The Supreme Court on 29th November 2011 (Monday) had ruled that under the Section 138 of the Negotiable Instruments Act, deemed that every award of Lok Adalat including an order that would record a settlement between parties in ‘check bouncing case’ is a civil court decree and hence, is executable by a civil court.
A bench of Justices P. Sathasivam and J. Chelameswar observed that Section 21 of the Legal Services Authorities Act does not make out any such distinction between the reference that is made by a civil court and one made by a criminal court. They also pointed out that there isn’t any restriction on the power that is possessed by the Lok Adalat to pass an award based on the compromise that has arrived at between the parties in respect of cases referred to by various courts (civil as well as criminal tribunals, rent control court, family court, consumer redress forum, the motor accidents claims tribunal, and other such forums).
While Justice Sathasivam was writing the judgment, he said that even if under Section 138 of the Negotiable Instruments Act a matter of criminal court is referred, and by virtue of the deeming provisions, the award that would be passed by the Lok Adalat based on a compromise has to be treated as a decree that would be capable of execution by a civil court.
The main question posed for the supreme court’s consideration in an appeal (against a Kerala High Court) was if a criminal case is filed under Section 138 of the Negotiable Instruments Acts, referred by the magistrate court of the Lok Adalat, and settled by the parties with an award recording settlement passed, then could it be considered as a decree of a civil court and be regarded as executable.
In the instant case, C.D. Shaji and K.N. Govindan had arrived at a compromise. The Lok Adalat in Ernakulum passed an award of Rs. 6,000 on the reference from the Legal Services Authority. Mr. Shaji, however, paid only Rs. 500 and on the same day agreed to pay the rest of the amount in five installments, each of Rs. 1,100 per month. Mr. Shaji failed to pay anymore and Mr. Menon filed an execution petition before the Principal Munsif Judge, at Ernakulum, who happened to dismiss it. This order was then upheld by the Kerala High Court.
Senior counsel V.Giri was appointed by the Bench, during the hearing of the appeal as amicus curie and counsel P. Prasanth appeared for the appellant.
While the appeal was being allowed, the Bench had held that the judiciary was given a task by the Parliament to implement the provisions of the Legal Services Authorities Act. The bench also held that Section 21 of the Act contemplates the deeming provision, which makes it a legal fiction that the ‘award’ of the Lok Adalat is a decree of a Civil Court.
The Bench had noted that the lower courts were wrong to think that only if the matter was referred by a civil court could it be a decree, and if it’s an order of the criminal court then it would be referred only by the criminal court and that the criminal court can’t hold a decree under Section 21 of the Legal Services Authorities Act.
The judgment was, however, set aside by the Bench and the execution petition was restored. The execution petition was then asked by the Bench to proceed further as per law.