What is Lok Adalat and What is the Procedure for settlement of Loan in Lok Adalat?

Lok Adalat is a process of administering justice without resorting to litigation, Its process is voluntary and works on the  principle that both the parties to the dispute are wiling to sort out their disputes amicably. Through this mechanism, disputes can be settled in a simpler, quicker and cost effective manner.

 

There are certain advantages in using the forum of Lok Adalat by banks in compromise settlement of NPAs. There are no Court fees involved when fresh disputes are referred. It can take cognizance of any existing suit in the Court/DRT. If no settlement is arrived at, the parties can continue with the Court/DRT proceedings. The award is having legal status and is binding on a decree. The award is not appealable, as it is arrived at through the consent of parties. It is a speedier system of administration of justice.

What is the Constitution of Lok Adalat? 

 

1.      Lok Adalat is the body constituted within the legal system to encourage settlement of disputes in an atmosphere of conciliation without going to the Courts and for arriving at a workable solution amicably. It can take cognizance of  both suit filed  and non suit filed cases.

2.   The Lok Adalats shall,for the purpose of holding any determination under the Act, have the same powers as are vested in the civil Court under the Code of Civil Procedure while trying  a suit in respect of the following :

      a) The summoning and enforcing the attendance of any witness and examine him on oath;

      b) The discovery and production of any documents

      c) The reception of any evidence on affidavits;

      d) The requisitioning of any public record or document or copy of such record or document  from

          any court or office.

      e) Such other matters as may be prescribed.

3.     The Lok Adalat has the power to specify its own procedure for determination of any dispute coming before it. All the proceedings before the Lok Adalat shall be deemed to be a judicial proceedings and every Lok Adalat shall be deemed  to a Civil Court for the purposes of Indian Penal Code and Criminal Procedure Code.

 

What is the Jurisdiction of Lok Adalat?

Normally the local Chief Judicial Officer identifies cases for reference to Lok Adalats, It has  jurisdiction in respect of

 1.      cases pending before the court.

2.      Matters falling within the jurisdiction of the court but not brought before the court (non suit filed)

3.      Matters pending before Debt Recovery Tribunals.

 

If a case is Pending Before Court whether it can be taken to Lok Adalat?

Court may refer the case to Lok Adalat

a)      where the parties to the case agree to refer the case to Lok Adalat,

b)      where one of the parties applies to the court for referring the case to Lok Adalat and court is satisfied as to the chances of settlement after giving reasonable opportunity of being heard to the parties,

c)      where the court  is satisfied that the matter is an appropriate one to be taken cognizance by Lok Adalat, after giving reasonable  opportunity of being heard to parties.

 

Where no Case is Pending Before the Court :

On an application to the Authority  / Committee organizing Lok Adalat, from anyone of the parties to the matter, such authority / committee may refer the matter to Lok Adalat, if it is a matter that need to be determined by Lok Adalat, after giving reasonable opportunity of being heard to the other party. In case the matter is not settled before the Lok Adalat, the parties will be advised to seek remedy in a court.

 

Eligibility for Coverage for Lok Adalat.

 

The scheme includes all NPA accounts  both suit filed and non-suit filed, with outstanding balance upto Rs.20 lakh.  However, it must be noted that in case no settlement could be arrived at and no Award has been made in respect of a non suit filed case, then mere reference to Lok Adalat would not save the documents from the  operation of Law of Limitation. In  other words, if no Award has been made in respect of a non suit filed case, then the documents should be kept live by obtaining Balance Confirmation  from  time to time. How ever in respect of non-suit filed accounts the value of security held should not exceed Rs.1.00 cr for the account/s to become eligible for settlement under lok adalat scheme.  Suit field account with outstanding balance above Rs.20 lakhs can be referred to the lok adalat conducted by the DRT irrespective of the value of security held.

 

What is the Working of Lok Adalats :

The advocates of plaintiff Bank as well as the defendant are given advance intimation of reference of the cases to Lok Adalats. The place and date of sitting of the same are also informed to the parties. If the parties are mutually agreeable to settle the disputes through conciliation, the Lok Adalat passes and appropriate Award immediately. The Award so made shall be deemed to be a decree of Civil Court. 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.

 

The State / District level Legal Aid Committee/s Boards identifies the place/s of Lok Adalat and communicate the same to the  Steering committee, which in turn gets in touch with individual banks on possibilities of holding Lok Adalat.

Once  both the parties have agreed  for settlement, an Award will be passed by Lok Adalat which is deemed to be a decree of a civil court. With a view to make the borrower to adhere to the settlement the Award shall have single / double default clause.

 It may also be noted that in respect of non suit filed accounts to refer the cases to lok adalat , the jurisdiction of the Loak Adalat is linked to the jurisdiction of the Local legal Services Authority (LLSA) . In respect of cases falling with the jurisdiction of DRTs Which will have territorial jurisdiction over more than one district the reference of cases shall be done only be the State  legal Services Authority.

What is the Settlement Formula in Lok Adalat?

The settlement of dues through the forum of Lok Adalat has been flexible having regard to the book balance on the date of account becoming NPA, interest and other costs charged to the borrower’s account thereafter value of security repaying capacity of the  borrower and cost of recovery etc.

The repayment in installments extended over a period of one to three years with proper justification may be considered.

The settlement should contain a default clause that incase the borrower fails to abide  by the terms of the compromise , the entire debt without any concession will fall due for payment and the bank may initiate further legal proceedings, by way of filing execution petition based on the  award passed by Lok Adalat.

What is the  Repayment Period of settled loan in Lok Adalat?

Repayment period in case of compromise through Lok Adalat can be considered over a period of 1 to 3 years in exceptional  cases, with proper justification.