UNITED INDIA INSURANCE CO. LTD. v. AJAY SINHA AND ANOTHER

Citation: [2008] 8 S.C.R. 509

Court: Supreme Court of India

Bench: S.B. SINHA, V.S. SIRPURKAR

Case summary

UNITED INDIA INSURANCE CO. LTD. v. AJAY SINHA AND ANOTHER.pdf

Judgment text

[2008] 8 S. C. R. 509 '. UNITED INDIA INSURANCE CO. LTD. V. AJAY SINHA AND ANOTHER (Civil Appeal No. 3537 Of 2008) MAY 13, 2008 [S. B. SINHA AND V. S. SIRPURKAR, JJ. ] t- Legal Services Authorities Act, 1987 - s. 22-C proviso '· and s. 22-C(B) - Cognizance of cases by Permanent Lok Ada/at (PLA) - Power of - Case of burglary - Goods of complainant insured with Insurance Company - Claim of, before PLA- Criminal case u! s 4791461 pending before criminal court - Jurisdiction of PLA - Held: Terms 'relating to an offence' in proviso 1 to s.

22 C is to be broadly interpreted - Since PLA is ,~ to determine whether non-compoundable offence has been committed or not, PLA has no jurisdiction to entertain such claim - Construction of statute conferring wide power in PLA must be guarded - PLA must at the outset formulate questions - It must exercise its power with due care and caution - It cannot be said that it has adjudicatory role to play in relation to its jurisdiction without going into the statutory provisions and restrictions imposed thereunder - Thus, order of Division Bench of High Court that PLA had jurisdiction to decide the claim not sustainable and set aside. f- • The goods of the first respondent were insured with the appellant company for the period 29. 08. 2001 - 31. 08. 2002. It is alleged that on the night of 18/19. 08. 2002 burglary took place in his godown. FIR was lodged.

Respondent raised a claim with the appellant-insurance company that in the burglary, goods worth Rs 11,14,597/-were stolen and the same was rejected. A criminal case was filed. The Investigating Officer filed a report. However, the insurance company denied the same. Aggrieved, respondents filed application before the District Consumer Fo- rum claiming a sum of Rs 18,45,697. 50 from the appellant. Application was not entertained. The First respondent then filed application before the Permanent Lok Adalat (PLA) claiming a sum of Rs 9,80,000/-. The PLA held that it had the pecuniary jurisdiction over the matter and pendency of a criminal case was not relevant. Appellant challenged the order. The Single Judge of the High Court -+ allowed the same holding that offence u/ss. 469/461 IPC not being compoundable, the PLA did not have jurisdiction to entertain the 1. laim. In appeal, the Division Bench of the High Court held that the PLA had jurisdiction to decide the claim made by the parties.

The pendency of a criminal case had nothing to do with the exercise of jurisdiction by PLA as it was not concerned as to who had committed the burglary but whether the burglary had taken place or not. It was not required to determine 0 whether offence committed by accused was compoundable or not. Hence the present appeal. Allowing the appeal, the Court HELD: 1. 1. Section 89 of CPC inter alia was enacted to promote resolution of disputes through mutual settlement. Chapter VI-A of the Act seeks to achieve a different purpose. It not only speaks of conciliation qua conciliation but conciliation qua determination. Jurisdiction of Permanent Lok Adalat, although is limited but they are of -\ wide amplitude. The two provisos appended to Section • 22-C (1) of the Act curtail the jurisdiction of the Permanent Lok Adalat.

It states that PLA will not have jurisdiction in respect of any matter relating to an offence not compoundable under any law and in the matter where the value of the property in dispute exceeds Rupees ten lakhs. [Para 22] [525-E-G] 1 1. 2 Chapter VI-A stands independently. Whereas, the heading of the Chapter talks of pre-litigation, conciliation and settlement, Section 22-C(8) of the Act speaks of de- 1- SINHA AND ANOTHER termination. It creates another adjudicatory authority, the decision of which by a legal fiction would be a decision of a civil court. It has the right to decide a case. The term· 'decide' means to determine; to form a definite opinion; to render judgment. [Para 23] [525-H; 526-A-B] Advanced Law Lexicon 3rd Edition 2005 p 1253 - ret ferred to. 1. 3 Any award made by the Permanent Lok Adalat is executable as a decree. No appeal thereagainst shall lie. The decision of the Permanent LokAdalat is final and binding on parties.

