Saha Sprage Limited vs Inka Associates

Abhilasha Kumari, J.—This petition under Articles 226 and 227 of the Constitution of India has been preferred by the petitioner, who is the original defendant in Summary Suit No. 42 of 2003, against the award passed by the Lok Adalat No. 4 in the said Suit, dated 16.12.2006. Further, the petitioner has prayed that the Summary Suit be restored and heard on merits, within a time-bound period. The brief facts of the case as emerging from the Memorandum of the petition are that, the petitioner is a Limited Company engaged in the business of "Electro" appliances in different parts of the country. The petitioner had entered into an agreement with the respondent, who was to act as an agent of the petitioner Company on commission basis. There was a dispute regarding the amount of commission, therefore, the respondent filed the above-mentioned Suit in the City Civil Court at Ahmedabad. A settlement was arrived at between the parties, therefore, the Suit was listed before the Lok Adalat No. 4, on 16.12.2006. As per the terms of the settlement, the Lok Adalat passed an award, on 16.12.2006. The said award is the subject matter of challenge before this Court.

Mr. I.M. Pandya, learned advocate for the petitioner, has submitted that the impugned award passed by the Lok Adalat is bad in law, unjust and unconstitutional, as it has been passed without application of mind. That while passing the impugned award, the Lok Adalat has exceeded the jurisdiction vested in it and that has caused grave miscarriage of justice to the petitioner. That the Lok Adalat has gravely erred in passing the decree of Rs. 29,62,612/- against the petitioner, as the settlement amount between the parties is Rs. 13,50,000/- only. That the Lok Adalat has committed an error in holding that the respondent (original plaintiff) shall be entitled to execute the decree in case of any two defaults mentioned in the Terms of Settlement. That the petitioner has paid the full amount to the respondent, but due to financial constraints, the payment could not be made within the period of time mentioned in the Terms of Settlement. The respondent has initiated execution proceedings that are pending before the Executing Court, which has necessitated the filing of the present petition.

In support of the above submissions, reliance has been placed upon a judgment of the Supreme Court dated 18.01.2008 in the case of State of Punjab & Anr. V. Jalour Singh & Ors. in Appeal (Civil) No. 522 of 2008 arising out of SLP (C) No. 3847 of 2005.

This Court has heard the learned advocate for the petitioner, perused the averments made in the petition, contents of the impugned award of the Lok Adalat and other documents on record.

It is not disputed by the learned advocate for the petitioner that the impugned award is as per the Terms of Settlement arrived at between the parties. It is not as though the award has been passed by overriding any objection of the petitioner or without there being full consensus on all the Terms of Settlement. This aspect clearly emerges from a perusal of the Terms of Settlement that have been annexed at Annexure-C to the petition. These very Terms of Settlement are reproduced by the Lok Adalat in the award under challenge. The relevant portion thereof is reproduced hereinbelow:

(1) Both the parties agree that a decree for an amount of Rs. 29,62,612/- (Rupees Twenty Nine Lakhs Sixty Two Thousand Six Hundred Twelve Only) be passed against the defendant.

(2) Plaintiff has agreed that if the defendant shall make payment of decretal amount by 15 monthly installments of Rs. 90,000/- (Rupees Ninety Thousand Only) by way of three different cheques of Rs. 30,000/- (Rupees Thirty Thousand Only) each in favour of Inka Associates, Inka Traders & Intak Engineers respectively commencing from 16th November, 2006 regularly the total amount of Rs. 13,50,000/- (Rupees Thirteen Lakhs Fifty Thousand Only) the decree shall stand satisfied fully as the plaintiff has agreed not to recover the balance amount of the decree that may be passed.

(3) The defendant agrees that in case of any two defaults of the installments, the plaintiff shall be entitled to execute the decree as stated in Para (1) for recovering the balance amount of the decree.

(4) Parties have agreed to bear their respective costs of the suit.

(emphasis supplied)

From a perusal of the consent terms, it is clear that both the parties had agreed that the decree for an amount of Rs. 29,62,612/- should be passed against the defendant. The submission of the learned advocate for the petitioner that the Lok Adalat has erred in passing a decree for this amount is, therefore, incorrect and cannot be accepted.

