Interpretation of Section 21 of Legal Services Authorities Act 1987
A borrower had two loans sanctioned by the bank in his favour-one cash credit and another term loan worth total 10 lacs. The above loans were created through equitable mortgage in favour of bank and the bank sanctioned the loans against the mortgage of same property in favour of bank. The borrower defaulted the loan because of normal loss incurred in the business and thereafter received repeated notice from the bank to regularise the above two loans, failing which the bank was due to file a suit against the borrower. A suit was filed in the Bolpur Civil Court and the case was pending before the Civil Judge (Senior Division) Court. Before argument the defendant/borrower prayed before the appropriate Court for transferring the case to the Lok Adalat. The Lok Adalat passed a compromise decree that 25% of the total borrowing amount will be paid by the defendant/borrower as the lumpsum and the rest of the 75% of the amount to be paid in 10 monthly instalments. Meanwhile the mortgage suit was pending before the original Civil Court. After the elapse of the 10 months period as per decree of the Lok Adalat, the borrower failed to comply with the decree. The borrower didn’t deposit a single rupee to the bank. Thereafter the bank deposited the decree of the Lok Adalat in the mortgage suit which was pending before the concerned Civil Court. AS Legal Associates was approached by the borrower for representing the case. The decree was challenged by the defendant/borrower but as per the Section 21 of the Legal Services Authorities Act, 1987, the decree drawn by the Lok Adalat is binding upon all parties and there is no provision for appeal. So the bank received the order from the Learned Court for proclamation of sale of the mortgage property and the sale notice was deposited to the court for publishing in two vernacular newspapers. After receiving the sale notice the defendant challenged the sale notice on maintainability ground and the defendant argued in the petition that when the decree was passed by the Lok Adalat the pending suit before the Learned Civil Court was aborted. Any decree passed by the Lok Adalat shall be final and binding upon all parties so the Court cannot draw a different decree in the same civil suit from the same Court. But the argument was dismissed by Learned Civil Court. After being aggrieved by the order, our firm (defendant/borrower) preferred an appeal to the Hon’ble High Court, Calcutta. The Hon’ble High Court says that after hearing both the parties a Court cannot draw two decrees in a civil suit case and bank had the liberty to execute the decree of the Lok Adalat by filing a execution case, thereby setting aside the order passed by the Learned Civil Court. The bank filed a execution case after the lapse of twelve years but the suit was already time barred so the bank gave a compromise proposal to the defendant/borrower on terms that the borrower will settle the loan by paying the bank only 10% of the total borrowing amount including the interest.
According to Section 21 of the Legal Services Authorities Act, 1987, every award of the Lok Adalat shall be deemed to be a decree of a civil court or, as the case may be, an order of any other court and where a compromise or settlement has been arrived at, by a Lok Adalat in a case referred to it under sub-section (1) of section 20, the court-free paid in such case shall be refunded in the manner provided under the Court Fees Act. 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.
Thus every award passed by the Lok Adalat is deemed to be a decree of the Civil Court and therefore after the award is passed by the Lok Adalat, the award can be executed like a decree of a Civil Court. Had there been no settlement in the Lok Adalat, the Learned Civil Court could have proceeded with the suit and deliver his judgment for which there is no bar. In such circumstances the petitioner could have filed execution petition before the appropriate Court seeking the award amount to be paid with costs and interests. Thus it is clear that the Learned Civil Court became functus officio to decide the case after the award has been passed by the Lok Adalat and the impugned order passed by the Learned Civil Court is not sustainable in law.