MOD IV: PRE-NEUTRAL EVALUATION AND LOK ADALAT

CONCEPT OF NEUTRAL EVALUATION

Introduction
Quoting the exact words of Aristotle, “The guest will judge better of a feast than the
cook.” Taking the above saying into consideration, it is best to administer a third party or an
individual who has no relation with either of the parties to give out the most genuine and
unbiased adjudication, in both formal or informal situations.

Early neutral evaluation is a preliminary assessment of facts, evidence, or legal merits.[1] Early

neutral evaluation is a non-binding Dispute Resolution Method. Most individuals resort to
including ENE clause in their contractual agreements along with the arbitration clause to get
their case valued pre-trial.[2] “Neutral evaluation” (also known as “early neutral evaluation”, or
“ENE”, and sometimes simply called “case evaluation”) can actually be many different things.
Just as there are many different ‘styles’ of mediation (directive or non-directive; caucus or non-
caucus; evaluative or facilitative; etc.), and just as there are many forms of arbitration (binding or
non-binding; high/low; baseball; and so on), so too there are many different things that happen
under the general rubric of “neutral evaluation”.[3] Its purpose is to facilitate further negotiations
or to give the parties an idea of what to expect upon litigation of the dispute. In this form of
ADR, a neutral third party hears a summary of both parties’ positions and then renders an
opinion.
ENE – How it works?
It is a confidential process in which a neutral third party, who is an expert in the subject matter of
the dispute, hears abbreviated arguments on the claims, defenses and expected court outcomes
from each party. The neutral then issue a non-binding opinion of the likely outcome of disputed
issues or the likely court resolution. An ENE session is intended to occur relatively early in the
pretrial period-so litigants can use it to reduce the disproportion between litigation transaction
costs and case value and to craft the most critically focused and efficient case development plan
possible. It usually involves the parties agreeing to employ a senior lawyer or appropriate expert
to evaluate the case and to provide an opinion in relation to a specific question or on the outcome
generally, which may be after considering oral or written arguments, evidence and submissions.
Sometimes neutrals state their views by means of written opinions or recommendations.[16] The
parties may agree to be bound by the evaluation and so for it to be determinative. Participation
typically is voluntary,[17] although in many jurisdictions parties can be ordered to take part.
[18] The term “ENE” has been used to describe the process of giving an expert (non-
determinative) opinion, whilst “expert determination” has been the description used for a process
that may be identical but which produces an outcome that the parties agree will be determinative
and binding upon them.[19] Evaluation sessions are confidential.[20] In order for an evaluation
to be enforceable, it needs to be recorded in a consent order and approved by the court. There is
no mechanism in place to appeal an evaluation, nor is it clear what a court will do if one party
considers the decision to be wrong.[21] As may be seen, courts use early neutral evaluation to
correct counsel’s mistaken evaluations of their cases and to find ways of getting to the decisive
issues quickly.[22]

• In general, procedure of early neutral evaluation involves the following steps:

1. Appointment of evaluator-

 The parties must ensure that the evaluator appointed has special knowledge and expertise
in the subject- matter of the suit.

 This makes the process of evaluation more effective and reliable.

 Other criteria - fairness, impartiality, and a skill of evaluating facts and circumstances.

 There is no specified number of evaluators that have to be appointed.

 It is upon the parties’ discretion to appoint one or more than one evaluator.

2. Preparation of neutral evaluation-

• Before the proceedings of neutral evaluation commence, the parties are required to
submit a written statement stating the facts and issues from their point of view.

• This enables the evaluator to understand the perspective of both the parties.

• Simultaneously, the parties decide the day, date and venue at which the proceedings shall
commence.

3. Evaluator’s opening statement-

• The parties’ and the evaluator meet on the decided date and venue.

• The proceedings commence with the evaluator’s opening statement.

 • He describes his role as a neutral third party,

• he also states the rules and the various stages of the proceedings.

4. Parties’ presentations-

• The next step is the oral presentation of the parties.

• The disputants make a presentation of the case from their point of view, the issues that
are important pertaining to the case, and the outcome they are seeking from the
proceedings.

• This step is very important because it makes the parties’ aware about the perspective of
the other party.

• It also clears any sort of misunderstanding between the disputants.

