Authority & Competence of a Lawyer appointed by a Party to Conduct a Suit on its behalf to Settle the Suit Claim before a Lok Adalat [CASE LAW]
Legal Services Authorities Act, 1987 - S.19 - Authority and competence of a lawyer appointed by a party to conduct a suit on its behalf to settle the suit claim before a Lok Adalat.
Held:- There was no reference of the subject matter of the suit to the Lok Adalat in terms of Section 19 of the Legal Services Act. The settlement dated 6th December, 2014 was not for the benefit of the respondent Bank and caused huge loss to it. The counsel for the respondent in entering into the settlement has not acted either in good faith or for the benefit of the client and implied power to enter into the settlement, the counsel also therefore, failed. There was more than sufficient time and opportunity for the counsel to inform the respondent-bank of the proposed referral to the Lok Adalat and to take its consent with regard to matters which were noted by the trial court in its order dated 28th November 2014. Even if it could be held that the advocate for the bank had implied authority to enter into the settlement, in the instant case, while entering into the settlement on 6th December 2014, there was no exigency or circumstances demanding immediate settlement of the suit by a compromise on 6th December 2014, precluding obtaining instructions from the respondentbank or signature of the person authorized by the bank to enter into a settlement. The learned Single Judge had rightly held that the consent of the respondent-bank for arriving at the compromise before the Lok Adalat which was the sine-qua-non for making of the award before the Lok Adalat was lacking and, therefore, no sanctity could be attached to the award dated 6 th December 2014 passed by the Lok Adalat. In the result, the challenge to the judgment dated 19th March, 2018 is devoid of any merit. The appeal is, therefore, dismissed.
HIGH COURT OF JAMMU
AND KASHMIR AT JAMMU
Coram: HON’BLE THE
CHIEF JUSTICE HON’BLE MR. JUSTICE TASHI RABSTAN, JUDGE
LPA No.28/2018, IA
No.01/2018
Date of order: 31st .12.2018
M/S Singh Hospitality
And Resorts and Ors. vs. Punjab And Sind Bank Bank And Anr.
Appearance: For
the petitioner/appellant (s) : Mr. Abhinav Sharma, Advocate. For the
Respondent(s) : Mr. Sandeep Singh, Advocate.
Gita Mittal CJ:
1. The instant appeal
has been filed by the appellants assailing the order dated 19th March,
2018 passed by the learned Single Judge accepting OWP No.1965/2014 filed by the
Punjab And Sind Bank, respondent No.1 herein.
2. By way of the writ
petition, the Punjab & Sind Bank, Udhampur challenged an order dated 06th December,
2014 passed by the Lok Adalat, Udhampur permitting a settlement proposed before
it.
3. The facts giving
rise to the present appeal fall within a narrow compass and to the extent
necessary, we note the factual background hereafter.
Factual
background
4. M/S Singh Hospitality
& Resorts Ltd (the appellant No.1 before us) had sought and been authorized
financial facilities by the Punjab and Sind Bank (respondent No.1 herein).
Daljit Singh-appellant No.2 and Sarbjeet Singh- the appellant No.3 are the
Directors of the appellant No.1.The facilities which were sanctioned in 2011 to
the respondent No.1 herein included an ODP limit of Rupees Twenty lakhs; and
three term loans. To secure these facilities, the appellant mortgaged several
properties in favour of the Punjab & Sind Bank-the respondent No.1 (the
„Bank‟ hereafter).
5. Default in abiding
with the financial discipline lead to the filing of a civil suit by the Bank
against the appellants before the District Judge, Udhampur for the recovery. In
the plaint filed by the respondent No.1, reference was made to several demands,
requests as well as the notice dated 16th January,
2014 issued under the SARFEASI Act, 2002 served upon the appellants herein
which were not complied with necessitating the filing of the suit on 03rd June,
2014. The suit was filed for recovery of the following amounts:
Principal Amount:
Rs.6,83,72,664/-
Interest : Rs. 96,
44,217/-
Total :
Rs.7,80,16,881/-.
The respondent
No.1-Bank also sought pendentelite and future interest at the rate of 15.25 per
cent per annum with monthly rests on the above amount from 01st May,
2014.
6. The suit was listed before the court on 28th November,
2014 when the following order came to be recorded:
“Counsel for the
parties present. During hearing of the case and submissions of the parties
in order to settle the case in National Lok Adalat, following reference
point is made with regard to which parties may deliberate and
also inform their respective higher competent authority or head office and
put up their respective stand before this court by or before
06.12.2014 date of scheduled National Lok Adalat.
In
case the principal amount is agreed to be paid in lumpsum
what shall be the rate of interest which the parties will agree to pay.
It is mentioned that
while putting forth the stand by respective parties nothing shall be taken into
account for disposal of the said case on merits nor any stand or submission
during negotiations shall prejudice either of the parties for final determination
of the suit. Put up the case on 06.12.2014.”
(Emphasis
by us)
7. On the 06th December, 2014, instead of the case being listed before the court,
the suit was also placed in the National Lok Adalat. The proceedings of the Lok
Adalat as placed before us record the presence of the counsel for the plaintiff
Mr. Sohan Lal, Advocate; Daljit Singh; defendant and the defendant‟s counsel-
Mr. Ajay Bendral, Advocate before it.
