Lok Adalats

Lok Adalats

Subject: Economy

Context:

The number of non-per-forming assets (NPAs) referred by banks to various recovery channels, including Lok Adalat and the Insolvency and Bankruptcy Code (IBC) route, in 2021-22 witnessed a four-fold jump compared to 2020-21 as lakhs of small ticket loans were referred for resolution to Lok Adalats of banks.

Details:

The recovery rate was however  low at  2.3 per cent, as it is very difficult to recover loans from defaulters in the small ticket loan segment who willingly do not want to repay.

Debt Recovery:

Apart from Lok Adalat and IBC, the other routes for NPA recovery are Debt Recovery Tribunal (DRTs) and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act).

Debt Recovery by Lok Adalats:

Banks refer stressed accounts of up to Rs 20 lakh to Lok Adalats, organized by banks through the district legal services authority.

• Lok Adalat is one of the alternative dispute redressal mechanisms, it is a forum where disputes/cases pending in the court of law or at pre-litigation stage are settled/ compromised amicably.
• The Lok Adalats are formed to fulfil the promise given by the preamble of the Indian Constitution– securing Justice – social, economic and political of every citizen of India.

Constitutional basis:

• Article 39A of the Constitution provides for free legal aid to the deprived and weaker sections of the society and to promote justice on the base of equal opportunity.
• Articles 14 of the Constitution also make it compulsory for the State to guarantee equality before the law.

Statutory provisions:

• Under the Legal Services Authorities Act, 1987 Lok Adalats have been given statutory status.
• The decision made by the Lok Adalats is considered to be a verdict of a civil court and is ultimate and binding on all parties.

No appeal:

• There is no provision for an appeal against the verdict made by Lok Adalat.
• But, they are free to initiate litigation by approaching the court of appropriate jurisdiction by filing a case by following the required procedure, in exercise of their right to litigate.

Court fee:

• There is no court fee payable when a matter is filed in a Lok Adalat.
• Note: If a matter pending in the court of law is referred to the Lok Adalat and is settled subsequently, the court fee originally paid in the court on the complaints/petition is also refunded back to the parties.

Nature of Cases to be Referred to Lok Adalat:

• Any case pending before any court.
• Any dispute which has not been brought before any court and is likely to be filed before the court.
• Provided that any matter relating to an offence not compoundable under the law shall not be settled in Lok Adalat.