• It also helps the evaluator in identifying the primary and secondary issues of the dispute.

5. Evaluator’s opinion-

• The final step of the proceedings is the opinion of the evaluator.

• The neutral third party will provide his opinion on every issue of the dispute, and then
suggest possible points on which parties’ may negotiate and compromise.

• The evaluator also mentions the possible outcomes of litigation if the parties decide to
move to court.

• the opinion and the evaluation of the neutral third party is not binding on the disputants.

• There are two possible outcomes of this proceedings.

• If the dispute is resolved, the parties enter into a written agreement.

• If the dispute is not resolved, the parties may approach the court upon their discretion.

CHARACTERISTICS OF A NEUTRAL EVALUATION

• 1. Voluntary: 

• It is non-binding on the parties:

• they are free to accept or reject the outcome of the Neutral Evaluation.

• They may expressly agree to attempt settlement through the Neutral Evaluation process
and may withdraw from the process at any given time.
 • 2. Informal: 

• There are no fixed evidentiary or procedural rules governing the process.

• Rather, the parties decide on the governing rules that may be set out in writing in the
Neutral Evaluation agreement.

• This is a flexible process as its scope can be shaped by the neutral evaluator and/or the
parties according,

• 3. Confidential:

• generally a confidential process, unless the parties agree otherwise.

• The parties should jointly establish the extent of confidentiality in a confidentiality

agreement or

• via a clause in the Neutral Evaluation agreement.

• 4. Assisted:

• The neutral evaluator's role is that of an impartial third party

• helps the parties identify the main issues in dispute,

• discusses the strengths and weaknesses of the parties' arguments,

• assesses the merits of the claims and

• renders an opinion on the likely outcome of the case in court.

• Whenever possible, the neutral evaluator helps the parties explore the possibility of a
mutually acceptable settlement and may be invited to serve as mediator or facilitator.

OBJECTIVE OF A NEUTRAL EVALUATION

• to reduce litigation costs by promoting forthright communication between the parties and
providing an early, realistic assessment of their case.

• It may also include discussions about the possibility of early settlement.

• to kick start the dispute resolution process.

Neutral Evaluation is designed to enhance pre-trial practice by:

• Encouraging each party and counsel to analyse their situations as early as possible;
 • Offering the parties an early opportunity to communicate directly about the case and to
exchange relevant information;

• Helping the parties isolate the core issues of the dispute;

• Enabling parties to develop a discovery approach that focuses early on key issues and
disclosure of key evidence, and at less expense;

• Providing each party and counsel with an early opportunity to present their positions and
hear the other;

• Offering counsel and parties a brief, impartial, confidential and objective assessment of
the relative strengths and weaknesses of their positions and the overall value of the case
at an early stage in its evolution;

• Providing the parties with an early opportunity to negotiate settlement with the help of a
skilled neutral evaluator, who is an expert in the substantive area of the dispute.

THE ROLE OF THE NEUTRAL EVALUATOR

• The neutral evaluator will:

• Permit the parties with or without counsel to make an oral presentation of their positions
regarding the dispute;

• Help and direct parties to search for common ground and narrow the scope of the dispute;

• Introduce new ideas or a fresh perspective to the dispute and search for or propose
alternative solutions;

• Assess the relative strengths and weaknesses of the parties' positions,

• explain the reasons of his or her assessment and estimate,

• Wherever possible, the likelihood of liability and the verdict range of damages;

• Suggest and help the parties explore the possibility of a settlement.

ADVANTAGES OF THE NEUTRAL EVALUATION

• Provides an opportunity for early, open and direct communication, enabling parties to
focus on the core issues in dispute.

• The process is non-binding. 

•  Is an informal, flexible and creative tool of dispute resolution 

 • Neutral Evaluation is confidential (unless agreed otherwise by the parties),

• May generally reduce litigation costs

• Widely applicable to civil cases of varying types and complexity.

• Presence of a third-party neutral allows for a controlled and impartial process

• Used as a gatekeeper for other dispute resolution processes.

DISADVANTAGES OF THE NEUTRAL EVALUATION

• Can be perceived as adding an additional step or layer before getting to court and thus
postponing the eventual trial.