8. It appears that the Presiding Officer of the trial Court was
appointed as one of the two members of the National Lok Adalat along with Shri
Ch. M Shafi, Advocate. The proceedings of the Lok Adalat and the Award which
came to be passed on 06th December, 2014 are self-speaking and also deserve to be extracted
in extenso. The same reads as follows:
“Award
The suit has
been taken in National Lok Adalat in presence of the Counsel
for the plaintiff Mr. Sohan Lal Advocate and defendant Daljit Singh and
defendant’s counsel Mr. Ajay Bendral Advocate.
The parties and
their counsels have agreed to settle the present suit and defendants have agreed
to liquidate the original principal amount and the plaintiff bank waived
the interest on the condition that the amount shall be paid to the plaintiff
bank within one year from today.
The plaintiff bank
has also agreed to release the property mortgaged with Bank except Hotel
Singh Axis situated at M. H., within one month from today.
Parties have also
agreed that in case the amount is not paid within one year as aforesaid the
defendant shall be liable and plaintiff shall be entitled to recover whole of
the suit amount alongwith interest rate agreed between the parties at the
time of loan as mentioned in suit in one go.
The above terms
and conditions are acceptable to the parties who have fixed their
signatures.
1. Bank Counsel
Sohan Advocate Members (R K Wattal)
2. Defendant Daljit
Singh
3. Ajay Bendral
Advocate (Ch. Shafi Adv.)”
(Emphasis
by us)
9. When the above settlement was brought to its notice, the
respondent No.1-Bank challenged the same and sought its quashing by way of a
writ petition which was registered as OWP No.1965/2014.
10. Our attention has been drawn to the order dated 13th October,
2017 in the writ petition when the appellants had sought time to file a reply
to the writ petition and were granted three weeks‟ time to file objections.
This was not done.
11. Again on 07th November, 2017, the respondents had sought and were granted a
week‟s further time to file objections. On this date, Mr. Sandeep Singh,
learned counsel for the Bank had sought time to lay a motion for impleadment,
being CMA No.2554/2014, of Legal Services Authority as party respondent in the
writ petition.
12. On the next date of hearing, i.e. 08th December,
2017, the counsel for the appellants had prayed for and were granted eight
weeks‟ time by way of “last and final opportunity for filing
objections/reply, failing which right to file shall stand closed and the writ
petition shall be heard without response”. This order was not complied
with.
13. It appears that on 19th March,
2018, a stand was taken on behalf of the appellants that they did not file
objections for the reason that the Bank had filed an application seeking
amendment of the petition. This stand was not accepted by the learned Single
Judge who noted the pronouncement of the Supreme Court reported at (1996) 3
SCC 435, State of Orissa vs. Sharad Chandra Sahu. It was observed by
the learned Single Judge that the respondents in such a situation ought to have
filed an application seeking extension of time to file objections and
consequently the order dated 08th December, 2017 bound the
parties.
So far as the
application for amendment of the petition was concerned, the respondent-Bank
had sought a prayer to implead the Presiding Officer of the Lok Adalat which
was not permissible. The application was also, therefore, rejected.
14. In this background, the writ petition was admitted for hearing
and with the consent of the counsel for the parties, the same was heard finally
on the available pleadings and allowed on 19th March,
2018 quashing the order dated 06th December, 2014 passed by the
Lok Adalat.
15. The learned Single Judge noted that there was no rebuttal to the
stand taken by the petitioner. The order dated 19th of
March, 2018 was premised on the finding by the learned Single Judge to the
effect that there was no consent of the respondent No.1-Bank before making a
concession waiving the complete interest liability of the appellant to the
respondent-Bank. It was observed that since the consent of the respondent No.1
was lacking, which was the sine qua non for making of an award before
the Lok Adalat, therefore, no sanctity could be attached to such an award
passed by the Lok Adalat in the eye of law which was consequently quashed and
the suit remitted to the District Judge, Udhampur for adjudication.
Appellants
contentions
16. The primary ground on which the appellants assail the order dated
19th March, 2018 of the learned Single Judge is that before the Lok
Adalat, the respondent-Bank was represented by its counsel. It is submitted
that Mr. Sohan Lal was the appellants‟ advocate before the trial court who
appeared before the Lok Adalat on 06th December,
2014 was a duly authorized advocate of the respondent-Bank, and therefore had
full authority to enter into the settlement and bind the respondent-Bank by the
same.
17. It is contended by Mr. Sharma that Sohan Lal had been duly
engaged by the Bank to file and conduct its suit and, therefore, a presumption
arose that he must have obtained consent of the petitioner.
18. Mr. Abhinav Sharma, has also placed reliance on the pronouncement
of the Supreme Court reported at AIR 1975 SC 2202, Jamil Abdar Kadar vs. Shankarlal
Gulabchand(Para 22); and AIR 1991 SC 2234, Byram Pesotnji Gariwala v. Union
Bank of India and others and contended that the principles laid down in
these two judgments apply to the present case and the settlement reached before
the Lok Adalat and that its award dated 06th December,
2014 binds the respondent No.1- Bank and that it cannot be permitted to wriggle
out of the same. In support of the same proposition, Mr. Abhinav Sharma,
learned counsel for the appellants has also placed reliance on the judgment of
the learned Single Judge of this court reported at 2008 (2) JKJ 492 [HC],
Ram Ji and Another v. New India Assurance C. Ltd. & Ors.
