Friday, 9 June 2017

Whether award passed by Lok adalat can be quashed?

 I see that the Lok Adalath has merely endorsed the

terms of concurrence of the parties without considering the

probable issues of violation of morals and public policy in

permitting parties to settle on contingent terms which depends

on the decisions of this Court in future. This is grossly

inappropriate and I am of the view that the Lok Adalath

misdirected itself in allowing the parties to enter in to a

settlement which is contra bonos mores and contra public policy.

       13. I am of the firm view that the Lok Adalaths have a duty

to ensure that the settlements entered into by the parties confirm

to law, morals and public policy of the Society and the Polity. Any

settlement entered in contravention of these would be completely

unsustainable and incompetent. If this Court notices that the

settlement is one that offers undue advantage to one side on

account of prescription of certain contingencies, it becomes a

case of contravention of public morals as also of public policy

and, therefore, this Court would obtain certain justification in

interfering with such Awards under Article 226 of the Constitution

of India, it being null, void and non-est.


       14. The unexpendable requirement of Lok Adalats to invest

due care, attention and position while passing awards has already

been spoken to about by a Division Bench of this Court in

Rajagopala Rao v. State Police Chief [2016 (3) KLT 358].

The Bench had formated certain guidelines and are very pertinent

to read. I, therefore, deem it necessary to extract the relevant

paragraph of the said judgment as under:

       "18. In order to prevent the menace of passing awards

without due care, attention and precision by Lok Adalats, we

intend to formulate some guidelines. We may hastily add that

they are not exhaustive and may take in other things as well,

depending on the facts of each case. The crucial points to be

borne in mind by the persons presiding over the Lok Adalats and

the lawyers appearing for the parties are thus:

                      (i) The persons presiding shall thoroughly
              study and clearly understand the facts of the
              case coming up for settlement.
                      (ii) They must have a clear understanding
              about the legal issues involved in the dispute
              between the parties.
                      (iii) If the parties have engaged lawyers,
              they shall also participate in the proceedings
              before the Lok Adalat so that a proper
              settlement could be arrived at.
                      (iv) The persons presiding over the Lok
              Adalat and the lawyers concerned shall bear in
              mind the fundamental principles, under the


              Indian Contract Act, 1872, essentially required
              for executing a legally enforceable agreement.
                      (v) They shall bear in mind the principles
              under Order XXIII Rule 3 of the code of Civil
              Procedure, 1908 also, so that the award must
              be in the form of an enforceable decree, if the
              parties so wish. This is all the more important
              because by virtue of sub-section (2) of Section
              21 of the Legal Services Authorities Act, 1987,
              every award made by Lok Adalats shall be final
              and binding on the parties to the dispute and no
              appeal shall lie to any court against the award.
                      (vi) The persons presiding over the Lok
              Adalat shall see that the award passed is clear
              in its terms and there shall be no room for any
              confusion in respect of the terms and conditions
              in the award. They shall take care to see that
              on account of ill-drafting of the compromise, no
              litigation in future arises in respect of the
              matters once settled.
                      (vii) They shall see that the awards
              passed are not only legal, but also conforming
              to the norms prescribed for a decree with all the
              required details in clear and explicit terms."

       15. However, in spite of express declarations by this Court,

it is extremely disheartening and disquieting that lessons are not

being learnt requiring repeated interventions Court.

       16. In the case at hand, I see that the absence of a Clause

in Ext.P7 as to what would happen in the event this Court

dismisses Crl.M.C. No.295/2013, would render the settlement

between the parties, as recorded by the Lok Adalath, inoperative

and completely contingent and therefore, contrary to public



morals. Contingent Awards cannot be countenanced, especially

when such contingencies are relating to pending matters before

Courts, especially this Court.

       17. The malafides involved in the present stand of the 2nd

respondent would be very apparent because it now asserts that

since Crl.M.C. No.295/2013 has been withdrawn by the

petitioner, it is under no obligation to make payment at all. This

obviously offers an illegal and unlawful advantage to the 2nd

respondent, tilting the balance of the scales of justice capriciously

against the petitioner, merely because Ext.P7 Award had been

allowed to be entered into thoughtlessly by the competent

Authority of the 1st respondent. I cannot permit this to happen

and I, therefore, am of the view that I will be justified in

interfering with Ext.P7 Award and relegating the parties to their

normal channel of litigation, so that substantial justice can be

obtained for both sides.

       In such circumstances, I have no hesitation in striking down

and quashing Ext.P7 Award so as to pave way for the

proceedings before the Sub Court, Kollam pending in O.S.

No.381/2013 to be continued and concluded in the manner that



is appropriate in law. I do so.
IN THE HIGH COURT OF KERALA AT ERNAKULAM

                                             PRESENT:

              MR. JUSTICE DEVAN RAMACHANDRAN

                 7TH DAY OF APRIL 2017

                                   WP(C).No. 35992 of 2015 


                P.O.THOMAS, S/O. OOMMAN,
V

         KOLLAM TALUK LEGAL SERVICE COMMITTEE,
        






      If there ever be a Book on Lawyers' Truths, the first

aphoristic percept that would occupy it is that a bad settlement is

better than a good law suit. This truism is well recognised

because     litigation  is   expensive,    time    consuming  and

unpredictable. However, many a time, this aphorism has been

pushed well beyond its intent leading to a settle-at-all-costs

mentality without being cognizant of the forensic worth or value

of such settlement.