• There is concern about possible duplication between Neutral Evaluation and other case
management or DR processes.

• Possibility of overall added costs to litigation if the process does not produce settlement
or if the process is pursued in bad faith.

• Procedural safeguards are limited: abbreviated discovery and presentation may produce
an inequitable outcome.

• Neutral Evaluation may be vulnerable to manipulation as it may be used to preview a

counterpart's case;

• If pursued in bad faith, it may also be used as a dilatory tactic.

• Is a non-binding dispute resolution process, it cannot produce legal precedents.

• K. Srinivas Rao v. D.A. Deepa,

• the Supreme Court discussed the idea of pre-litigation mediation in the context of family
disputes.

• In this case, the husband prayed for a divorce decree on grounds of mental cruelty as the
wife had filed a false criminal complaint against him and his family.

• The Court, while granting the husband relief, placed great importance on the benefits of
pre-litigation mediation as a form of dispute settlement, observing that in the present case
there would be no requirement for a divorce had the parties approached a mediation
centre prior to pursuing the suit.

• The Court acknowledged that often disputes such as these arise as a result of trivial
reasons that are exacerbated by pursuing litigation.
 • The oppositional ‘winner takes all’ set-up is not beneficial for the relationship between
parties, particularly in the context of matrimonial disputes.

Advantages and Difficulties

The primary benefit of the ENE process is that it is relatively quick and, if successful, can avoid
extensive litigation. A neutral assessment of the parties’ claims can spur a resolution–by leading
the parties to re-evaluate their own cases and revise their settlement proposals–or can narrow the
dispute.[23] Generally, ENE works best early in a dispute when neutral guidance about the
strengths and weaknesses of a position may facilitate a resolution. In some cases, however, ENE
may be more productive after there has been some discovery to develop the issues more fully.
Commercial disputes are appropriate for ENE if the parties respect the views of a well-regarded
neutral. ENE is also appropriate in disputes involving a specialized field of law or complex or
technical issues. Parties can benefit from ENE when they cannot afford delay or when they want
to promote a continuing.[24] This process lends itself well to an application in patent litigation
and misappropriation of trade secret cases. Generally, this process would work in any dispute
involving complex or proprietary technology and having counts based on multiple principles of
law. The neutral expert may assist in reducing the number of counts, thus enabling the parties to
focus on the few key issues. In this manner, discovery and resources may be concentrated on the
critical issues, and the parties can work through to a meaningful settlement.[25]
Nevertheless, difficulties can result if one of the parties lacks confidence in the neutral or does
not accept the evaluation. Even if the parties accept the evaluation, they are sometimes left to
negotiate a resolution based on that evaluation without assistance from a facilitator. Furthermore,
it may be difficult to maintain the confidentiality of the process or the evaluation in particular.
[26] ENE may not be appropriate in cases involving serious credibility disputes, cases where the
parties have not yet exchanged critical evidence, and cases raising issues with no legal precedent
or unresolved public policy questions.
Difference from other ADR methods
In case of ENE, the evaluator acts as a neutral person to assess the strengths and weaknesses of
each of the parties and discusses the same with the parties jointly or in caucuses, so that the
parties are aware of the independent evaluation of the merits of their case. ENE is, thus, distinct
from-mediation being explicitly evaluative in nature and normally requires the expertise in the
subject matter. It also focuses on the procedure of law as opposed to the interest of parties and it
is not a process of discussion towards a negotiated settlement.[28] The process of ENE is,
however, distinct from arbitration as there is no testimony or oath or examination and such
neutral evaluation is not recorded. The process is confidential and cannot be used by any of the
parties against the other. There is no award or result filed. It is really a judgment by the neutral
evaluator on the basis of material on record -without the judgment is binding and in a Case of
non-acceptance, the matter is referred back to the Court without disclosure of reasons as in the
case of a mediation.
Position in India
Section 89 of the Civil Procedure Code, 1908 includes provisions for referring the parties to
ENE. It reads:
(1) Where it appears to the court that there exist elements of a settlement which may be
acceptable to the parties, the court shall formulate the terms of settlement and give them to the
parties for their observations and after receiving the observations of the parties, the court may