Respondents
contentions
19. On the other hand, Mr. Sandeep Singh, learned counsel for the
respondent-Bank has drawn our attention to Section 18(4) and Section 19 of the
Legal Services Act, 1997. Mr. Singh has also placed the order dated 28th November,
2004 recorded by the learned Principal District Judge, Udampur in the civil
suit. It is Mr. Singh‟s submission that in the instant matter, as a matter of
fact, there was no order of reference made by the learned District Judge
referring the dispute for consideration before the National Lok Adalat. In the
absence of referral order, on 06th December, 2014, the Lok
Adalat could not have taken cognizance of the disputes between the parties and,
therefore, no award could have been passed settling the disputes between the
parties. In support of this submission, apart from the reliance on the above
noted statutory provisions, Mr. Sandeep Singh has placed reliance on the
judgment dated 14th November, 2011 deciding OWP No.210/2008, Bachan Kour and Others
vs. Mega Lok Adalat and Others, etc.
20. Mr. Singh would further submit that in the writ petition, the
Bank has delineated the tremendous loss which resulted to the respondent-Bank
by the settlement and that as on present, the appellant owes a liability of Rs.
Ten crore to the respondent-Bank.
21. Our attention is also drawn to the statement made by the counsel
for the appellant before the learned Single Judge on 19th March,
2018 to the effect that he would submit a proposal to the Bank under the “One
Time Settlement Scheme” within one month from the date of receipt of copy
of the order.
The counsel for the
Bank had informed the learned Single Judge that in case such a proposal is
submitted by the appellants herein, the same shall be considered in accordance
with law. On these submissions, the learned Single Judge had issued time bound
directions that in case a proposal under the One Time Settlement Scheme, the
competent authority shall deal with the proposal of the appellants in
accordance with law within a period of four weeks of its receipt.
22. Mr. Sandeep Singh, learned counsel for the respondent has
submitted that the appellants have even backed out of this proposal.
Discussion
23. The basic issue which has to be considered in the present matter
is the authority and competence of a lawyer appointed by a party to conduct a
suit on its behalf to settle the suit claim before a Lok Adalat.
24. In support of the submission that a counsel is legally competent
to enter into a binding settlement with the other party, Mr. Abhinav Sharma,
learned counsel would place reliance on Section 2(15), Rules 1, 2, 4(1) of
Order 3 and Rule 3 of Order 23 of Code of Civil Procedure, 1977 as it applies
to Jammu and Kashmir which read thus:
Sec.
2(15): “Pleader” means any person entitled to appear and plead for another
in Court, and includes an advocate, a vakil and [ any attorney of the High
Court].
Order
III:
(1)
Appearances, etc., may be in person, by recognized agent or by pleader Any
appearance, application or act in or to any Court, required or authorised by
law to be made or done by a party in such Court, may, except where otherwise
expressly provided by any law for the time being in force, be made or done by
the party in person, or by his recognized agent, or by a pleader duly appointed
to act on his behalf: Provided that any such appearance shall, if the Court so
directs, be made by the party in person.
Order
III:
(2)
Recognized agents
The recognized agents
of parties by whom such appearances, applications and acts may be made or done
are-
(a) persons holding
powers-of-attorney, authorizing them to make and do such appearances,
applications and acts on behalf of such parties;
(b) persons carrying
on trade or business for and in the names of parties not resident within the
local limits of the jurisdiction of the Court within which limits the
appearance, application or act is made or done, in matters connected with such
trade or business only, where no other agent is expressly authorized to make
and do such appearances, applications and acts.
Appointment
of pleader
4(1)
The appointment of a pleader to make or do any appearance, application or act
for any person shall be in writing, and shall be signed by such person or by
his recognized agent or by some other person duly authorized by
power-of-attorney to act in this behalf.
xxxxxxx
Order
XXIII:
Compromise
of suit
(3) Where
it is proved to the satisfaction of the Court that a suit has been adjusted
wholly or in part by any lawful agreement or compromise, [in writing and signed
by the parties] or where the defendant satisfies the plaintiff in respect of
the whole or any part of the subject-matter of the suit, the Court shall order
such agreement, compromise or satisfaction to be recorded, and shall pass a
decree in accordance therewith so far it relates to the parties to the suit
whether or not the subject-matter of the agreement, compromise or satisfaction
is the same as the subject-matter of the suit:
[Provided that where
it is alleged by one party and denied by the other that an adjustment or
satisfaction has been arrived at, the Court shall decide the question; but no
adjournment shall be granted for the purpose of deciding the question, unless
the Court, for reasons to be recorded, thinks fit to grant such adjournment.]
[Explanation. — An
agreement or compromise which is void or voidable under the Contract Act, Svt.
1977, shall not be deemed to be lawful within the meaning of this rule.]
25. Before considering the submissions, let us consider the
principles laid down in the judicial precedents placed before us. So far as the
first judicial pronouncement reported at AIR 1975 SC 2202, Jamil Abdar
Kadar v. Shankar Gulabchand placed by the appellants before us is
concerned, it would be useful to extract the relevant portion thereof in
extenso, which reads as follows:
“22. While we are not
prepared to consider in this case whether an Advocate or pleader is liable to
legal action in case of deviance or negligence, we must uphold the actual,
though implied, authority of a pleader (which is a generic expression including
all legal practitioners as indicated in s. 2(15), C.P.C.) to act by way of
compromising a case in which he is engaged even without specific consent from
his client, subject undoubtedly to two over-riding considerations : (i) He must
act in good faith and for the benefit of his client ; otherwise
the power fails (2) it is prudent and proper to consult his client and take his
consent if there is time and opportunity. In any case, if there
is any instruction to the contrary or withdrawal of authority, the implicit
power to compromise in the pleader will fall to the ground. We need hardly
emphasise that the bar must sternly screen to extirpate the black-sheep among
them, for Caesar's wife must be above suspicion, if the profession is to
command the confidence of the community and the court.”