      2. The bane of thoughtless and ill drafted settlements is

that the cure became worse than the malady, ironically then

causing even more litigation. When settlements couched on

illogical, unenforceable, impractical and sometimes even dissolute

terms are brought to the notice of Courts, it become difficult to

be blind to it since the final outcome of any judicial process in


justice and everything else is only a cornolony effort to

approximate the result of a well functioning judicial system.

       3. The situation presented in this case is graphically

illustrative of what I have said above.

       4. The petitioner assails Ext.P7, which is an award passed in

a Lok Adalath conducted by the Kollam Taluk Legal Services

Committee. This challenge hypostized on Article 226 of the

Constitution of India against such an Award would, at first blush

appear to be slightly far fetched and perhaps even incompetent

on account of the imperative provision of the Kerala Lok Adalath

Act, which virtually invest settlement of awards in total finality.

However, on an analysis of the facts involved, I am persuaded to

think otherwise.

       5. The wood cut of the facts, as is constitutive for my

consideration, is that the petitioner had entered into an

agreement for sale with the 2nd respondent on 20.12.2010. The

agreement involved 55 cents of land and the sale consideration

was fixed at Rs.1.9 Crores. As per the terms of the agreement,

the 2nd respondent was to execute the Sale Deed within a period

of two months and on such covenant, the petitioner paid the


entire consideration of Rs.1.9 Crores to the 2nd respondent in

2012. These facts are virtually conceded to by the 2nd

respondent. However, it appears that while matters stood thus,

the 2nd respondent, which is a Private Limited Company, was

proceeded against by various of its other creditors, leading to

Ext.P3 order being issued by the Chief Judicial Magistrate's Court,

Kollam, injuncting the 2nd respondent from disposing of the

Company properties or the personal properties of the Directors.

This consequently constrrained the petitioner to file O.S.

No.381/2013 on the files of the Sub Court, Kollam seeking

recovery of Rs.1.9 Crores paid by him under the agreement of

sale. While the suit was pending, the matter was referred to the

Lok Adalath for an attempt of settlement.

       6. In the Lok Adalath, the parties agreed to certain terms,

which were reduced to writing and recorded by the Adalath as a

settlement, as is discernible from Ext.P7. The two terms in

Ext.P7, which is recorded in Malayalam, is as under:

               (i) The parties agree that the suit will be settled

       on the defendant paying the plaintiff an amount of

       Rs.1.9 Crores in full and final settlement.



               (ii) The defendant will pay the amount of Rs.1.9

       Crores to the plaintiff within a period of 9 months after

       Crl.M.C. No.295/2013 filed by the plaintiff is allowed

       by the High Court.

       7. It transpires that based on this award, but on a

misinterpretation of its terms, the petitioner, who was the

plaintiff in the suit, withdrew Crl.M.C. No.295/2013 before this

Court.

       8. The reasons that led to the petitioner filing Crl.M.C.

No.295/2013 is also relevant here. This Crl.M.C. was filed by the

petitioner to vary the terms of Ext.P3, under which the Company

was injuncted from selling its properties, as has been mentioned

by me earlier. So, obviously the parties thought that once the

injunction is vacated by an order of this Court, the amount

retained by the Company could be returned to the petitioner.

       9. However, when Crl.M.C. No.295/2013 was withdrawn by

the petitioner, on a misjudgment of the terms of the award, the

2nd respondent Company took the stand that under the terms of

Ext.P7, they are no longer obligated in making payment to the

petitioner. This has led to the present fracas between the parties


and to this writ petition being filed challenging the terms of

Ext.P7.

       10. I started this judgment by saying that the challenge

against an Award of the the Lok Adalath, voluntarily entered into

by the parties, would normally be not countenanced. It is only in

cases where the Award can be seen to be vitiated by

misrepresentation and fraud or if it is opposed to public policy,

can this Court, exercising jurisdiction under Article 226 of the

Constitution of India, even entertain a challenge against it.

       11. In the case at hand, I see that the parties have agreed

into the terms of the award on the happening of a specific

contingency that this Court allow Crl.M.C. No.295/2013. This was

a matter of pure conjuncture and speculation. I am concerned

that the Award did not provide for a prescription as to how the

parties would be regulated, if the Court had dismissed Crl.M.C.

No.295/2013. Both parties appear to have been inexplicably

confident that this Court would act in a particular fashion and

that the said Crl.M.C. would be allowed in future. I do not see

how the parties could entertain such an impression in their

minds, and how the Lok Adalath could have allowed the parties to



enter in to such an award.

