The Legal Services Authorities Act, 1987 was enacted with the objective of providing free and competent legal services to weaker sections of society, thereby ensuring access to justice for all. One of the most important mechanisms introduced under this Act is the Lok Adalat system, which promotes alternative dispute resolution to reduce the burden on the courts and provide quick, cost-effective justice.
Lok Adalats have grown to become an integral part of the Indian judicial framework, especially in matters related to banking, finance, accident compensation, and other compoundable disputes.
Organization of Lok Adalats
The Act provides for the establishment of Lok Adalats at various levels:
- State Authorities
- District Authorities
- Taluk Legal Services Committees
- High Court Legal Services Committees
- Supreme Court Legal Services Committee
Lok Adalats can be organized at regular intervals and may also take the form of Mobile Lok Adalats that travel to different places to ensure wider access to justice.
A typical Lok Adalat bench comprises:
- A judicial officer as the Chairman
- A lawyer
- A social worker or representative from society (e.g., retired officer, NGO participant)
This composition ensures a balanced approach blending judicial, legal, and social perspectives.
Jurisdiction of Lok Adalats
Lok Adalats are empowered to take up:
- Disputes pending before any court (if both parties agree to settlement)
- Pre-litigation disputes (cases which could otherwise be taken to a court)
However, they cannot handle criminal cases involving non-compoundable offences.
For the banking sector, Lok Adalats often deal with:
- Loan recovery matters involving small borrowers
- Settlement of dues and non-performing assets (NPAs)
- Compromise solutions between banks and defaulting customers
Cognizance of Cases by Lok Adalats
Cases may be referred to Lok Adalats in two main ways:
- Court-referred cases: When a court finds that a case is fit for settlement and gains consent from parties.
- Direct access: Parties can approach the Lok Adalat directly before initiating any formal litigation.
This dual mechanism makes Lok Adalats flexible and accessible, especially for borrowers and institutions looking for amicable solutions outside traditional litigation.
Disposal of Cases by Lok Adalats
Lok Adalats follow the principles of compromise and settlement, not strict legal procedures or the rigid application of Evidence Law. The emphasis is on mutual agreement:
- If the parties reach settlement, the case is disposed of.
- If no compromise is reached, the case is returned to the referring court without prejudice to the rights of the parties.
This method not only reduces legal costs but also saves time for individuals, businesses, and especially financial institutions.
Nature of Award of the Lok Adalats
The award of a Lok Adalat has the same effect as a decree of a civil court and is final and binding on all parties.
- There is no appeal against a Lok Adalat award, which makes the resolution conclusive.
- This finality ensures speedy enforcement, highly relevant in cases like loan recoveries or banking disputes where prolonged litigation harms both lender and borrower.
Powers of Lok Adalats
Although Lok Adalats do not follow strict procedural laws, they enjoy certain powers, including:
- Deeming powers of a civil court for summoning witnesses, examining evidence, and administering oaths.
- Facilitating compromise through counseling, conciliation, and persuasion.
- Encouraging settlements in a flexible, informal atmosphere without the adversarial nature of normal courts.
Special provisions also empower Lok Adalats to handle public utility service disputes, covering areas like transport, housing, insurance, and banking.
Conclusion
The Lok Adalat system under the Legal Services Authorities Act, 1987 has become a cornerstone of India’s justice delivery framework, especially in resolving disputes efficiently and amicably. Its importance in the banking sector is significant, as banks and borrowers can settle recovery claims, dues, and financial disputes swiftly without engaging in years of costly litigation.
For financial institutions, investors, and customers alike, Lok Adalats represent a practical blend of legal certainty, cost efficiency, and speedy justice—qualities that strengthen both the justice system and commercial confidence.
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