(Emphasis
by us)
26. The second pronouncement placed before us by the appellants
stands reported at as AIR 1991 SC 2234, Byram Pestonji Gariwala v. Union
of India and others. Para 37 of this pronouncement on which
reliance is placed is extracted below as:
“37. We may, however,
hasten to add that it will be prudent for counsel not to act on implied authority
except when warranted by the exigency of circumstances demanding immediate
adjustment of suit by agreement or compromise and the signature of the
party cannot be obtained without undue delay. In these days of easier and
quicker communication, such contingency may seldom arise. A wise and
careful counsel will no doubt arm himself in advance with the necessary
authority expressed in writing to meet all such contingencies in order that
neither his authority nor integrity is ever doubted. This essential precaution
will safeguard the personal reputation of counsel as well as uphold the
prestige and dignity of the legal profession.”
(Emphasis
by us)
27. Lastly, the judicial pronouncement of a learned Single Judge of
this Court reported at 2008 (2) JKJ 492[HC], Ram ji and another V. New
India Assurance C. Ltd and Ors has been placed. Mr. Sharma has relied
on Paras 16 and 17 of the pronouncement which read as follows:
16. A Single Bench
judgment of this court rendered in Kesar Singh v. Balbir Singh and another,
2004 (1) SLJ, 189, on the issue can also be read with advantage. In the said
case, the claim petition arising out of an accident was compromised
in Lok Adalat by the counsel for the claimant and an appeal was filed
impugning the award on the ground that the counsel should have obtained consent
of the claimant and as such he had mis-conducted himself. This Court while
dismissing the appeal of the claimant/appellant, held that it is settled preposition
of law that no appeal would lie against the consent decree. However,
it can definitely be interfered with, if the same is the result of fraud and
misrepresentation or such like factor. It was further held that
the compromise entered into between the parties is binding and it is only
under exceptional circumstances that the court may interfere with the same.
The court did not find any exceptional circumstances in the aforesaid case. The
grievance shown by the appellant in the present appeals is of not
taking of consent from them by their counsel before entering into the
settlement and that the second grievance is with regard to the amount of
compensation being on lower side. No fraud, misrepresentation or such like
objections have been pleaded in the appeals. Therefore, pleas taken herein
cannot be considered as exceptional circumstances for interfering with the
consent decree and, as such, no appeal would lie in such like factual backdrop.
To be fair to Mr. Bhatia, I would like to mention here that question of
maintainability of appeals was not the issue in Kamlesha Devi’s case (supra)
relied by Mr. Bhatia.
17. Although on the
point of maintainability, the present three appeals merit dismissal in the
light of the aforesaid discussion, yet I intend to comment upon the second issue
also on which Mr. Bhatia is relying upon very heavily. According to him,
the compromise effected before Lok Adalat is in violation of Order
XXIII Rule 3 of the Code of Civil Procedure. In my view, this plea is also
not sustainable in view of the judgment rendered by Apex Court in Byram
Pestonji Gariwala’s case (supra), in which their Lordships have held that the
expression “in writing and signed by the parties” includes counsel and agent of
the party. In the said judgment, while discussing various other judgments,
it was observed that it has always been universally understood that a party
can always act by his duly authorized representative and if a power of attorney
holder can enter an agreement or compromise on behalf of his principal, so can
his counsel possessed of the requisite authorization by Vakalatnam can act
on behalf of his client. It was further observed that not to recognize
such capacity is not only to cause much inconvenience and loss to the parties
personally, but also to delay the progress of proceedings in Court and if the
legislature had intended to make such a fundamental change, even at the risk of
delay, inconvenience and needless expenditure, it would have expressly so
stated.”
(Emphasis
by us)
28. The provisions of the Code of Civil Procedure which have been
placed before us are clear and need no further elaboration. By virtue of
sub-section 15 of section 2 of the CPC, an advocate is covered under the
definition of a Pleader in Court. Rule 1 of Order III enables such advocate who
has been duly appointed to appear, make an application or act in any court.
29. Rule 2 of Order III is concerned with the acts of “recognized
agents of parties by whom certain acts can be undertaken on behalf of the
parties to the litigation”. Clause (a) of Rule 2 of Order III refers “
persons holding power of attorney”.
30. So far appointment of a pleader i.e. advocate is concerned, the
same is provided in sub-rule (1) of rule 4 of Order III of the CPC. The same mandates
that a pleader would be appointed by act for any person by document in writing
which has been signed by the person or by his recognized agent or by another
person duly authorized by a power of attorney.
31. In the instant case, the act of the advocate which has been
challenged by the party who may represent it does not relate to an act “in
court” but his act of settling the matter before the Lok Adalat. What has to be
therefore seen is as to whether Order III mandates that a party is bound by
acts of his advocate appointed by him in terms of Order III to represent him in
case before a court or would it bind him in proceedings before the Lok Adalat?
32. In the instant case, the respondent excepts Shri Sohan Lal,
Advocate was authorized to file and conduct the suit before the trial court.
