Lok Adalat award binding on parties: HC

Srinagar, Apr 28: Upholding a Lok Adalat award in a cheque dishonour case, the High Court of J&K and Ladakh Tuesday cautioned against defeating the very purpose of alternative dispute resolution forums. 

A bench of Justice Wasim Sadiq Nargal while dealing with a related plea noted that “an award passed by a Lok Adalat on the basis of a settlement arrived at between the parties attains finality, is binding upon the parties, and is executable as a decree of a civil court”.

The court dismissed one R A Wani’s plea that had sought to quash a Lok Adalat award dated March 8, 2025, along with subsequent execution proceedings.

“No appeal lies against such an award. However, the same may be assailed before the High Court in exercise of its writ jurisdiction under Articles 226 and 227 of the Constitution of India on limited grounds, inter alia, absence of free consent, jurisdictional error, or fraud.”

The court, however, held that an award must be capable of implementation in its true letter and spirit.

“Terms which are vague, unduly onerous, or contingent upon uncertain events beyond the control of the parties render the settlement illusory and incapable of execution,” it said.

As per Wani’s plea, the dispute arose from a complaint filed under Section 138 NI Act before the Chief Judicial Magistrate, Sopore.

The complaint pertained to two dishonoured cheques each issued by Wani in favour of one A H Dar.

Wani had acknowledged the liability during proceedings and later agreed to settle the matter before a Lok Adalat.

As per the settlement, he undertook to pay Rs 3.8 lakh in full and final settlement by March 2025.

However, after failing to honour the agreement, execution proceedings were initiated, including coercive steps such as issuance of arrest warrants.

This led Wani to approach the High Court under Article 227 of the Constitution of India.

The court observed that it was evident that the impugned Lok Adalat Award dated March 8, 2025, had been passed on the basis of a settlement arrived at between the parties and duly recorded by the Lok Adalat.

The award clearly reflected that the petitioner undertook to pay an amount of Rs 3,80,000 to the respondent in full and final settlement of the dispute within a stipulated time frame, the court said.

The court noted that the petitioner had consciously participated in the settlement process and derived the benefit of avoiding criminal prosecution.

Therefore, he could not later “approbate and reprobate” by challenging the same settlement.

In response to the argument that the award imposed penal consequences including imprisonment and payment of double the amount, the court said, the statutory limitation of civil decree status does not imply that parties are precluded from incorporating deterrent or default clauses within the terms of their settlement.

“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,” it said.

Underscoring the foundational principles governing Lok Adalats the court cautioned against deviations that undermine their purpose as alternative dispute resolution forums.

The mechanism was designed to provide a speedy, cost-effective, and amicable resolution of disputes through mutual settlement rather than adjudication, the court observed.

Referring to the National Legal Services Authority (Lok Adalats) Regulations, 2009, particularly Rule 13, the court clarified that members of Lok Adalats function only as facilitators and have no adjudicatory powers.

“Any award passed must be based solely on voluntary compromise between parties, free from coercion or undue influence,” it said.

Expressing concern over the growing trend of parties challenging Lok Adalat awards, the court said that such practices defeat the very purpose of the system and burden higher courts with avoidable litigation.

Highlighting the reasons behind such failures, the court pointed to lapses on both sides.

“Parties must approach Lok Adalats with bona fide intent and cannot be allowed to resile from settlements after consenting to them. Simultaneously, members of Lok Adalats must ensure that settlements are voluntary, informed, lawful, and free from coercion,” it said.

The court further stressed that awards must be clear, practical, and enforceable. Inclusion of vague, onerous, or impracticable terms, often leads to fresh disputes at the enforcement stage, thereby defeating the purpose of settlement, the court said.