, by Annexure-1,
a settlement was arrived at for satisfaction of the loan amounts,
by payment of Rs.27 lakhs in installments; specified date-wise
in the order itself, the last of which installments fell on
17.01.2011
. The petitioner failed to comply with the terms and
conditions of the order of the Lok Adalat and the DRT went
ahead with the O.A. filed, the proceedings in which culminated
in a certificate of recovery of the amounts demanded, along with
pendente lite and future interest at contractual rate from
01.02.2008, being issued (Annexure-2 of the writ petition).
8. The Bank also initiated R.P. Case No.40 of 2011
before the Recovery Officer, DRT, Patna and during the
pendency of the said proceedings, M.A. No.79 of 2012 was filed
Patna High Court L.P.A No.1688 of 2019 dt.06-08-2024
before the DRT, Patna, to interdict the recovery, in view of the
award of the Special Lok Adalat. Though, the contentions of the
petitioner were rejected, a fresh direction by the DRT was issued
that the petitioner would pay 40% of the settlement amount
within 15 days and the balance in 3 months in equal
installments, with simple Prime Lending Rate (PLR) interest;
which order is produced as Annexure-3 to the writ application.
The DRT had absolutely no jurisdiction to grant such time on
the basis of the compromise; which compromise was hedged in,
with the specific instalments date-wise; which if not complied
with, the compromise itself would fall through and the award of
the Special Lok Adalat would be of no consequence. Be that as
it may, the Bank did not challenge the said order and the
borrower also failed to satisfy the settlement amounts, even in
the further time granted by the DRT.
9. The Recovery Officer, thus, proceeded with R.P.
Case No.40 of 2011 and auction sale of the mortgage properties
was notified. Once again, an M.A. was filed before the DRT
with a cheque of Rs. 8 lakhs, praying for further time to pay the
settlement amounts in installments. The DRT once again by its
order dated 19.07.2012, deferred the recovery and a last chance
was given to the borrower to clear the balance amounts as per
Patna High Court L.P.A No.1688 of 2019 dt.06-08-2024
the settlement of 17.01.2010 before the Lok Adalat with 9%
simple interest from the date of default. A time of two months
was granted for settlement of the amounts by the Tribunal;
which again was not complied with by the appellant/borrower.
10. Yet again, M.A. No.378 of 2005 was filed by
the appellant in which an order was passed on 04.04.2014, again
referring to the order of the Special Lok Adalat in 2010 and
permitting three monthly installments to pay up the amounts as
per the compromise and also permitting the appellant/applicant
to approach the Tribunal, if any problem is faced in paying up
the balance amounts; for reducing the compromise amount. We
cannot but observe that these repetitive orders were clearly
without jurisdiction. The last order has been challenged by the
respondent-Bank before the Debts Recovery Appellate Tribunal
(DRAT) wherein the proceedings are registered as S.R. No.135
of 2014.
11. The appellant's claim is that he had made
substantial payments, as per the order dated 04.04.2014, and this
led to the statement of the Bank before the Special Lok Adalat
that what remains to be paid is only Rs.96,134/- and a
compromise was arrived at to settle the claim by payment of
Rs.20,000/-; which has been paid up by the appellant. The Bank
Patna High Court L.P.A No.1688 of 2019 dt.06-08-2024
challenged the award passed by the Lok Adalat by way of M.A.
No.51 of 2015 in which the impugned order was passed.
12. We will have to first deal with the decisions
placed before us to understand the jurisdiction insofar as the
challenge to a compromise decree; which we have to observe
are distinct and different insofar as a compromise decree
obtained in a compromise entered into between the parties
before a Court of law, specifically under the Civil Procedure
Code and a compromise resulting in an award passed by the Lok
Adalat constituted under the Legal Services Authorities Act,
1987 (hereinafter referred to 'LSA Act').
13. R. Janakiammal (supra), was a case arising
under the family and personal laws which dealt with partitions,
family arrangements and settlements and the status of the
properties held by the family and its members, whether it was
jointly held or self-acquired. The question dealt with and
highlighted by learned Counsel appearing for the respondent-
Bank was regarding the forum for challenging a compromise
decree on the ground that it was unlawful. Noticing Order XXIII
Rule 3A of the Code of Civil Procedure, which bars a suit to set
aside the decree on the ground that compromise entered into
was not lawful, the word 'lawful' in Order XXIII Rule 3A was
Patna High Court L.P.A No.1688 of 2019 dt.06-08-2024
juxtaposed with the Explanation in Rule 3 which declared that
an arrangement or compromise which is void or voidable under
the Indian Contract Act shall not be deemed to be lawful. It was
held that an agreement or compromise, if clearly void or
voidable, will not be lawful and would attract the bar under
Order XXIII Rule 3A and there cannot be a separate suit filed to
set aside the void or voidable decree; but the party who assails
the compromise can question the same before the Court which
had recorded the compromise in question and that Court which
passed the decree is enjoined to decide the controversy as to
whether the parties have arrived and adjusted the lis, in a lawful
manner.