Unfortunately, the Vakalatnama has not been placed before us.
33. In a judgment of a learned Single Judge reported 2014 (2)
JKJ 344, Ishpal Singh v. Lok Adalat, a learned Single Judge of this
Court referred to the Vakalatnama on record in the suit and noted that the
petitioner thereby authorized the counsel inter alia to compromise the
said cause. In view of this authority, it was held that the petitioner therein
could not be heard to say that his counsel was not authorized to enter into a
settlement before the Lok Adalat.
34. This judgment is distinguishable on facts from the present case,
inasmuch as the reference to the Lok Adalat in the case was at the instance of
the petitioner, who was instructed to be present before the Lok Adalat. He
chose not to appear and in the circumstances, his counsel has signed the
settlement deed. It was, therefore, held that the counsel stood authorized to
enter into the settlement and, therefore, no fault could be found that the
impugned award “unless the petitioner demonstrates that the case is not
acted bonafidely”.
Inasmuch as, we are
taking a view on the later part on the issue of bonafides, we are not dwelling
on the question of authorization under the Vakalatnama. This is also for the
reason that the Vakalatnama itself has not been placed before us. We,
accordingly, refrain from further inquiry on this aspect of the matter. Whether
the requirement of the Legal Services Authorities Act had been satisfied?
35. We examine this issue a little later. Let us briefly also examine
the nature of the proceedings before the Lok Adalat which stand created under
Chapter V of the Jammu and Kashmir Legal Services Authorities Act, 1997
(hereinafter called „Legal Services Act‟).
36. We may usefully extract the relevant portion of Sections 18, 19,
20 as well as 21 of the Legal Services Act, which stand placed by Mr. Sandeep
Singh, Advocate before us. These sections read thus:
18.
Organization of Lok Adalats.—(1) The State Authority or District
Authority or the High Court Legal Services Committee, or as the case may be,
Tehsil Legal Services Committee may organize Lok Adalats as such intervals and
places and for exercising such jurisdiction and for such areas as it thinks
fit.
(2)
Every Lok Adalat organised for an area shall consist of such number of— (a)
serving or retired judicial officers ; and (b) other persons, 14 of the area as
may be specified by the State Authority or the District Authority or the High
Court Legal Services Committee, or as the case may be, the Tehsil Legal
Services Committee, organising such Lok Adalats.
(3)
The experience and qualification of persons referred to in clause (b) of
sub-section (2) for Lok Adalats shall be such as may be prescribed by the
Government in consultation with the Chief Justice of the High Court.
(4)
Lok Adalat shall have jurisdiction to determine and to arrive at a
compromise or settlement between the parties to a dispute in respect of—
(i) any case pending before ; or (ii) any matter which is falling within the
jurisdiction of and is not brought before, any court for which the Lok Adalat
is organised : Provided that the Lok Adalat shall have no jurisdiction in
respect of any case of matter relating to an offence not compoundable under any
Law.
19.
Cognizance of cases by Lok Adalats.—(1) Wherein any case referred to in
clause (1) of sub-section (4) of section 18,—
(i)
(a) the parties thereof agree ; or
(b) one of the parties thereof makes an application to the
Court for referring the case to the Lok Adalat for settlement and if such court
prima facie satisfied that there are chances of such settlement ; or
(ii)
the court is satisfied that the matter as an appropriate one to be taken
cognizance of by the Lok Adalat, 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.
(2)
Notwithstanding anything contained in any other law for the time being in
force, the Authority or Committee organising the Lok Adalat under sub-section
(I) of section 18 may, on receipt of an application from anyone of the
parties to any matter referred to in clause (ii) of sub-section (4) of
section 18 that such matter needs to be determined by a Lok Adalat refer such
matter to the 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 the Lok Adalat under subsection (1) 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, with utmost expedition to arrive at a compromise or settlement between the
parties and shall be guided by the principles of justice, equity, fair play and
other legal principles.
20. Award of Lok Adalat.–(1) Every award of the Lok Adalat shall be deemed to
be a decree of a civil or, as the case may be an order of any other court
and where a compromise or settlement 16 has been arrived at, by a Lok Adalat in
a case referred to it under sub-section (1) of section 19, the Court fee
paid in such case shall be refunded in the manner provided under the Court
Fees Act, Samvat 1977.
(2)
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.
21.
Powers of Lok Adalats.—(1) The Lok Adalat shall, for the purposes of
holding any determination under this Act, have the same powers as are vested in
a civil court under the Code of Civil Procedure, Samvat 1977, while trying
a suit in respect of the following matters, namely :—
(a)
the summoning and enforcing the attendance of any witness and examining him on
oath ;
(b)
the discovery and production of any document ;
(c)
the reception of evidence on affidavits ;
(d)
the requisitioning of any public record or document or copy of such record or
document from any court or office ; and
(e)
such other matters as may be prescribed. (2) Without prejudice to the generality
of the powers contained in sub-section (1), every Lok Adalat shall have the
requisite powers to specify its own procedure for the determination of any
dispute coming before it.
(3)
All proceedings before a Lok Adalat shall be deemed to be judicial
proceedings within the meaning of sections 193, 219 and 228 of the Ranbir
Penal Code, Samvat 1989 and every Lok Adalat shall be deemed to be a civil
court for the purpose of section 195 and Chapter XXXV of the Code of Criminal
Procedure, Samvat 1989.”