       12. I see that the Lok Adalath has merely endorsed the

terms of concurrence of the parties without considering the

probable issues of violation of morals and public policy in

permitting parties to settle on contingent terms which depends

on the decisions of this Court in future. This is grossly

inappropriate and I am of the view that the Lok Adalath

misdirected itself in allowing the parties to enter in to a

settlement which is contra bonos mores and contra public policy.

       13. I am of the firm view that the Lok Adalaths have a duty

to ensure that the settlements entered into by the parties confirm

to law, morals and public policy of the Society and the Polity. Any

settlement entered in contravention of these would be completely

unsustainable and incompetent. If this Court notices that the

settlement is one that offers undue advantage to one side on

account of prescription of certain contingencies, it becomes a

case of contravention of public morals as also of public policy

and, therefore, this Court would obtain certain justification in

interfering with such Awards under Article 226 of the Constitution

of India, it being null, void and non-est.


       14. The unexpendable requirement of Lok Adalats to invest

due care, attention and position while passing awards has already

been spoken to about by a Division Bench of this Court in

Rajagopala Rao v. State Police Chief [2016 (3) KLT 358].

The Bench had formated certain guidelines and are very pertinent

to read. I, therefore, deem it necessary to extract the relevant

paragraph of the said judgment as under:

       "18. In order to prevent the menace of passing awards

without due care, attention and precision by Lok Adalats, we

intend to formulate some guidelines. We may hastily add that

they are not exhaustive and may take in other things as well,

depending on the facts of each case. The crucial points to be

borne in mind by the persons presiding over the Lok Adalats and

the lawyers appearing for the parties are thus:

                      (i) The persons presiding shall thoroughly
              study and clearly understand the facts of the
              case coming up for settlement.
                      (ii) They must have a clear understanding
              about the legal issues involved in the dispute
              between the parties.
                      (iii) If the parties have engaged lawyers,
              they shall also participate in the proceedings
              before the Lok Adalat so that a proper
              settlement could be arrived at.
                      (iv) The persons presiding over the Lok
              Adalat and the lawyers concerned shall bear in
              mind the fundamental principles, under the


              Indian Contract Act, 1872, essentially required
              for executing a legally enforceable agreement.
                      (v) They shall bear in mind the principles
              under Order XXIII Rule 3 of the code of Civil
              Procedure, 1908 also, so that the award must
              be in the form of an enforceable decree, if the
              parties so wish. This is all the more important
              because by virtue of sub-section (2) of Section
              21 of the Legal Services Authorities Act, 1987,
              every award made by Lok Adalats shall be final
              and binding on the parties to the dispute and no
              appeal shall lie to any court against the award.
                      (vi) The persons presiding over the Lok
              Adalat shall see that the award passed is clear
              in its terms and there shall be no room for any
              confusion in respect of the terms and conditions
              in the award. They shall take care to see that
              on account of ill-drafting of the compromise, no
              litigation in future arises in respect of the
              matters once settled.
                      (vii) They shall see that the awards
              passed are not only legal, but also conforming
              to the norms prescribed for a decree with all the
              required details in clear and explicit terms."

       15. However, in spite of express declarations by this Court,

it is extremely disheartening and disquieting that lessons are not

being learnt requiring repeated interventions Court.

       16. In the case at hand, I see that the absence of a Clause

in Ext.P7 as to what would happen in the event this Court

dismisses Crl.M.C. No.295/2013, would render the settlement

between the parties, as recorded by the Lok Adalath, inoperative

and completely contingent and therefore, contrary to public



morals. Contingent Awards cannot be countenanced, especially

when such contingencies are relating to pending matters before

Courts, especially this Court.

       17. The malafides involved in the present stand of the 2nd

respondent would be very apparent because it now asserts that

since Crl.M.C. No.295/2013 has been withdrawn by the

petitioner, it is under no obligation to make payment at all. This

obviously offers an illegal and unlawful advantage to the 2nd

respondent, tilting the balance of the scales of justice capriciously

against the petitioner, merely because Ext.P7 Award had been

allowed to be entered into thoughtlessly by the competent

Authority of the 1st respondent. I cannot permit this to happen

and I, therefore, am of the view that I will be justified in

interfering with Ext.P7 Award and relegating the parties to their

normal channel of litigation, so that substantial justice can be

obtained for both sides.

       In such circumstances, I have no hesitation in striking down

and quashing Ext.P7 Award so as to pave way for the

proceedings before the Sub Court, Kollam pending in O.S.

No.381/2013 to be continued and concluded in the manner that



is appropriate in law. I do so.

       Consequently, the Sub Court is directed to continue with the

processes, trial and disposal of O.S. No.381/2013, pending before

it, expeditiously and without any avoidable further delay. The

parties are directed to appear before the Sub Court, Kollam, for

this purpose on 15th of June, 2017.

       This writ petition is thus ordered as above. In the peculiar

facts and circumstances of this case, I make no order as to costs

and I direct the parties to suffer their respective costs.

                                            Sd/-

                                DEVAN RAMACHANDRAN,
                                          JUDGE.

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