14. Again, we have to reiterate the distinct nature
and status of a decree passed on compromise under the CPC and
an award passed under the LSA Act. The question to be decided
would be when a Lok Adalat is constituted in the DRT or any
other Court; whether the members constituting the Lok Adalat
would bring with him/her the status of the Courts, they are
normally occupying and render the award passed also, the status
of an award/decree passed by the Court they officially occupy. If
the answer is in the negative, there is no question of the award
of the Lok Adalat being challenged in the Court, normally
Patna High Court L.P.A No.1688 of 2019 dt.06-08-2024
occupied by the member/members. The decision in R.
Janakiammal (supra) has absolutely no application insofar as
the awards passed under the LSA Act.
15. In this context, a three Judge Bench in State of
Punjab v. Jalour Singh (supra) is relevant. Therein, the award
of the Lok Adalat was with respect to the compensation in a
Motor Accidents Claim which was pending before the High
Court in an appeal, from the order of the Motor Accidents
Claims Tribunal. The appeal was referred to the Lok Adalat
organized by the High Court for settlement and when the case
was taken up, the parties were not present, but the Counsel were
present. The Lok Adalat passed an order enhancing the
compensation and also provided that if the parties object to the
enhancement, then, they could move the High Court within two
months for disposal of the appeal. The appellant challenged the
award under Article 227 of the Constitution of India and a
Single Judge of the High Court dismissed the same finding that
it was not maintainable. The Hon'ble Supreme Court asserted
and affirmed the jurisdiction of the High Court in deciding the
writ petition under Article 226 or 227 as against the award of a
Lok Adalat and expressed dismay at the manner in which the
entire matter was dealt with, undermining the very purpose and
Patna High Court L.P.A No.1688 of 2019 dt.06-08-2024
object of the Lok Adalat. In the context of the award of the Lok
Adalat, not being agreed to, by the parties, the option was for
the High Court to deal with the appeal against the order of the
Motor Accidents Claims Tribunal itself, was the finding.
16. The Hon'ble Supreme Court dilated upon the
manner in which the awards of the Lok Adalats are to be
challenged; which the impugned judgment in this case failed to
reckon. Referring to the provisions of the LSA Act, it was held
that a Lok Adalat would have jurisdiction to determine and to
arrive at a compromise or settlement between the parties to a
dispute in respect of any case pending, for which Lok Adalat is
organized and even in matters at the pre-litigation stage; but
they have no adjudicatory or judicial functions and their
function is purely and simply one of conciliation.
17. We specifically refer to paragraph 8 and 9
from Jalour Singh (supra), which are extracted hereunder: -
8. It is evident from the said provisions that the 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 puts 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
Patna High Court L.P.A No.1688 of 2019 dt.06-08-2024
parties and persuades them to arrive at a just settlement. In
their conciliatory role, the Lok Adalats are guided by the
principles of justice, equity and 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.
9. But we find that many sitting or retired Judges, while
participating in the Lok Adalats as members, tend to conduct
the Lok Adalats like courts, by hearing parties, and imposing
their views as to what is just and equitable, on the parties.
Sometimes they get carried away and proceed to pass orders
on merits, as in this case, even though there is no consensus or
settlement. Such acts, instead of fostering alternative dispute
resolution through the Lok Adalats, will drive the litigants
away from the Lok Adalats. The Lok Adalats should resist
their temptation to play the part of judges and constantly strive
to function as conciliators. The endeavour and effort of the
Lok Adalats should be to guide and persuade the parties, with
reference to principles of justice, equity and fair play to
compromise and settle the dispute by explaining the pros and
cons, strengths and weaknesses, advantages and disadvantages
of their respective claims.
18. We emphasize the caution expressed by the
Hon'ble Supreme Court insofar as the members constituting the
Lok Adalat; be it sitting or retired Judges, participating and
conducting proceedings in the Lok Adalat, like Courts, by
hearing parties and imposing their views which they deem to be
Patna High Court L.P.A No.1688 of 2019 dt.06-08-2024
just and equitable. The Lok Adalats do not play the part of
Judges and in that context, there is no question of the award
being challenged in the Court in which the member of the Lok
Adalat normally sits. We also emphasize the fact that often Lok
Adalats are constituted of retired Judges in which event, there
would be no Court existing to challenge the award passed. There
would also be Lok Adalats constituted with members from the
Bar which again cannot be challenged in the Courts occupied by
such member; which is non-existent. Merely because a sitting
Judicial Officer is the Lok Adalat or a member of the Lok
Adalat, that would not confer jurisdiction on the Court, which
he or she normally occupies, with the jurisdiction to challenge
the award passed in the Lok Adalat. Nor can an award of the
Lok Adalat be challenged before the Court which referred it,
since once the matter is referred and the matter is settled, the
Court of reference becomes functus officio. There is also pre-
litigation matters settled in Lok Adalats which are not referred
by any Court. This is why we emphasized at the outset that there
is a distinction insofar as a compromise decree passed under the
CPC and an award on the basis of a settlement entered into
before the Lok Adalats, constituted under the LSA Act.