(Emphasis by us)
37. So far as the proceedings before the Lok Adalat are concerned,
the same would commence when any case is referred to a Lok Adalat in terms of
Section 19. Sub section(1) (a) of the section 19 mandates an agreement of the
parties to a case for referring the matter to the Lok Adalat. In case only one
of the parties is desirous in referring the case to the Lok Adalat for
settlement, the court has to proceed in accordance with Section 19(1b) of the
Legal Services Act.
38. A case can be referred to the Lok Adalat by the Court in
accordance with Section 19(2), if it is satisfied that the matter is an
appropriate one to be taken cognizance of by the Lok Adalat. However, this suo
moto power is guided by the proviso which mandates that no case shall be
referred to the Lok Adalat under sub clause (b) of Clause (1) or sub section
(2) of Section 19 of the Legal Services Act by the Court “except after
giving reasonable opportunity of being heard to the parties”.
39. Sub section (2) enables parties to also approach the authority or
Committee organizing the Lok Adalat to make an application that the matter
needs to be determined by the Lok Adalat. Such Committee or Authority may also
refer the matter to the Lok Adalat for determination again subject to the stipulation
as contained in the proviso to Section 19(2) that “no matter shall be
referred to the Lok Adalat except after giving reasonable opportunity of being
heard to the other party”.
40. It is evident from the legislative mandate that a party to a case
has the right to oppose its reference to the Lok Adalat for settlement. Though
the legislation enables any one of the parties to seek reference of the matter
to the Lok Adalat, either by the Court or by the Authority, constituting the
Lok Adalat, such reference however can be made only after prior hearing
accorded to the other side.
41. We have extracted hereinabove the order dated 28th November,
2014 of the trial court wherein the issue of reference of the matter to the Lok
Adalat had been for the first time mooted by the court. The Trial Judge has
clearly reminded the parties that they may “deliberate and also inform their
respective higher competent authority or head office and put up their
respective stand “before this Court by or before 06th December,
2014”. The issues on which the parties were required to deliberate has
also been noted in the order dated 28th November,
2014 which was that, in case the principal amount is agreed to be paid in the
lumpsum, what shall be the rate of interest which the party would agree to pay.
It is clear from this order that no hearing on the question of reference to the
Lok Adalat in terms of Section 19 of the Act was conducted on 28th November,
2014. This hearing itself was postponed to 6th December,
2014.
42. The order dated 28th November, 2014 also shows
that the learned trial Judge was cognizant of the fact that the litigation
involved a party which may require consent from “higher competent authority
or head office” and also consideration of the “rate of interest”. The
order dated 28th November, 2014 thus by no stretch can be construed to be an order
of reference of the disputes between the parties to the Lok Adalat.
43. We are unable to comprehend as to how the case even came to be
placed before the Lok Adalat on the 6th December,
2014. It had clearly not been so directed by the trial Judge. The proceedings
before the Lok Adalat thus were in complete violation of the provisions of the
Legal Services Authorities Act.
Legality
and bindness of the settlement and award recorded on 06th December,
2014 by the Lok Adalat.
44. Be that as it may, given the detailed submissions made by Mr.
Abhinav Sharma, learned counsel for the appellants, we may test these
submissions in the light of the law placed by Mr. Sharma before us.
45. Applying the principles laid down by the Supreme Court in AIR
1975 SC 2202, Jamil Abdar Kadar vs. Shankarlal Gulabchand, even
if we were to hold that Shri Sohan Lal had the authority of a pleader under
Section 2(15) CPC to act by way of compromising before the Lok Adalat the claim
in the suit pending in the court even without specific consent from his client,
in Para 22 of the pronouncement, the Supreme Court has categorically stated
that such pleader “must act in good faith and for the benefit of his client;
otherwise the power fails”. The Supreme Court has also declared the manner
in which the pleader should proceed observing that “it is prudent and proper
to consult his client and take his consent if there is time and opportunity”. In
the present case, as is evident from the above narration, the learned trial
Judge had on the 28th November, 2014 recorded the order in the presence of the pleader
of the Bank suggesting a reference to the Lok Adalat and calling upon the
parties to deliberate. This was not the duty of the learned trial Judge. Yet,
he had cautiously reminded the counsels that they could “inform their
respective higher competent authority or head office”. The Trial Court had
even suggested deliberation on the rate of interest which the parties would
agree to pay. The suit was posted on 06th December,
2014. Shri Sohan Lal, Advocate, therefore, not only stood notified of the
proposal by the trial Judge and that he ought to consult his client but was
given more than sufficient time to inform his client and to seek proper
instructions. Clearly he has acted imprudently and improperly and failed to
consult his client.
Whether
there was consent of the respondent-Bank to the terms of the settlement ?
46. We are next called upon to examine the challenge to the finding
of the learned single Judge that the respondent No.1-Bank had not given its
consent to any settlement, more specifically to the waiver of the complete
interest liability of the appellant to it. Significantly, specific assertions
to this effect made in the writ petition by the Punjab and Sind Bank which were
not repudiated by the respondents. In Paras 4 and 5 of the writ petition, OWP
No.1965/2014, the respondent Bank has clearly stated that the lawyer appeared
without authority and in Para 6 of the writ petition, it is reiterated that
even a show-cause notice stand issued to the Advocate. Despite repeated
opportunities and even last opportunity to do so having been granted, the
appellants had failed to file objections or counter affidavit challenging the
assertion of fact by the Bank.