Whereas on the one hand, keeping in view the Parliamentary intent, settlement of all disputes through negotiation, conciliation, mediation, Lok Adalat and Judicial Settlement are required to be encouraged, it is equally well settled that where the jurisdiction of a court is sought "-. i -.. , object of the Act is to provide free legal cind competent legal services to the weaker section of ihe Socieiy to ensure that opportunities for securing justice are not denied to any citizen by reason of economic or other disability. The amended provision of the Act does not confer power to the Permanent LokAdalat even to entertain the disputes which related to a criminal offence non compoundable in law. " 18. An intra court appeal was preferred thereagainst. The . ~.

Division Bench of the High Court by reason of the impugned 1 judgment and order dated 29 h March, 2006 allowed the appeal of the first respondent holding that the pendency of a criminal case has nothing to do with the exercise of jurisdiction by the Permanent Lok Ada lat as it was not concerned as to who had committed the burglary but was only concerned with the fact 2s to whether burglary had taken place or not stating :-. -t "So far as the case Defore the Permanent Lok Acialat is concerned, the Adalat is to det::~rmine whether burglary had taken place or not, after taking into consideration the - -. l independent evidence of the parties. It is not required to determine as to who has committed burglary nor it is required to determine whether an accused is guilty for the charges or not. Therefore, for the purpose of determination of the issue and claim in question, the Permanent Lok Adalat is not required to determine whether offence committed by an accused is 'compoundable' or not.

Thus, as in this case such issue is not required to be determined by the Permanent Lok Ada lat, we hold that the Permanent Lok Adalat has jurisdiction to decide the claim as made by the appellant, on merit, after hearing the parties and on appreciation of evidence on record. Learned Single Judge has failed to notice the aforesaid facts while determining the issue in question. " 19. Mr. Raju Ramachandran, learned Senior counsel ap- •· ;. j pearing on behalf of the appellant would submit:- (i) Chapter VI-A of the Act will have no application in a case of this n_ature which involves complicated questions of fact and law. (ii) The question as to whether the burglary has been committed or not being pending before the criminal court, Permanent Lok Adalat had no jurisdiction in relation thereto. j .. (iii) As the contract of insurance had been repudiated, it was not a case which was fit for settlement within the meaning of Section 22-B of the Act.

(iv) Claim of first respondent is mala fide as he had artificially reduced the claim to bring the same ,. _ within the jurisdiction of the Permanent Lok Adalat, although initially he claimed a sum higher than Rs. 10 lakhs. 20. Mr. Amit Kumar, learned counsel appearing on behalf of the respondent, on the other hand, would urge:- ' . J.. -~ (i) That the value of the property being less than Rs. 10 lakhs, the Permanent Lok Adalat had jurisdiction in regard to the dispute in question. (ii) The restrictions imposed in regard to the offences cannot be applied to civil dispute between the parties arising out of any offence as the same relates to the claim of the -... · respondent against the appeilant. (iii) Jurisdiction of the Permanent Lok Adalat being • confined to determination of the amount of loss caused to the first respondent on account of burglary, Permanent LokAdalat is not required to decide the case between the accused of burglary and the State.

(iv) For invoking the jurisdiction of Permanent Lok )": . , Adalat. the question as to whether the offence is compoundable or not is not relevant. (v) Proviso appended to sub-section (5) of Section 22 of the Act should be construed in a manner which would widen the scope and ambit of the Act, rather accentuate the same. (vi) The object of the legislation is to promote resolution of the dispute by conciliation and, \therefore, it is for the welfare of the general public • that construction which would achieve the object of the beneficial legislation should be preferred. 21. The term "conciliation" is not defined under the Act. It should, therefore, be consideCed from the perspective of Arbitration and Conciliation Act, 1996. In order to understand what _. , Parliament meant by 'Conciliation', we have necessarily to re- ,_ fer to the functions of a 'Conciliator' as visualized by Part Ill of the 1996 Act. Section 67 describes the role of a conciliator.

