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Canara Bank vs G.S. Jayarama

Civil Appeal · 2022 INSC 597Decided 19 May 2022
Civil Appeal No. 3872 of 2022
Dr Dhananjaya Y Chandrachud · Pamidighantam Sri Narasimha

Background

Syndicate Bank (later merged into Canara Bank) had filed an application before the Permanent Lok Adalat at Mangalore against the respondent and his guarantor for recovery of unpaid credit dues. The respondent did not meaningfully participate, and the Permanent Lok Adalat, without conducting any real conciliation, went ahead and passed an award on merits directing repayment. The Karnataka High Court set aside this award, holding that a Permanent Lok Adalat has no adjudicatory function at all, and the Division Bench upheld that view. The Bank appealed to the Supreme Court.

Decision Breakdown

The Supreme Court clarified the difference between ordinary Lok Adalats (which can only attempt conciliation and have no power to decide a dispute on merits) and Permanent Lok Adalats created under Chapter VI-A of the Act (which do have adjudicatory power under Section 22-C(8), but only after conciliation proceedings under Section 22-C have been attempted and have failed). It held that the High Courts were wrong to say Permanent Lok Adalats have no adjudicatory function at all. They do, once conciliation genuinely fails, even if a party stays absent. However, since the Permanent Lok Adalat in this case never actually attempted or proposed any terms of settlement to the parties before deciding the dispute, the mandatory conciliation step under Section 22-C(7) was skipped. The Court therefore corrected the legal reasoning of the High Court but upheld its final result, the award was rightly set aside, because the Permanent Lok Adalat had jumped straight to adjudication without following the mandatory conciliation procedure.

Lesson Learnt

A Permanent Lok Adalat does have the power to finally decide disputes over public utility services (unlike an ordinary Lok Adalat), but it must first genuinely attempt conciliation and propose settlement terms to both parties, even an absent party, before it can adjudicate the case on merits; skipping that step makes its award invalid.

Official source (sci.gov.in)View Judgment (PDF)

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