19. The subsequent judgment of the Hon'ble
Patna High Court L.P.A No.1688 of 2019 dt.06-08-2024
Supreme Court in Bhargavi Construction (supra), followed the
three Judge Bench in Jalour Singh (supra) and categorically
laid down a particular remedy for challenging the order of the
Lok Adalat, which has to be followed by every litigant in letter
and spirit especially the declaration made by the Hon'ble
Supreme Court, being law under Article 141 of the Constitution
of India as laid down in M. Nagaraj and Others v. Union of
India; (2006) 8 SCC 212. Examining the case on the basis of
the declaration of law made by the Hon'ble Supreme Court, we
are clear in our minds that the challenge made by the Bank to
the award, before the DRT by M.A. No.51 of 2015 is clearly
without jurisdiction despite the fact that the Presiding Officer of
the DRT was the Lok Adalat which passed the award. Neither
that nor the fact that the matter was referred to the Lok Adalat
by the DRT, does not empower or clothe the DRT with the
authority to examine the correctness or otherwise of the award
passed on settlement. Nor can it examine the issue as to whether
the same is passed on fraud or misrepresentation; which grounds
can be raised only when a proper challenge is made to the award
passed in a petition under Article 226 before the High Court.
20. We also observed at the outset that, we cannot
proceed to decide matters of jurisdiction, merely on the conduct
Patna High Court L.P.A No.1688 of 2019 dt.06-08-2024
of the parties or based on our anxiety to protect public money.
The learned Single Judge has noticed the decision in Indian
Bank (supra) and the decision of the Allahabad High Court in
Dr. (Smt.) Shashi Prateek v. Charan Singh Verma and
Another; AIR 2009 ALL 109 referred to by the Tribunal. With
due respect, we have to notice that the paragraphs of the
decisions in Indian Bank and Shashi Prateek (both supra)
were extracted together in paragraph 24 of the impugned
judgment; which gives the impression that the issue of
jurisdiction decided in the later paragraph, was a consequence of
the principle stated in the former paragraph; which it is not. The
first paragraph from the decision in Indian Bank (supra)
emphasize the aspect of the Banks being trustees of public
funds, in a matter wherein there was no consideration of an
award under the LSA Act. In the paragraph extracted by the
DRT, from the decision of the Allahabad High Court, the
Tribunal was found to be entitled to empower or recall the order
or award passed by the Lok Adalat on the ground of fraud or
misrepresentation or mistake of fact; which clearly runs against
the decision of the Hon'ble Supreme Court in Jalour Singh
(supra). Indian Bank (supra) does not deal with the issue of a
challenge against a compromise decree, either under the CPC or
Patna High Court L.P.A No.1688 of 2019 dt.06-08-2024
the LSA Act, and the principle stated therein, though having
universal application; cannot render inconsequential the
jurisdictional issue regarding the manner of challenge to an
award passed by the Lok Adalat, as per a settlement arrived at
between the parties before it.
21. We find no reason to sustain the order at
Annexure-13 challenged in the writ petition. We reverse the
judgment of the learned Single Judge and set aside Annexure-13
order. We make it clear that the Bank would be left remedy to
challenge the award in a properly instituted writ petition under
Article 226. The Bank would initiate such proceedings, if it
desires, so to do, within 3 months from the date of uploading of
this judgment. In the meanwhile, the Bank would not be coerced
into surrendering the documents by which the
borrower/appellant created mortgage of the properties,
furnishing collateral security. The Bank would also be entitled
to prosecute the appeal filed against the order of the DRT which
granted further time to satisfy the loan amount, as per settlement
arrived at by Annexure-1; after the borrower failed to comply
with Annexure-1 and also failed to comply with two subsequent
indulgence shown by the DRT to satisfy the loan amount as per
Annexure-1; all of which as we held are without jurisdiction and
Patna High Court L.P.A No.1688 of 2019 dt.06-08-2024
works against the principles enshrined under the LSA Act.
22. Just as a judicial decision, awards passed by
the Lok Adalat also should have a finality to it. If the terms of
the settlement are not complied with then, necessarily the order
based on compromise works itself out and there cannot be a
further settlement ordered by the Court or Tribunal, which has
referred the matter to the Lok Adalat, especially without the
consent of the other side.
23. The appeal is allowed but with the above
reservations and the liberty conceded to the respondent-Bank.
The parties are left to suffer their respective costs.
(K. Vinod Chandran, CJ)
Partha Sarthy, J: I agree.
(Partha Sarthy, J)
sharun/-
AFR/NAFR AFR
CAV DATE 31.07.2024
Uploading Date 06.08.2024
Transmission Date
