Lok Adalat Awards Being Routinely Challenged Defeats Object Of Quick Resolution, Settlement Must Be Confined To Practical Terms: J&K&L High Court

The Court held that the very object of Lok Adalats is to ensure expeditious, amicable and cost-effective resolution of disputes and to reduce the burden on regular courts and the same gets defeated when such awards are routinely and indiscriminately brought under challenge.

The Court was hearing a petition under Article 227 of the Constitution of India challenging a Lok Adalat Award which arose from a criminal complaint under Section 138 read with Section 142 of the Negotiable Instruments Act, 1881.

A Bench of Justice Wasim Sadiq Nargal, while stating that “the efficacy and credibility of a Lok Adalat award lie in its workability and enforceability,” examined the validity of an award that had incorporated stipulations of imprisonment and payment of double the settled amount upon default, and dismissed the challenge while issuing significant observations on the functioning of Lok Adalats.

Background

In the instant case the respondent/complainant instituted a criminal complaint under Section 138 of the NI Act before the Chief Judicial Magistrate, Sopore, on the basis of two cheques each issued by the petitioner, which were dishonoured with remarks “Funds Insufficient and Alterations require drawer's attention”. The complaint alleged that the petitioner had undertaken to discharge the liability of his brother, who had taken an advance amount from the complainant in connection with supply of apple boxes.

Upon issuance of process, the petitioner appeared before the learned Magistrate and his statement under Section 251 CrPC was recorded, wherein he acknowledged the cheque amount while asserting that the liability pertained to his brother. Subsequently, the Magistrate obtained an undertaking from the petitioner with regard to payment and referred the matter to the Lok Adalat.

The Lok Adalat, thereafter passed an award recording that the parties had amicably settled the dispute. The petitioner undertook to pay the complainant in full and final settlement by the end of March 2025. The award further provided that in case of failure to adhere to the terms, the petitioner shall be liable to one year imprisonment and payment of double the settled amount. Upon initiation of execution proceedings, the executing court issued coercive process including warrants of arrest, leading to the present petition.

The petitioner contended that the Lok Adalat exceeded its jurisdiction by imposing penal consequences, that the proceedings violated principles of natural justice, and that the executing court acted arbitrarily.

Court's Observation:

Adjudicating the matter Justice Nargal first reiterated that an award passed by a Lok Adalat on the basis of a settlement attains finality, is binding on the parties, and is executable as a decree of a civil court, with no appeal lying against it. Referring to Section 21 of the Legal Services Authorities Act, 1987 and the Supreme Court's decision in Punjab v. Jalour Singh (2008) 2 SCC 660, the Court held that such an award can be assailed only on very limited grounds like absence of free consent, fraud, or jurisdictional error through a petition under Articles 226/227 of the Constitution.

The Court found that the petitioner had voluntarily appeared before the Magistrate, his statement under Section 251 CrPC was recorded, and he gave an undertaking before the matter was referred to the Lok Adalat. No material was brought on record to demonstrate coercion, fraud, or misrepresentation. The Court held that the petitioner, having consciously participated in the settlement process, was estopped from resiling from the same merely on account of inconvenience or inability to comply.

On the challenge to the penal clauses, the Court observed,

“A compromise may validly include stipulations providing for enhanced liability upon breach, so as to secure performance. Such clauses are neither uncommon nor impermissible; rather, they are recognised incidents of a binding settlement, unless they are shown to be opposed to law.” Referring to Section 138 of the NI Act, the Court noted that the stipulations in the award mirror the very contours of liability that the legislature itself has contemplated.

In a significant elaboration on the functioning of Lok Adalats, the Court made the following observations,

“This Court is constrained to observe that, day in and day out, it is coming across cases where parties seek to challenge awards passed by Lok Adalats. This growing tendency leads to the unnecessary invocation of the writ jurisdiction of this Court and results in a waste of valuable judicial time, which ought to be devoted to genuine and deserving matters. The very object behind the establishment of Lok Adalats, that is, to ensure expeditious, amicable and cost-effective resolution of disputes and to reduce the burden on regular courts, is defeated when such awards are routinely and indiscriminately brought under challenge.”

The Court further observed that the members of Lok Adalat must ensure that the terms embodied in the award are precise, realistic, and capable of compliance within the framework of law. Justice Nargal remarked,

“Ultimately, the efficacy and credibility of a Lok Adalat award lie in its workability and enforceability. The members would do well to confine the settlement to lawful, practicable, and executable terms, so that the award achieves its intended purpose of bringing finality to the dispute, rather than engendering further litigation.”

The Court also quoted Rule 13 of the National Legal Services Authority (Lok Adalats) Regulations, 2009, which provides that members of Lok Adalats shall not pressurise or coerce any party to compromise, and that no Lok Adalat has the power to hear parties to adjudicate their dispute as a regular court.

Commenting further on their mandate the court added,

“… They must scrupulously adhere to the mandate of Rule 13 of the National Legal Services Authority (Lok Adalats) Regulations, 2009 and refrain from assuming any adjudicatory posture or from imposing terms upon the parties. The role of the Members is facilitative and not determinative, and any deviation therefrom would vitiate the very foundation of the award”

In consonance with these observations the High Court concluded that the impugned Lok Adalat Award is binding upon the parties and enforceable in accordance with law. The petition, being devoid of merit, was accordingly dismissed.

Case Title: Riyaz Ahmad Wani Vs Abdul Hamid Dar

Citation: 2026 LiveLaw (JKL)