Sub-section (1) states that he shall assist parties in an independent and impartial manner. Subsection (2) states that he ->-- shall be guided by principles of objectivity, fairness and justice, giving consideration, among other things, to the rights and obligations of the parties, the usages of th~ trade concerned and r· the circumstances surrounding the dispute, including any-previous business practices between the parties. Sub-section (3) states that he shall take into account "the circumstances of the case, the wishes the parties may express, including a request for oral statements''. Sub-section (4) is important and permits the 'conciliator' to make proposals for a settlement. This section is based on Article 7 of UNICTRAL Conciliation Rules. Section 73, which is important, states that the conciliator can formulate terms of a possible settlement if he feels that there exists elements of settlement.

He is also entitled to 'reformulate the terms' after receiving the obseNations of the parties. The above provisions in the 1996 Act make it clear that the 'Conciliator' under the said Act, apart from assisting the parties to arrive at a . ,.. settlement, is also permitted to make "proposals for a settlement" and "formulate the terms of a possible settlement" or "reformulate the terms". This is indeed the UNCITRAL concept. 22. Section 89 of the Code of Civil Procedure inter alia was enacted to promote resolution of disputes through mutual settlement. Chapter VI-A of the Act seeks to achieve a different purpose. It not only speaks of conciliation qua conciliation but conciliation qua determination. Jurisdiction of Permanent LokAdalat, although is limited but they are of wide amplitude.

The two provi- -~ • sos appended to Section 22-C (1) of the Act curtail the jurisdiction of the Permanent Lok Adalat which are as under :- Provided that the Permanent Lok Adalat shall not have jurisdiction in respect of any matter relating to an offence not compoundable under any law: Provided further that the Permanent Lok Adalat shall also not have jurisdiction in the matter where the value of the property in dispute ~xceeds ten lak~ rupees: 23. Chapter VI-A stands independently. Whereas, the heading of the Chapter talks of pre-litigation, conciliation and settlement, Section 22-C(B) of the Act speaks of determination. It creates another adjudicatory authority, the decision of which by a legal fiction would be a decision of a civil court. It has the right to decide a case. The term 'decide' means. to deter- 8 mine ; to for;-n a definite opinion ; to render judgment. (See Advanced Law Lexicon 3rd Edition 2005 at 1253).

Any award made by the Permanent Lok Adalat is executable as a decree. No appeal thereagainst shall lie. The decision of the Permanent Lok Adalat is final and binding on parties. Whereas on the one hand, keeping in view the Parliamentary intent, settlement of all disputes through negotiation, conciliation, medication, Lok Adalat and Judicial Settlement are required to be encouraged, it is equally well settled that where the jurisdiction of a court is sought to be taken away, the statutory provisions deserve strict construction. A balance is thus required to be struck. A court of 0 law can be created under a statute. It must have the requisiie infrastructure therefor. Independence and impartiality ofTribu·· nal being a part of human right is required to be taken into consideration for construction of such a provision. When a court is created, the incumbents must be eligible to determine the lis. 24. An option is given to any party to a dispute.

It may be a public utility service provider or a public utility service recipient. The service must have some relation with public utility. Ordinarily insurance service would not come within the public utility service. But having regard to the statutory scheme, it must be held to be included thereunder. It is one thing to say that an authority is created under a statute to bring about a settlement through Alternate Dispute Resolution mechanism but it is other thing to say that an adjudicatory power is conferred on it. Chapter VI-A, therefore, in our opinion, deserves a closure scrutiny. It a case of this nature, the level of scrutiny must also be high. {See Amlj Garg & ors. vs. Hotel Association of India & Ors. [(2008) 3 SCC 1]} 25. St:b-section (1) of Section 22-C speaks of settlement of disputes. The authority has to take recourse to conciliation mechanism. One of the essential ingredients of the concilia- tion proceeding is that nobody shall be forced to take part therein.

