Case: United India Insurance Co. Ltd Vs. Ajay Sinha &amp; Another

Legal Services Authorities Act, 1987 (the Act) was enacted to constitute Legal Services Authorities to provide for free and competent legal service to the weaker sections of the society, to ensure that opportunities for securing justice are not denied to any citizen by reason of economic or other disabilities, and to organize Lok Adalats to secure that the operation of the legal system promotes justice on a basis of equal opportunity.2. The Act was enacted with a view to give effect to the provisions of Article 39A of the Constitution of India which mandates that State shall secure that the operation of the legal system promotes justice on a basis of equal opportunity, and shall in particular, provide free legal aid, by suitable legislation or schemes or in any other way, to ensure that opportunities for securing justice are not denied to any citizen by reason of economic or other disability.3. If we are to look at the history of grant of legal aid, it may be noticed that the Law Commission of India in its 14th report on reform of Judicial Administration published in 1958, strongly advocated the need for rendering legal aid to poor litigants and categorically stated that the rendering of legal aid to the poor litigants is not a minor problem of procedural law but a question of fundamental character.4. The committee under the Chairmanship of Honble Mr. Justice V.R. Krishna Iyer, then a Member of the Law Commission, constituted by the Government of India Order dated 27th October, 1972 to consider the question of making available to the weaker sections of the community and persons of limited means in general and citizens belonging to the socially and educationally backward class in particular, facilities for(a) legal advice so as to make them aware of their constitutional and legal rights and obligations; and(b) legal aid in proceedings before Civil, Criminal and Revenue Courts so as to make justice more easily available to all sections of the community.With a view to implement the report of the Bhagwati Committee and in fulfillment of its constitutional obligations under Article 39-A of the Constitution, a committee known as the "Committee for Implementing Legal Aid Schemes (CILAS) was being constituted by the Government of India at the very beginning under the Chairmanship of Honble Mr. Justice P.N. Bhagwati. This Committee formulated a broad pattern of the legal aid programme to be set up in the country. It gave stress on preventive legal aid programme with a view to creating legal awareness amongst the people. It also suggested dynamic and activist programmes to carry legal services to the doorsteps of the rural population, to promote community mobilization and rights enforcement through public interest litigations and other statutes. The Committee also framed a model scheme for establishment of State Legal Aid and Advice Boards, as also, Committees at the High Court, District and Tahasil levels to cater legal services to the people at large.5. In the year 1987 the Legal Services Authorities Act was enacted by the parliament with a view to provide free and competent legal services and to ensure opportunity for securing justice to the downtrodden class of the society. The Statement of Objects and Reasons for enacting the Amendment Act is asLegal Services Authorities Act, 1987 was enacted to constitute legal services authorities for providing free and competent legal services to the weaker sections of the society to ensure that opportunities for securing justice were not denied to any citizen by reason of economic or other disabilities and to organize Lok Adalats to ensure that the operation of the legal system promoted justice on a basis of equal opportunity. The system of Lok Adalat, which is an innovative mechanism for alternate dispute resolution, has proved effective for resolving disputes in a spirit of conciliation outside the courts.We may have a look to the relevant statutory provisions for the purpose of this case.7. Section 22-A of the Act defines "Permanent Lok Adalat" to mean a Permanent Lok Adalat established under sub-section (1) of Section 22B. "Public utility service"" inter alia means insurance service, and includes any service which the Central Government or the State Government, as the case may be, may, in the public interest, by notification, declare to be a public utility service for the purposes of this Chapter. Section 22-B. provides for establishment of Permanent Lok Adalats. Section 22-C delineates the jurisdiction of Permanent Lok Adalat to take cognizance of cases filed before it, the relevant provisions whereof are as underCognizance of cases by Permanent Lok Adalat :-1. Any party to a dispute may, before the dispute is brought before any court, make an application to the Permanent Lok Adalat for the settlement of dispute:Provided that the Permanent Lok Adalat shall not have jurisdiction in respect of any matter relating to an offence not compoundable under any law:Provided further that the Permanent Lok Adalat shall also not have jurisdiction in the matter where the value of the property in dispute exceeds ten lakh rupees:Provided also that the Central Government, may, by notification, increase the limit of ten lakh rupees specified in the second proviso in consultation with the Central Authority.(2) After an application is made under sub-section (1) to the Permanent Lok Adalat, no party to that application shall invoke jurisdiction of any court in the same dispute.(3) ... .... ....(4) ... .... ....(5) The Permanent Lok Adalat shall, during conduct of conciliation proceedings under sub-section (4), assist the parties in their attempt to reach an amicable settlement of the dispute in an independent and impartial manner.(6) It shall be the duty of every party to the application to cooperate in good faith with the Permanent Lok Adalat in conciliation of the dispute relating to the application and to comply with the direction of the Permanent Lok Adalat to produce evidence and other related documents before it.