47. So far as issue of “good faith” and “benefit of his
client” is concerned, the respondent-Bank in its writ petition has made the
following assertions:
“ (7) That the
said Advocate Sh. Sohan Lal has settled the case on the principles original
amount and whole of the interest part has been waived out. It may be further
pointed out that as on dated i.e. 30.12.2014 the principle amount to be
recovered by the petitioner bank is Rs.6,29,84,134.23 paise and interest
component to be recovered is Rs.2,07,78,084/-. Thus total amount of Rs.8,37,62,218.23
is recoverable. The said Advocate Sh. Sohan Lal without any authority from the
bank has waived the interest of amount of Rs.2,07,78,084/-. The said waiver
of interest cannot be granted by the Manager of the bank, nor the zonal officer
of the bank, but the same can be considered only by the Board of Directors for
which a proper motion is required to be made. The detail with regard to
the total Principle amount and memoranda of interest is enclosed as annexure
P-6 for the kind perusal of this Hon’ble court. It may be further pointed out
that Law circular No.226 dt. 22.5.2013 issued by the Punjab and Sind Bank
clearly delegates the power to the functionary and other executives for grant
of notional concession. The Chairman and the Managing Director of the Bank has
power to remit the interest part only upto Rs. One crore and any amount above
to Rs. One crore is to be placed before the Managing Committee of the Members
who has powers to remit the same but in the present case Sh. Sohan Lal Advocate
has exercised the powers of the Managing Committee of the Board and has
remitted the interest of Rs.2,07,78,084/- which is beyond his Authority and
as such the award dt. 6.12.2014 is bad in law and is required to be quashed.
The copy of the said circular is enclosed herewith as annexure P -7 for the
kind perusal of this Hon’ble Court.
xxxxx
(10). That in case
the above said award dt. 6.12.2014 is not quashed the petitioner bank
will suffer a loss to the tune of Rs.2,07,78,084/- plus further interest till
the realization which cannot be compensated by way of cost.”
(emphasis
supplied)
48. So far as the settlements are concerned, in Para 8 of the writ
petition, a reference has been made to a Bank Circular in the following terms:
“8.
That the said Advocate Sh. Sohan Lal without the consent of the petitioner bank
has granted consent of the payment within a period of one year but the
law circular further states that in case of settlement the whole payment is to
be paid within a period of 90 days failing which the interest rate on that
amount is required to be charged. Moreover, at the time of the
settlement as per the law circular, 25 % of the settled amount is
required to be deposited by the borrower. All these circular were in the
knowledge of the said Advocate but inspite of that without information to the
bank and without any authority from the bank to settle the case has given his
consent before the Lok Adalat bench and has settled the case for only principal
amount and has waived of the interest Component”.
(Emphasis
supplied)
49. The award dated 06th December, 2014 notes that
mortgaged property would stand released within a month. On the issue of power
of releasing of mortgaged property in Para 9 of the writ petition, it has been
stated as follows:
“9.
That the said Advocate has further agreed to release the property
mortgaged with the bank within a period of one month which also beyond
his jurisdiction and authority given to the said Advocate. The said Advocate
was not having any authority to say anything with regard to the remission of
the interest and release of the property. The same lies only with the higher
authorities which is the Managing Committee of the Bank and without their
approval nothing can be settled by the said advocate of the petitioner bank and
as such the award dt. 6.12.2014 is required to be quashed.
(emphasis
supplied)
50. None of these specific pleadings have been controverted. The rear
averments of the Bank, therefore, stoop up repudiated.
51. It must be satisfied that the advocate has acted in good faith
and for the benefit of respondent-bank. Otherwise the implied authority of the
advocate to compromise the case has to fail.
52. So far as the settlement which was reached on 6th December
2014 is concerned, the advocate agreed to settle the suit claim for only the
principal amount of Rs. 6,83,72,664/- and completely waived the entire interest
liability i.e., the amount of Rs. 96,44,217/- upto the date of the filing of
the suit as well as the pendentelite interest on the total amount.
53. The settlement does not stop at this. While agreeing to receive
only the principal amount, the advocate gave his consent that even this
principal amount could be paid to the Bank within one year from the date of the
settlement. No down payment at all was sought nor was any security for even
this amount obtained. Instead the advocate agreed that the property mortgaged
with the bank except one hotel would be released by the bank “within one month
from today”. Thus, the advocate agreed to release of property which had been
mortgaged to the bank without receiving a penny‟s payment. No effort was made
to ascertain as to whether the Hotel Singh Axis (which was agreed to remain
mortgaged with the Bank) was enough to secure the amount which was payable by
the appellants in terms of this settlement. Even the default clause which was
incorporated in the settlement refers only to payment of monetary amount. It
makes not a remotest suggestion to the fate of the mortgaged property in case
of the default.
54. The agreement to waive an amount of over Rs. 96,44,217/-
certainly cannot be held to be for the benefit of the respondent-bank. The
agreement to release valuable mortgaged property which was held by the bank as
security for securing the amounts due and payable by the appellant is equally
against the interest of the respondent-bank. In case of breach of payment by
the appellants the bank would have little to recover the amount.
55. The agreement to permit the appellants to pay even the principal
amount within one year, that too without any interest is against the benefit of
the client. It needs no elaboration that the Punjab and Sindh Bank is dealing
with public funds and is accountable to the other account holders. It is not
open for any bank to arbitrarily confer special treatment to any of its
clients, more so, when benefits running into lakhs of rupees are concerned. In
this case, it would seem the benefit which the appellant reaps, runs into
crores of rupees.