reformulate the terms of a possible settlement and refer the same for— (a) arbitration; (b)
conciliation; (c) judicial settlement including settlement through Lok Adalat; or (d) mediation.
In Bawa Masala Company v Bawa Masala Pvt Ltd the Delhi High Court referred the parties to
early neutral evaluation, thus introducing the concept to India. It forms a part of the recent trend
in the Delhi High Court of encouraging ADR in intellectual property disputes forward by leap
and bounds. The matter had earlier been referred for mediation as there were a number of
interlinked disputes pending before the trial court. Although the two officials of the Delhi High
Court Mediation and Conciliation Centre who had been appointed as mediators in the matter had
successfully resolved all the other disputes, the instant suit had not been settled. In view of this,
the counsel for both parties suggested that another attempt for amicable resolution through the
ADR mechanism be made and instead of mediation, the endeavor should now be through the
process of Early Neutral Evaluation (ENE). Hon’ble Mr. Justice Sanjay Kishan Kaul describes
ENE in the words of Robert A. Goodin as “Early neutral evaluation is a technique used in
American litigation to provide early focus to complex commercial litigation, and based on that
focus, to provide a basis for sensible case management or offer resolution of the entire case, in
the very early stages”. While referring the parties to ENE, he observed:
“ENE is, thus, a different form of alternative dispute resolution and I see no reason why this
process cannot be resorted to towards the object of a negotiated settlement in pursuance to
Section 89 of the Code of Civil Procedure, 1908 especially when the parties volunteer for the
same. The provisions of the said section inter alia provide for Alternative Dispute Resolution
Mechanism, which inter alia includes mediation. ENE also broadly follows the same process as a
mediation, though the concept is not a negotiated settlement, but a neutral assessment.”
 PERMANENT LOK ADALAT
• Lok Adalat has been found to be a successful tool of alternate dispute resolution in India.
• However, the major defect of the mechanism of Lok Adalat is that it cannot take a
decision, if one of the parties, is not willing for a settlement, though the case involves an
element of settlement.
• The adamant attitude shown by one among the parties will render the entire process
futile.
• Even if all the members of the Lok Adalat are of the opinion that the case is a fit one for
settlement, under the present set-up, they cannot take a decision unless all the parties
consent.
• In his inaugural address at the second annual meet of the State Legal Services
Authorities, 1999, the then Hon'ble Chief Justice Dr A.S. Anand stated:
"There will be no harm if Legal Services Authorities Act is suitably amended to provide
that in case, in a matter before it, the Judges of the Lok Adalats are satisfied that one of
the parties is unreasonably opposing a reasonable settlement and has no valid defence
whatsoever against the claim of the opposite party, they may pass an award on the basis
of the materials before them without the consent of one or more parties.
• It may also be provided that against such awards, there would be one appeal to the court
to which the appeal would have gone if the matter had been decided by a court....
• This course, I think, would give relief to a very large number of litigants coming to Lok
Adalats at pre-litigative stage as well as in pending matters."
• In 2002, Parliament brought about certain amendments to the Legal Services Authorities
Act, 1987.
• The said amendment introduced Chapter VI-A with the caption PRE LITIGATION
CONCILIATION AND SETTLEMENT.
• Section 22-B envisages establishment of "PERMANENT LOK ADALATS (PLA)" at
different places for considering the cases in respect of Public Utility Services (PUS).
• 22A. Definitions.—In this Chapter and for the purposes of sections 22 and 23, unless the
context otherwise requires,—
• (a) “Permanent Lok Adalat” means a Permanent Lok Adalat established under sub-
section (1) of section22B;
• (b) “public utility service” means any—
• (i) transport service for the carriage of passengers or goods by air, road or water; or
• (ii) postal, telegraph or telephone service; or
• (iii) supply of power, light or water to the public by any establishment; or
• (iv) system of public conservancy or sanitation; or
• (v) service in hospital or dispensary; or
• (vi)insurance service, and
• includes
• any service which the Central Government or the State Government, as the case may be,
in the public interest, by notification, declare to be a public utility service for the
purposes of this Chapter.
22B. Establishment of Permanent Lok Adalats.—
• (1) Notwithstanding anything contained in section19,
• the Central Authority or, as the case may be, every State Authority shall,
• by notification,
• establish Permanent Lok Adalats at such places and for exercising such jurisdiction in
respect of one or more public utility services and for such areas as may be specified in the
notification.