(7) When a Permanent Lok Adalat, in the aforesaid conciliation proceedings, is of opinion that there exist elements of settlement in such proceedings which may be acceptable to the parties, it may formulate the terms of a possible settlement of the dispute and give to the parties concerned for their observations and in case the parties reach at an agreement on the settlement of the dispute, they shall sign the settlement agreement and the Permanent Lok Adalat shall pass an award in terms thereof and furnish a copy of the same to each of the parties concerned.(8) Where the parties fail to reach at an agreement under sub-section (7), the Permanent Lok Adalat shall, if the dispute does not relate to any offence, decide the dispute.The Permanent Lok Adalat, in terms of Section 22-D of the Act, while conducting conciliation proceedings or deciding a dispute on merit is not bound by the provisions of the Code of Civil Procedure, 1908 and the Indian Evidence Act, 1872 but guided by the principles of natural justice, objectivity, fair play, equity and other principles of justice.9. Section 22-E of the Act makes an Award of Permanent Lok Adalat to be final and binding on all the parties, which would be deemed to be a decree of a civil court. Jurisdiction of the civil court to call in question any Award made by the Permanent Lok Adalat is barred. It has the jurisdiction to transfer any Award to a civil court and such civil court is mandated to execute the order as if it were the decree by the court.10. Interpretation of the aforesaid provisions in the light of the Statement of Objects and Reasons for which they have been enacted calls for our consideration.11. Before, however, we embark thereupon we may briefly notice the factual matrix involved herein.12. First respondent carries on business in electrical goods. He is an authorized distributor of Sony products. He entered into a contract of insurance with the appellant company; the period covered thereunder being 29th August, 2001 to 31st August, 2002. Allegedly, a burglary took place in his godown in the night of 18th /19th August, 2002. He lodged a First Information Report with Doranda Police Station, Ranchi. He also submitted a claim with the appellant alleging that in the said burglary, goods worth Rs.11,14,597/- had been stolen away.13. Appellant denied and disputed the said claim which refuted the claims by a letter dated 12th August, 2004 interaliaThe surveyor has observed that the loss cannot be assessed since the quantity claimed by you is not verifiable especially as the authenticity of the documents provided by you creates doubt.b) The surveyor has noticed that there is movement of stock from the godown without proper billing and proper entry which was found by the surveyor on their random inspection of the godown on 27.7.2003.c) ..... ..... ......d) .... ..... .....e) The Chartered Accountant who accompanied the surveyor had made an inspection of the financial statements as provided by you and found various discrepancies in your accounts. For these reasons the accounts provided by you cannot be relied upon. It was found by the said Chartered Accountant that there was difference in closing stock, Opening Balance of Sundry Debtors etc. and such the credibility of the accounts submitted by you is doubtful.f) The Dy. Superintendent of Police in his supervision note has recorded that the alleged crime has been done by people who are closely associated with the Company under a high hatched conspiracy and also having the capacity to sell the alleged stolen products in the market.g) It is also observed that neither the FIR nor during investigation by the police you ever disclosed that there was a common watchman in that area where the godown is located which creates doubt about the genuineness of thenot providing any security/watchman with respect to the said godown also amounts to violation of the terms of the Policy coupled with misrepresentation." (Emphasis supplied)14. The Investigating Officer in the criminal case filed a final report. It was, however, opposed by the insurance company. We have not been informed as to whether the cognizance of the alleged offence has been taken by a competent court or not.15. We may, however, notice that respondent being aggrieved by and dissatisfied with the purported repudiation of his claim filed an application before the District Consumer Forum claiming a sum of Rs.18,45,697.50 from the appellant. It was not entertained on the premise that deficiency in service had occurred in connection with a commercial contract.16. First respondent, thereafter, filed an application for the Permanent Lok Adalat claiming a sum of Rs.9,80,000/-. Appellant filed an objection raising the question of jurisdiction of the Permanent Lok Adalat. By reason of an order dated 4th January, 2005, the said objection was overruled stating that it had the pecuniary jurisdiction over the matter and only because a criminal case is pending in the Court of Chief Judicial Magistrate, Ranchi, the same was not relevantthe finding of criminal court is not binding on this court and this court has to decide as to whether burglary had taken place or not. After taking independent evidences of the parties, so far finding of Surveyor is concerned, it is regarding merit of the claim which this P.L.A. has to decide after taking evidence. If the claim cannot be refused on the basis of surveyor report at this stage.Appellant filed a writ application challenging the validity of the said order before the Jharkhand High Court. A learned Single Judge of the High Court allowed the said writ application opining that as Sections 479/461 of the Indian Penal Code being not compoundable, the Permanent Lok Adalat had no jurisdiction to entertain the claimIn my considered opinion, the Permanent Lok Adalat has committed great error of law in holding that it has jurisdiction inspite of the fact that the matter relates to an offence not compoundable under any law. The Permanent Lok Adalat has further committed serious error in holding that the finding of the criminal Court in non-compoundable offence is not binding on it.10. No doubt