Award Of Lok Adalat Cannot Be Set Aside Without Facts Recorded In Such Award Being Found Fraudulent - Supreme Court

Mr Anirudh Gotey appeared for the Appellants and Ms Manju Jetly appeared for the Respondents.

Plaintiff Nos. 1, 4, 5, 6 and Defendant Nos. 2 and 5 were the children of Defendant No. 1 and her husband. Plaintiff Nos. 2 and 3 were the sons of Plaintiff No. 1. The Plaintiffs filed a suit for partition and separate possession of the suit properties, stating that the suit schedule properties were acquired by Defendant No. 1's husband and were in joint possession and enjoyment of the Plaintiffs and Defendants, until the demise of Defendant No. 1's husband. Following her husband's death, Defendant No. 1 was in possession of the suit schedule properties and was acting in a manner detrimental to the interests of the Plaintiffs and had attempted to alienate the properties without effecting a partition so as to crystallise the rights of each of the parties to the suit. The requests of the Plaintiffs for a partition of the property were met with threats by the Defendants to alienate the same.

During the pendency of the suit, a compromise petition was filed jointly by the Plaintiffs and the Defendants under Order XXIII Rule 3 of CPC before the Trial Court stating that the parties to the suit had inter-se settled their disputes on intervention of relatives and well-wishers. The mediation resulted the Plaintiffs relinquishing their right, title, interest and claim in the property and the Defendants were to pay the Plaintiffs in exchange.

Plaintiff No. 4 encashed two cheques received by her as part of the compromise.

In view of the inter-se compromise, the matter was referred by the Trial Court to the Lok Adalat, and the Lok Adalat allowed and accepted the application filed by the parties for partition and separate possession.

Two days later, only Plaintiff Nos. 4, 5, 6 filed an affidavit before the Lok Adalat stating that the Defendants had played fraud on them and misled them in order to obtain their consent to the terms of compromise. The Lok Adalat rejected their prayer, noting that the order recording the compromise was passed after duly recording the consent of all parties to the compromise.

Aggrieved, the Plaintiff No. 4 approached the High Court, where she contended that the compromise petition was signed by her only as a result of fraud by the Defendants. The High Court dismissed the Petition and remanded the matter to the Civil Judge to refer the matter to the Lok Adalat to hold an enquiry and record a finding on the allegation of fraud levelled against the Defendants.

Plaintiff Nos. 4, 5, 6 filed their objections to the compromise stating that their signatures on the compromise petition were obtained by fraud. On hearing the parties, the Lok Adalat rejected to objections.

Aggrieved, Plaintiffs Nos. 4, 5, 6 filed Petitions before the High Court. The Judge disposed the Petition by recalling the order of compromise passed by the Lok Adalat and remanding the matter to the Civil Judge to dispose the matter in accordance with the law, as if no compromise was entered into between the parties. Aggrieved, Defendants Nos. 2-5 approached the Supreme Court.

The Supreme Court opined that it did not find any reason forthcoming from the judgment of the High Court while setting aside the order of the Lok Adalat. Further, it was noted that to recall a compromise that has been recorded, the Court needed strong reasons because a compromise would result ultimately into a decree of a Court which can be enforced just as a decree passed on an adjudication of a case. The Supreme Court recorded that the same is true in the case of a compromise recorded before a Lok Adalat, as per the provisions of Section 21 of the Legal Servies Authorities Act, 1987, which equates an award of the Lok Adalat to a decree of a Civil Court and imputes an element of finality to an award of compromise passed by the Lok Adalat. Further, relying on the case of P.T. Thomas vs. Thomas Job, the Court opined that considering the element of finality attached to an award of the Lok Adalat, no appeal would lie under Section 96 of the CPC against such award.

Further, the Supreme Court opined that the Single Judge of the High Court had not considered the facts of the case while setting aside the award of the Lok Adalat.

To that end, the Court opined that "It is a settled position of law that where an allegation of fraud is made against a party to an agreement, the said allegation would have to be proved strictly, in order to avoid the agreement on the ground that fraud was practiced on a party in order to induce such party to enter into the agreement. Similarly, the terms of a compromise decree, cannot be avoided, unless the allegation of fraud has been proved. In the absence of any conclusive proof as to fraud on the part of the objectors, the High Court could not have set aside the compromise decree in the instant case."

Therefore, the Supreme Court held that no ground was made out warranting the decision of the High Court to set aside the order of the Lok Adalat, and the decision of the High Court ran contrary to established principles of law which seek to protect the sanctity and finality of orders based on a compromise or consent between parties. The Supreme Court set aside the order of the High Court and upheld the order of the Lok Adalat thereby restoring compromise between the parties.