(1) In case of any dispute relating to the transactions involving a loan of up to Rs. 50,000 (fifty thousand) or equivalent value (excluding interest), the aggrieved person may file an application in the prescribed form along with the prescribed fee, before the Panchayat and on receipt of such application, the Panchayat shall cause a notice or the application to be given to the other party.
(2) Where in any area there is no Panchayat and in every dispute relating to the transactions involving a loan exceeding Rs. 50,000/- (fifty thousand) or equivalent value (excluding interest), the aggrieved person may file an application in the prescribed form along with the prescribed fee before the Lok Adalat and on receipt of such application, the Lok Adalat shall cause a notice of the application to be given to the other party.
(3) The orders passed by the Panchayat or Lok Adalat, as the case may be, after hearing the parties shall be binding on all the parties to the dispute.
(4) Notwithstanding anything contained in any law for the time being in force, in any suit to which this Act applies, ––
(a) a Lok Adalat or Panchayat shall, before deciding the claim on merits, frame and decide the issue whether the money lender has complied with the provisions of section 6 ;
(b) if the Lok Adalat or Panchayat finds that the provisions of section 6 have not been complied with by the money lender, it may, if the money lender’s claim is established in whole or in part, disallow the whole or any portion of the interest found due as may seem reasonable to it in the circumstances of the case and may disallow costs.
Explanation :––A money lender who has given the receipt or furnished a statement of accounts or a passbook in the prescribed form and manner, shall be held to have complied with the provisions of section 6, as the case may be, in spite of any errors and omissions if the Lok Adalat or Panchayat finds that such errors and omissions are not material or not fraudulent.
(5) Notwithstanding anything contained in the [Code of Civil Procedure, 1908 (5 of 1908)], the Panchayat or Lok Adalat, as the case may be, shall have jurisdiction to hear and decide disputes relating to loan between a money lender and borrower at the place where the borrower resides.
(6) The Panchayat or Lok Adalat, as the case may be, while hearing a disputes under this Act shall have all the powers as are vested in a Civil Court under the [Code of Civil Procedure, 1908 (5 of 1908)] while trying a suit in respect of the following matters, namely : ––
(i) the summoning and enforcing the attendance of any defendant or witness and examining the witnesses on oath ;
(ii) the discovery and production of any document or other material object producible as evidence ;
(iii) the reception of evidence on affidavits ;
(iv) issuing of any commission for the examination of any witness ; and
(v) any other matter which may be prescribed.