It has to be voluntary in nature. The proceedings are akin to one of the recognized ADR mechanism which is made of Medola. It may be treated at par with Conciliation and Arbitration. In such a case the parties agree for settlement of dispute by negotiation, conciliation or mediation. The proceedings adopted are not bending ones, whereas the arbitration is a binding procedure. Even in relation to arbitration, an award can be the subject matter of challenge. The provisions of the Arbitration and Conciliation Act, 1~. 96 shall apply thereto. The jurisdiction in terms of Section 34 of the Arbitration and Conciliation Act, 1996 is wide. The court in exercise of the said jurisdiction may not enter into the merit of the case but would be entitled to consider as to whether the arbitrator was guilty of misconduct. If he is found to be biased, his award would be set aside. The scope of voluntary settlement through the mechanism of conciliation is also limited.

If the parties in such a case can agree to come to settlement in relation to the principal issues, no exception can be taken thereto as the parties have a right of self determination of the forum, which shall help them to resolve the conflict, but when it comes to some formal differences between the parties, they may leave the matter to the jurisdiction of the conciliator. The conciliation only at the final stage of the proceedings would adopt the role of an arbitrator. 26. Here, however, the Permanent Lok Adalat does not simply adopt the role of an Arbitrator whose award cou Id be the subject matter of challenge but the role of an adjudicator. The Parliament has given the authority to the Permanent LokAdalat to decide the matter. It has an adjudicating role to play. 27. The validity of the said provision is not in question. But then construction of such a provision must be given in such a manner so as make it prima facie reasonable.

With that end in view let us consider the meaning of the word "relating to an, offence". We will assume that in a given case the dispute between the service provider and the service recipient may not have anything to do with the ultimate result of thP. criminal case but there are cases and cases. 28. In this case, as noticed above, the genuineness of the claim itself is in dispute. Where the parties have taken extreme positions, the same prima facie may not be the subject matter of conciliation which provides for a non binding settlement. 29. For the said purpose, the dispute under the criminal procedure and/or the nature thereof would also play an important role. Whereas Respondent states that the burglary has taken place, the appellant denies and disputes the same. In a criminal case, the accused shall be entitled to raise a contention that no offence has taken place.

If the criminal court form an opinion that an offence had taken place, which otherwise is a non-compoundable one, the term "relating to an offence" should be. given wider meaning. The first proviso appended to section 22•8 ~f the Act may not be of much relevance. 0 30. This aspectof the matter har:l not been argued before. the Division Bench of the High CoLJrt. The counsel appearing were remiss in bringing the same to the notice oqhe Court the binding precedents, ;:is regards the jurisdictional aspect of the Civil Court in the light of Section 9 of the Code of Civil Procedure. 31. In Dhulabhai and Ors. vs. The State of Madhya Pradesh and Anr. : AIR 1969 SC 78, the Court discussed the ambit of S. 9:ofthe CPC and laid down the following principles: "... (1) Where the statute gives a finality to the orders of the . • special tribunals the Civil Court's jurisdiction must be held to be excluded if there is adequate remedy to do what the Civil Courts would normally do in a suit.

Such provision, however, does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure. (2) Where there is an express bar of the jurisdiction of the court, an examination of the scheme of the particular Act · to find the adequacy or the s~fficiency of the remedies provided may be relevant but is not decisive to sustain the jurisdiction of the civil court. Where there is no express exclusion the examination of the remedies and the scheme of the particular Act to find out the intendment becomes necessary and the result of the inquiry may be decisive. In the latter case it is necessary to see if the statute creates a special right or a liability and .

""" provides for the determination of the right or liability and further lays down that all questions about the said right and liability shall be determined by the tribunals so constituted, ·and whether remedies normally associated with actions in Civil Courts are prescribed by the said statue or not. .. " 32. In Dwarka Prasad Agarwal (D) by Lrs. and Anr vs. Ramesh Chander Agarwal and Ors. : (2003) 6 SCC 220 , this . o Court held: "... The dispute between the parties was eminently a civil dispute and not a dispute under the provisions of the Companies Act. Section ~of the Code of Civil Procedure confers jurisdiction upon the civil courts to determine all £: disputes of civil nature unless the same is barred under a statute either expressly or by necessary implication. Bar of jurisdiction of a civil court is not to be readily inferred. A provision seeking to bar jurisdiction of a civil court requires strict interpretation.