56. On the suit claim, the bank had paid court fee of Rs.75,000/-. No
amount towards the cost incurred by the Bank in initiating the litigation and
pursuing the same is forthcoming on the record.
57. We find that not only the complete interest, for which the Bank
had paid court fees of Rs.75,000/- on the suit filed by it, being completely
waived but also the mortgaged property has been released.
58. We are informed by Mr. Sandeep Singh, learned counsel, that the
liability of the appellants to the Bank, when calculated on the terms of the
financial facilities and documentation executed between the parties, as on
date, is well over Rs. Ten Crore.
59. The settlement is by no stretch of imagination is for the benefit
of the bank. In view of the above, it is undisputed that the counsel has caused
substantial loss to the respondent-Bank . It therefore has to be held that the
advocate has neither acted in good faith nor for the benefit of his client.
Therefore, on application of the principles laid down by the Supreme Court in Jamil
Abdar Kadar vs. Shankarlal Gulabchand, the compromise must fail.
Consequently, even
implied authority, if any, in the counsel engaged for prosecuting the suit, to
compromise the case before the Lok Adalat, completely fails.
60. Even on application of the principles laid down by the Supreme
Court in Byram Pesotnji Gariwala (supra), the appellant is unable to
show any “exigency or circumstances demanding immediate adjustment of suit
by agreement or compromise”.
61. The order dated 28th November, 2014 was passed in
the presence of the counsel.
62. The mala fide of the appellants is also writ large on the face of
record inasmuch a statement was made before the writ court that it would opt
for a one time settlement. The filing of the appeal manifests that the
respondents have backed out from the same.
63. The trial court had specifically directed the advocate that in
case it was agreed that the principal amount would be paid in lumpsum, then
instructions needed to be obtained as to “what shall be the rate of interest
which the parties will agree to pay”. Such instructions were to be obtained
from the “ his/her competent authority or head office.” Yet, there is no
dispute at all that despite the clear mandate of the order dated 28th November
2014 and the directions of the trial court, the advocate failed to even inform
the respondent-bank, let alone any higher competent authority or its head
office, with regard to the proposal to refer the suit claim to the National Lok
Adalat.
64. We find that there is nothing on record to suggest that the
consent or signature of the competent authority of the Bank could not be
obtained without undue delay.
The advocate acted in
complete breach of this clear direction by the trial court.
65. In Byram Pesotnji Gariwala v. Union Bank of India and
others, the Supreme Court has unequivocally declared the law that it would
not be prudent for counsels to act on implied authority, “except when
warranted by the exigency of circumstances demanding immediate adjustment of
the suit by agreement or compromise and the signature of the party cannot be
obtained without undue delay”. In the present case, there is no exigency or
circumstance at all which necessitated immediate adjustment of the suit by the
compromise. There was no reason as to why the signature of the authorized
person in the respondent-bank could not be obtained.
As back as in 1991,
the Supreme Court had noted that in these days of easier and quicker
communication, such contingency may seldom arise. In the present case, there
was no urgency at all.
66. We have put to learned counsel Mr. Abhinav Sharma, to explain as
to what were the exigencies which demanded immediate attention and adjustment
necessitating such an emergent situation that the settlement had to be reached
before the Lok Adalat on 06th December, 2014. Instead of
pointing out a single circumstance which would enable this Court to hold that
the matter was so emergent that there was no time for the parties or counsel to
approach the Bank, we were told by Mr. Sharma that it was not for the appellants
who were the private parties to respond to this query. It is contended before
us that if we wanted an answer to this question, we had to implead the counsel
for the Bank who alone could answer what was the exigency or the emergency in
reaching a settlement without even intimating the respondent-Bank.
It has to be held
that the settlement has been reached was not only without authority but was an
absolute breach of the rights of the appellant-bank.
Conclusions
I. There was no
reference of the subject matter of the suit to the Lok Adalat in terms of
Section 19 of the Legal Services Act.
II. The settlement
dated 6th December, 2014 was not for the benefit of the respondent Bank and
caused huge loss to it.
III. The counsel for
the respondent in entering into the settlement has not acted either in good
faith or for the benefit of the client and implied power to enter into the
settlement, the counsel also therefore, failed.
IV. There was more
than sufficient time and opportunity for the counsel to inform the
respondent-bank of the proposed referral to the Lok Adalat and to take its
consent with regard to matters which were noted by the trial court in its order
dated 28th November 2014.
V. Even if it could
be held that the advocate for the bank had implied authority to enter into the
settlement, in the instant case, while entering into the settlement on 6th December
2014, there was no exigency or circumstances demanding immediate settlement of
the suit by a compromise on 6th December 2014, precluding
obtaining instructions from the respondent-bank or signature of the person
authorized by the bank to enter into a settlement.
VI. The learned
Single Judge had rightly held that the consent of the respondent-bank for arriving
at the compromise before the Lok Adalat which was the sine-qua-non for
making of the award before the Lok Adalat was lacking and, therefore, no
sanctity could be attached to the award dated 6th December
2014 passed by the Lok Adalat.
Result
67. In the result, the challenge to the judgment dated 19th March, 2018 is devoid of any
merit.
The appeal is, therefore, dismissed.