Chapter VI-A has been inserted in the Legal Services Authority Act, 1987 by Amendment Act of 2002 for constitution of Permanent Lok Adalat for the purpose of pre-litigation, conciliation and settlement, but the whole object of the Act is to provide free legal and competent legal services to the weaker section of the Society to ensure that opportunities for securing justice are not denied to any citizen by reason of economic or other disability. The amended provision of the Act does not confer power to the Permanent Lok Adalat even to entertain the disputes which related to a criminal offence non compoundable in law.An intra court appeal was preferred there against. The Division Bench of the High Court by reason of the impugned judgment and order dated 29th March, 2006 allowed the appeal of the first respondent holding that the pendency of a criminal case has nothing to do with the exercise of jurisdiction by the Permanent Lok Adalat as it was not concerned as to who had committed the burglary but was only concerned with the fact as to whether burglary had taken place or notfar as the case before the Permanent Lok Adalat is concerned, the Adalat is to determine whether burglary had taken place or not, after taking into consideration the independent evidence of the parties. It is not required to determine as to who has committed burglary nor it is required to determine whether an accused is guilty for the charges or not. Therefore, for the purpose of determination of the issue and claim in question, the Permanent Lok Adalat is not required to determine whether offence committed by an accused is compoundable or not. Thus, as in this case such issue is not required to be determined by the Permanent Lok Adalat, we hold that the Permanent Lok Adalat has jurisdiction to decide the claim as made by the appellant, on merit, after hearing the parties and on appreciation of evidence on record. Learned Single Judge has failed to notice the aforesaid facts while determining the issue in question."

Reasoning: 28. In this case, as noticed above, the genuineness of the claim itself is in dispute. Where the parties have taken extreme positions, the same prima facie may not be the subject matter of conciliation which provides for a non binding settlement.29. For the said purpose, the dispute under the criminal procedure and/or the nature thereof would also play an important role. Whereas Respondent states that the burglary has taken place, the appellant denies and disputes the same. In a criminal case, the accused shall be entitled to raise a contention that no offence has taken place. If the criminal court form an opinion that an offence had taken place, which otherwise is a non-compoundable one, the term "relating to an offence" should be given wider meaning. The first proviso appended to section 22-B of the Act may not be of much relevance.30. This aspect of the matter had not been argued before the Division Bench of the High Court. The counsel appearing were remiss in bringing the same to the notice of the Court the binding precedents, as regards the jurisdictional aspect of the Civil Court in the light of Section 9 of the Code of Civil Procedure.We must also take notice of a recent decision of this Court in State of Punjab and another vs. Jalour Singh and others : JT 2008 (2) SC 83 where this Court expressed its dismay with the manner in which the Lok-Adalat matters are dealt with. Chief Justice of India speaking for the Bench, upon noticing the provisions of the Legal Services Authority Act, 1987, observed that whereas Lok Adalat had to arrive at a just settlement in their conciliatory role guided by the principles of justice, equity, fair play and other legal principles, but in that case it assumed a judicial role, heard parties, ignored the absence of consensus, and increased the compensation to an extent it considered just and reasonable, by a reasoned order which is adjudicatory in nature. It arrogated to itself the appellate powers of the High Court and allowed the appeal and directed the respondents in the appeal to pay the enhanced compensation within a period fixed by it. It was held that such an order is not an Award.36. Section 22-C(1) read with Section 22-C(2), Section 22-C(8) and Section 22-E of the Act, exclude the jurisdiction of the civil courts by providing that when an application is made by either party to the Permanent Lok Adalat to settle a dispute at the pre-litigation stage, the PLA shall do so, and the other party is precluded from approaching the civil court in such a case.37. Section 22-C(1) contains certain Provisos which limit the jurisdiction of the PLA. Given the principle of statutory interpretation stated earlier, these Provisos, as a corollary, must be interpreted in an expansive manner.38. What is important to note is that with respect of public utility services, the main purpose behind Section 22-C(8) seems to be that "most of the petty cases which ought not to go in the regular Courts would be settled in the pre-litigation stage itself."39. Therefore, in the instant case, the terms "relating to" an "offence" appearing in Proviso 1 must be interpreted broadly, and as the determination before the Permanent Lok Adalat will involve the question as to whether or not an offence, which is non-compoundable in nature, has indeed been committed, this case falls outside the jurisdiction of the Permanent Lok Adalat.40. We must guard against construction of a statute which would confer such a wide power in the Permanent Lok Adalat having regard to sub-section (8) of Section 22-Cof the Act. The Permanent Lok Adalat must at the outset formulate the questions. We however, do not intend to lay down a law, as at present advised, that Permanent Lok Adalat would refuse to exercise its jurisdiction to entertain such cases but emphasise that it must exercise its power with due care and caution. It must not give an impression to any of the disputants that it from the very beginning has an adjudicatory role to play in relation to its jurisdiction without going into the statutory provisions and restrictions imposed thereunder.