Further, it is evident that the petitioner (original defendant) had agreed to make the payment of the decreetal amount by 15 monthly installments of Rs. 90,000/- by way of three different cheques amounting to Rs. 30,000/- only commencing from 16th November, 2006 regularly for the total amount of Rs. 13,50,000/- and the decree would stand satisfied fully as the respondent (plaintiff) had agreed not to recover the balance amount of the decree that may be passed. It was argued by the petitioner that in case of any two defaults in paying the installments, the plaintiff would be entitled to execute the decree as stated in paragraph (1), for recovery of the balance amount of the decree. It is clear from the averments made in the petition, especially at Ground (E) at running page 7 of the petition, that the petitioner Company has admitted that its financial condition was not good, therefore, the payment to the respondent could not be made in terms of the settlement or within a stipulated period of time. This would mean that a decree for the amount of Rs. 29,62,612/- would be passed against the defendant as per the Terms of Settlement in para-2 thereof. It has been submitted by the learned advocate for the petitioner that the petitioner has now paid the full amount of Rs. 13,50,000/- to the respondent, though not as per the Schedule mentioned in the settlement. In this view of the matter, as there appears to have been a default in making the payment as per the time schedule mentioned in the settlement terms, the respondent has started execution proceedings. This action is also as per the Terms of Settlement. The filing of execution proceedings does not render the award passed by the Lok Adalat bad in law. The said award does not suffer from any legal infirmity as it is not the case of the petitioner that it was passed without consensus. On the contrary, it is stated on behalf of the petitioner that the decree has been passed as per the Terms of Settlement arrived at between the parties.

The reliance of the petitioner in the case of State of Punjab & Anr. V. Jalour Singh & Ors. (Supra) would not come to his aid as in that case, the Lok Adalat had passed the award without there being any settlement or compromise between the parties. The Supreme Court has observed that the award made by the Lok Adalat was not an award in terms of any settlement, as contemplated under the Legal Services Act.

In para-12 of the said judgment, the Supreme Court has observed as below:

It is true that where an award is made by Lok Adalat in terms of a settlement arrived at between the parties, (which is duly signed by parties and annexed to the award of the Lok Adalat), it becomes final and binding on the parties to the settlement and becomes executable as if it is a decree of a civil court, and no appeal lies against it to any court. If any party wants to challenge such an award based on settlement, it can be done only by filing a petition under Article 226 and/or Article 227 of the Constitution, that too on very limited grounds. But where no compromise or settlement is signed by the parties and the order of the Lok Adalat does not refer to any settlement, but directs the respondent to either make payment if it agrees to the order, or approach the High Court for disposal of appeal on merits, if it does not agree, is not an award of the Lok Adalat. The question of challenging such an order in a petition under Article 227 does not arise. As already noticed, in such a situation, the High Court ought to have heard and disposed of the appeal on merits.

As per the principles of law enunciated by the Supreme Court in the above-quoted judgment, if an award of the Lok Adalat is passed on a settlement and if any party wants to challenge an award based on the settlement, it can be done only by filing the petition under Articles 226 and 227 of the Constitution of India that too, on very limited grounds.

In the present case, no cogent or legally convincing grounds have been raised by the petitioner in support of its challenge to the award made by the Lok Adalat. The award has been passed on the basis of consensus and is strictly in accordance with the Terms of Settlement arrived at between the parties. This aspect is not disputed by the petitioner. If the petitioner has defaulted by not adhering to the time schedule of payments indicated in the award, it cannot be said that the award itself suffers from any legal defect for the default of the petitioner. From the averments made in the petition and the submissions advanced by the learned advocate for the petitioner, it is evident that the respondent has initiated execution proceedings against the petitioner. The purpose of the petitioner in filing the present petition appears to be to scuttle the execution proceedings, that have been initiated as per the Terms of Settlement. In the view of this Court, the petitioner cannot invoke the jurisdiction of this Court on this ground, especially as the impugned award of the Lok Adalat does not suffer from any illegality, irregularity or jurisdictional error, so as to warrant the interference of this Court. The petition, being devoid of merit, deserves to be rejected. It is, accordingly, rejected.