S. Ravindra Bhat, J. (Open Court)— Issue Rule. Mr. Sanjeev Pathak, learned counsel waives notice of Rule. With consent of learned counsel for parties, the matter was heard finally.

2. The petitioners impugn the respondents’ recourse to the Secularization and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002 (hereafter called “Secularization Act”) and also an order dated 16th October, 2006 made by the Additional District Judge-cum-Chief Metropolitan Magistrate under Section 14 of the Act.

3. The brief facts for the purpose of deciding this case are that the petitioner is a customer borrower of the second respondent He entered into a transaction whereby an amount of Rs. 9,90,000/- was borrowed in the year 2004. In terms of the loan agreement/arrangement, the liabilities were to be liquidated over a period of 10 years by equal monthly instalments to the tune of Rs. 12,700/-. It is alleged that on account of certain compulsions as well as family exigencies the petitioners were unable to keep up the commitment and repay the instalments. As a result, the respondent bank sought to recall the loan and enforce the securities. The petitioners approached the Delhi Legal Services Committee under the Legal Services and Authorities Act, 1987.

4. It is not in dispute that by two orders dated 1.8.2006 and 20.8.2006, parties resolved their disputes; the same was recorded in the form of an award by Justice R.C Jain (Retd.), the concerned authority, in terms of provisions of the Act. The order dated 1.8.2006 which primarily records the terms of the settlement reads as follows:

“F.No 432.DHCLSC/06-07

Vijay Bank v. Rajan Kakkar

1.8.2006

Present: Mr. Vasant Hegde, AGM along with Sh. Vivek Aggarwal, Law Officer

Sh. Rajan Kakkar in person.

Efforts for conciliation made. During the course of conciliation matter has been amicably settled. Borrower has submitted that due to marriage of his daughter in December, he is in financial difficulty and will be pay Rs. 10,000/- per month for a period of 9 months regularly. He has also submitted that after a period of 9 months his account be re-scheduled and he shall clear the liability as per re-scheduled plan according to the Bank norms up to original due date. The same is agreeable to the bank.

Both the sides submit that matter be settled in terms above. Accordingly, matter is settled in terms above. Parties are directed to abide by their statements. Copy of the orders be given Dasti.

Matter be listed in the Lok Adalat for 20.8.2006

Secretary”

5. The subsequent order dated 20th August, 2006 confirmed the terms whereby the petitioners agreed to pay nine monthly instalments of Rs. 10,000/- each after which the bank was agreed to re-schedule the account to enable him to liquidate liabilities in terms of re-scheduled plan, according to the bank's norms. The said order reads as follows:

“F.N.O 432.DHCLSC/06-07

Vijaya Bank v. Raja Kakkar

20.8.2006

Present: Sh. Vivek Agrawal, Manager and Law Officer from Vijaya Bank.

Sh. Rajan Kakkar, borrower in person.

Both sides confirm to the settlement reached by them before the Secretary Delhi High Court Legal Services Committee in the meeting held on 1st August, 2006. However the representative of the bank has pointed out that in view of the past default(s) committed by the defendant it must be provided that in case of default in payment of any one or more installments by the respondent he will forfeit the concession offered to him. Sh. Rajan Kakkar states that he will not make any default in payment of nine monthly installments of Rs. 10,000/- each and whereafter his account be rescheduled and he shall clear his liability as per the rescheduled plan according to the bank norms and as per the original schedule of payment. Shri Rajesh Kakkar hereby agrees to pay Rs. 10,000/- p.m for a period of nine months regularly and whereafter his account will be rescheduled by the bank and his liability as per the rescheduled plan shall be cleared by him according to the bank norms up to the original due date. In case of default in the payment of two or more installments the petitioner shall be entitled to recover the amount of loan and interest thereon as per the bank norms.

Lok Adalat.”

6. On 5th November, 2005, a notice under Section 13(2) appears to have been issued. It is contended on behalf of the petitioners that this notice was not received by them. The present petition purports to be aggrieved by the order of the Chief Metropolitan Magistrate dated 16.10.2006 whereby the court appointed a Local Commissioner to take charge of the assets further to the steps take under the Act.

7. It is contended on behalf of the petitioners that regardless of the issuance of the notice under Section 13(2), the respondents were bound by the final order of the Lok Adalat in terms of Section 21(2) of the Legal Services Authorities Act, 1987. Learned counsel has relied upon the decision of the Supreme Court reported as P.T Thomas v. Thomas Job., (2005) 6 SCC 478. It is contended that the Court had categorically observed that where an award was made by a Lok Adalat under the provisions, the same is final and binding on both parties and has the effect of a decree under Order 23 Rule 3 CPC. Learned counsel contended that it cannot be even interfered with under Article 226 of the Constitution.

8. Learned counsel for the respondents relied upon the averments made in the return to these proceedings. It was contended that though the award was with the consent of the parties, it cannot be given effect to as its terms are contrary to public policy, i.e the guidelines of the RBI regarding compromise and settlement of NPA amount. It was contended that under RBI guidelines payment of complete outstandings was to be in three or four instalments. In the present case, the instalments were nine in number. Learned counsel also contended that regardless of the award, its rights to move under the Secularization Act remained intact and could not be prejudiced in any manner.

9. The above narrative shows that there is no serious dispute about the facts. The petitioner admittedly defaulted his commitment to return the amounts borrowed in terms of original loan agreement. Although, there is some dispute as to whether the notice under Section 13(2) of the Secularization Act was received by the petitioners, the parties did appear before the Lok Adalat. The Lok Adalat in two separate proceedings, held in a space of about three weeks, recorded the consent of the bank. In terms of consent, the outstanding were to be cleared by 9 instalments of Rs. 10,000/- each. The bank thereupon had to re-schedule the terms of payment and the petitioners were bound by the same. It is also not disputed that pursuant to the said agreement, the petitioners deposited the amounts each as instalment. In these circumstances, the question is whether the bank could have taken further recourse to Secularization Act.

10. The provisions of the Legal Services Act 1987, particularly, Sections 21 and 22 have been interpretated by the Supreme Court. The law laid down in P.T Thomas's case is categorical. The award of the Lok Adalat which finally records a compromise is deemed to be a decree. Nothing was brought to my notice to say that such awards can be over-ridden in terms of Secularization Act. On the contrary, Section 37 of the Act specifically states that the provisions of the Act or Rules thereunder shall be in addition to not an interrogation of specific enactments or any other law for the time being in force. Further the Secularization Act itself contains a schedule whereby amendments to provisions in other enactments have been carried out. The schedule is silent as far as the applicability or amendment in any of the provisions under the Legal Services Authorities Act, 1987 are concerned.

11. In view of the above, the only logical finding is that the action of the respondents in seeking to enforce the provisions of the Secularization Act are illegal or arbitrary. The petition is therefore entitled to succeed. The respondents are hereby directed to give effect to the award of the Lok Adalat dated 1st August, 2006 and 20th August, 2006; after verification of the amounts paid by the petitioners, it shall indicate the schedule of repayment of the liabilities within four weeks to them.

12. The petition is allowed in the above terms without any order as to costs.