The Hon’ble Supreme Court, in the matter of Canara Bank v. G.S. Jayarama, laid down the mandatory 5-step procedure for a conciliation proceeding as contemplated under 22(C) of the Legal Services Authority Act, 1987.
While hearing an appeal filed by Canara Bank challenging the order of the Karnataka High Court, which decided upon the adjudicative power of the Permanent Lok Adalat, the Court had to adjudicate on two issues, whether under 22(C) of the Legal Services Authority Act, 1987 the conciliation proceedings are mandatory; and whether the Permanent Lok Adalats have adjudicatory functions under the Legal Services Authority Act, 1987.
The Division Bench comprising Justice DY Chandrachud and Justice PS Narasimha concluded that conciliation processes under Section 22(C) of the LSA Act are mandatory and that the Permanent Lok Adalat must pursue the step-by-step procedure even if the opposing party does not appear.
The Hon’ble Supreme Court also outlined a five-step process establishing a procedure to be followed before the Permanent Lok Adalat. The Court noted that as per the Act, the parties are first required to file the application before the Permanent Lok Adalat, make requisite submissions and then file documents.
Upon the completion of the above three steps, the Permanent Lok Adalat can attempt to conciliate the dispute between the parties and finally, it can draw the terms of the settlement, propose them to the parties and accordingly pass an award. It is in those conditions where the parties have failed to reach the terms of the settlement, that the Permanent Lok Adalat can then proceed to the final step and decide the dispute on its merits as long as the dispute does not relate to an offence -- and passes an award accordingly, giving it adjudicatory functions under the Legal Services Authority Act, 1987.
The proposed terms of settlement under Section 22-C(7), as well as the conciliation proceedings that preceded it, are mandatory. The Supreme Court also justified that if the Permanent Lok Adalat is allowed to pass an award without the presence of the parties, it will be similar to hearing conflicts ex parte and passing awards that will be final, binding, and regarded as civil court judgements which would be counter-productive to the intent of the parliament.
The Permanent Lok Adalat’s fundamental purpose remained the resolution of conflicts involving public utilities and an award on merits is only the final resort. The Court then went ahead to conclude that conciliation proceedings in accordance with Section 22-C of the Legal Services Act of 1987 are mandatory in all cases.
 2022 SCC OnLine SC 656