• (2) Every Permanent Lok Adalat established for an area notified under sub-section (1)
shall consist of—

• (a) a person who is, or has been, a district judge or additional district judge or
• has held judicial office higher in rank than that of a district judge,
• shall be the Chairman of the Permanent Lok Adalat; and
• (b) two other persons having adequate experience in public utility service to be
nominated by the Central Government or, as the case may be, the State Government on
the recommendation of the Central Authority or, as the case may be, the State Authority,
• appointed by the Central Authority or, as the case may be, the State Authority,
• establishing such Permanent Lok Adalat and
• the other terms and conditions of the appointment of the Chairman and other persons
referred to in clause (b) shall be such as may be prescribed by the Central Government.
22C. Cognizance of cases by Permanent Lok Adalat.—
• (1) Any party to a dispute may,
• before the dispute is brought before any court,
• make an application to the Permanent Lok Adalat for the settlement of dispute:
• 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 exceeds ten lakh rupees:
• Provided also that the Central Government, may by notification, increase the limit of
ten lakh rupees specified in the second proviso in consultation with the Central
Authority.
• (2) After an application is made under sub-section(1) to the Permanent Lok Adalat, no
party to that application shall invoke jurisdiction of any court in the same dispute.
• (3) Where an application is made to a Permanent Lok Adalat under sub-section(1), it—
• (a) shall direct each party to the application to file before it a written statement, stating
therein
• the facts and nature of dispute under the application,
• points or issues in such dispute and
• grounds relied in support of, or in opposition to, such points or issues, as the case may be,
and
• such party may supplement such statement with any document and other evidence
• which such party deems appropriate in proof of such facts and grounds and
• shall send a copy of such statement together with a copy of such document and other
evidence, if any,
• to each of the parties to the application;
• (b) may require any party to the application to file additional statement before it at any
stage of the conciliation proceedings;
• (c) shall communicate any document or statement received by it from any party to the
application to the other party, to enable such other party to present reply thereto.
• (4) When statement, additional statement and reply, if any,
• have been filed under sub-section(3),
 • to the satisfaction of the Permanent Lok Adalat,
• it shall conduct conciliation proceedings between the parties to the application in such
manner as it thinks appropriate taking into account the circumstances of the dispute.
• (5) The Permanent Lok Adalat shall,
• during conduct of conciliation proceedings under sub-section(4),
• assist the parties in their attempt to reach an amicable settlement of the dispute in an
independent and impartial manner.
• (6) It shall be the duty of the every party to the application
• to cooperate in good faith with the Permanent Lok Adalat in conciliation of the dispute
relating to the application and
• to comply with the direction of the Permanent Lok Adalat to produce evidence and other
related documents before it.
• (7) When a Permanent Lok Adalat,
• in the aforesaid conciliation proceedings,
• is of opinion that there exist elements of settlement in such proceedings which may
be acceptable to the parties,
• it may formulate the terms of a possible settlement of the dispute and
• give to the parties concerned for their observations and
• in case the parties reach at an agreement on the settlement of the dispute,
• they shall sign the settlement agreement and
• the Permanent Lok Adalat shall pass an award in terms thereof and furnish a copy
of the same to each of the parties concerned.
• (8) Where the parties fail to reach at an agreement under sub-section (7),
• the Permanent Lok Adalat shall,
• if the dispute does not relate to any offence,
• decide the dispute.
22D. Procedure of Permanent Lok Adalat.—
• The Permanent Lok Adalat shall,
• while conducting conciliation proceedings or
• deciding a dispute on merit under this Act,
 • be guided by the principles of natural justice, objectivity, fair play, equity and other
principles of justice, and
• shall not be bound by the Code of Civil Procedure, 1908 (5 of 1908) and the Indian
Evidence Act, 1872 (1 of 1872).
22E. Award of Permanent Lok Adalat to be final.—
• (1) Every award of the Permanent Lok Adalat under this Act
• made either on merit or in terms of a settlement agreement
• shall be final and binding on all the parties thereto and on persons claiming under them.