The court, it is well settled, would normally lean in favour of construction, which would uphold retention of jurisdiction of the civil court ... " This case was cited with approval in Bhagubhai Dhanabhai Khalasi and Anr vs. The State of Gujarat and Ors. , 2007 (5) SCALE 357. 32. Therefore, it is a fundamental presumption in statutory interpretation that ordinary civil courts have jurisdiction to decide all matters of a civil nature. As a corollary, (i) provisions excluding jurisdiction of civil courts .. +- ' should receive strict construction. (See Bhagwat Singh vs. State of Rajasthan : AIR 1964 SC . · 444; Raichand vs. Union of India : AIR 1964 SC 1268), and (ii) · provisions conferring jurisdiction on authorities and tribunals other than civil courts (See Kasturi and Sons vs. Salivateswaran : AIR 1958 SC 507; Upper Doab Sugar Mills vs. . Shahdara (Delhi) Saharanpur Light Railway : AIR 1963 SC 217) have to be strictly construed. 34.

This principle, taken from Principles of Statutory Interpretation by G. P. Singh, Ninth Edition, page 630, was citedwith approval in Swamy Atmananda and Ors. vs. Sri Ramakrishna Tapovanam and Ors. : AIR 2005 SC 2392 . . 35. We . must also take notice of a recent decisipn of this Court in State otPunjab and another vs. Jalour Singh and others : JT 2008 (2) SC 83 where this Court expressed its dismay .. with the manner in which the Lok-Adalat matters are dealt with. · Chief. Justice of India speaking for the Bench, upon noticing the provisions of the Legal Services Authority Act, 1987, observed that whereas Lok Adalat had tp arrive at a just settlement in their conciliatory role guided by the principles of justice, equity, . fair play and other legal principles, but in that case it assumed a ' judicicil role, he.

ard parties, ignored the absence of consensus, and increased the compensation to an extent it considered just and reasonable, by a reasoned order which is adjudicatory in nature'. It arrogated to itself the appellate powers of the High Court and·'allowed' the appea4;ind 'directed' the respon- G:. dents in the appeal to pay the enhariced compensation within a period fixed by it Jt was held that. such an order is not an Award. 36. Section 22-C(1) read with Section 22-C(2), Section 22-C(8) and Section 22-E of the Act, exclude the jurisdiction of the civil courts by providing that when an application is made by H. -+ either party to the Permanent Lok Adalat to settle a dispute at the pre-litigation stage, the PLA shall do so, and the other party is precluded from approaching the civil court in such a case. 37. Section 22-C(1) contains certain Provisos which limit the jurisdiction of the PLA.

Given the principle of statutory interpretation stated earlier, these Provisos, as a corollary, must be interpreted in an expansive manner. ~-1- 38. What is important to note is that with respect of public utility services, the main purpose behind Section 22-C(8) seems to be that "most of the petty cases which ought not to go in the regular Courts would be settled in the pre-litigation stage itself. " 39. Therefore, in the instant case, the terms "relating to" an "offence" appearing in Proviso 1 must be interpreted broadly, and as the determination before the Permanent Lok Adalat will involve the question as to whether or not an offence, which is ~ -.. non-compoundable in nature, has indeed been committed, this case falls outside the jurisdiction of the Permanent Lok Adalat. 40. We must guard against construction of a statute which would confer such a wide power in the Permanent LokAdalat having regard to sub-section (8) of Section 22-Cof the Act.

The Permanent LokAdalat must at the outset formulate the questions. We however, do not intend to lay down a law, as at present advised, that Permanent LokAdalat would refuse to exercise its jurisdiction .. to entertain such cases but emphasise that it must exercise its , power with due care and caution. It must not give an impression to any of the disputants that it from the very beginning has an adjudicatory role to play in relation to its jurisdiction without going into the statutory provisions and restrictions imposed thereunder. 41. For the reasons abovementioned the order of thE) High Court cannot be sustained and is set aside accordingly. The }appeal is allowed. In the facts and circumstances of the case, there shall be no order as to costs. N. J. Appeal allowed.