• (2) Every award of the Permanent Lok Adalat under this Act shall be deemed to be a
decree of a civil court.
• (3) The award made by the Permanent Lok Adalat under this Act shall be by a majority
of the persons constituting the Permanent Lok Adalat.
• (4) Every award made by the Permanent Lok Adalat under this Act shall be final and
shall not be called in question in any original suit, application or execution proceeding.
• (5) The Permanent Lok Adalat may transmit any award made by it to a civil court having
local jurisdiction and
• such civil court shall execute the order as if it were a decree made by that court.]
Are the awards of PLA appealable?
• Every award of PLA is final and binding and “shall not be called into question in any
original suit, application or execution proceeding”- (S. 22 E)
• Here, one may argue that the appeal against the award of PLA should be possible
primarily because
• (i) the Act expressly doesn’t bar the appeal against the award of PLA whereas it does
expressly bar the appeal for the award of Lok Adalat’ and
• Section 21(2) says that “no appeal shall lie to any court against the award [of Lok
Adalat]”
• (ii) because PLA can adjudicate a dispute on the merits of the case which opens room for
the aggrieved party to move the award in appeal, in contrast to Lok Adalat which only
conciliates a dispute and passes award on the consent of the parties, thus, leaving no
room for an appeal.
• the Supreme Court refuted these arguments in  Bar Council of India v. Union of
India, (2012) 8 SCC 243,
• Held that the award of PLA is non-appealable.
• It further clarified that
• (i) the right to appeal is not an inherent right but a creation of statute;
• if a statute doesn’t expressly prohibits the appeal of an award, that by ipso facto doesn’t
make an award appealable especially when the text of the statute strongly suggests
otherwise;
• (ii) that PLAs are special tribunals aiming at resolving public utility disputes at the
earliest, and hence, to avoid unnecessary prolongation, the right to appeal is absent;
• (iii) that if at all, a party is aggrieved by the adjudication of PLA, he always has an option
to invoke the special and extraordinary jurisdiction of the High Court under Articles 226
and 227 of the Constitution of India.
• Punjab National Bank v. Lakshmichand Rai 
• the High Court held that "The provisions of the Act shall prevail in the matter of filing an
appeal and an appeal would not lie under the provisions of Section 96 C.P.C.
• Lok Adalat is conducted under an independent enactment and once the award is made by
Lok Adalat the right of appeal shall be governed by the provisions of the Legal Services
Authorities Act where it has been specifically barred under Provisions of Section 21(2),
no appeal can be filed against the award under Section 96 C.P.C."
• The Court further stated that "It may incidentally be further seen that even the Code of
Civil Procedure does not provide for an appeal under Section 96 against a consent decree.
• The Code of Civil Procedure also intends that once a consent decree is passed by Civil
Court finality is attached to it.
• Such finality cannot be permitted to be destroyed, particularly under the Legal Services
Authorities Act, as it would amount to defeat the very aim and object of the Act with
which it has been enacted.”
• Hence, we hold that the appeal filed is not maintainable.
• Board of Trustees of the Port of Visakhapatnam v. Presiding Officer,
• The AP High Court held that in Permanent Lok Adalat the award is enforceable as a
decree and it is final.
• The endeavour is only to see that the disputes are narrowed down and make the final
settlement so that the parties are not again driven to further litigation or any dispute.
• Though the award of a Lok Adalat is not a result of a contest but on merits , however,
• it is as equal and on par with a decree on compromise and will have the same binding
effect and is conclusive just as the decree passed on the compromises and cannot be
challenged in a regular appeal.
• Mansukhlal Vithaldas Chauhan v. State of Gujarat,
• it was held that-
• The duty of the Court is to confine itself to the question of legality.
• Its concern should be,
1. whether the decision-making authority exceeded its powers?;
2. committed an error of law;
3. committed a breach of the rules of natural justice;
4. reached a decision which no reasonable Tribunal would have reached; or
5. abused its powers.
 In the case on hand the Lok Adalat
 exceeded its powers,
 committed an error of law,
 committed breach of the rules of natural justice and
 abused its powers.
 Even if this Court were to strictly confine itself to the question of legality, the impugned
order cannot still be tolerated as it suffers from all the foibles that justify interference
under Article 226 of the Constitution.