Refund
of entire court fee based on out of court Settlement
The suit or claim instituted by a party to the lis
is to be valued in accordance with Suit Valuation Act and as per Court Fee Act,
1870 the court fee shall be payable. If the money value is sought to be
recovered then ad valorem court fee
shall be payable. However, during the pendency of the suit, the parties may
settle the disputes. Earlier, there was no provision for refund of court fee in
such cases. Now, under the auspices of
court mediation process, the court fee paid is liable to be refunded, if
settlement is arrived at during the pendency of the case. The court fee shall
also be refunded in case out of court settlement is reached between the parties
as well.
In terms of Section 16 or 16 A of Court Fee Act
1870 based on settlement and pursuant thereto if the judgment is passed and
decree is drawn, the court fee is liable to be returned to the plaintiff. However,
before analyzing it further, Section 89 of Code of Civil Procedure shall also
be of relevance in the context.
Section 16:- Refund of fee.—
Where the Court refers the parties to the suit to
any one of the mode of settlement of dispute referred to in section 89 of the
Code of Civil Procedure, 1908 (5 of 1908), the plaintiff shall be entitled to a
certificate from the Court authorising him to receive back from the collector,
the full amount of the fee paid in respect of such plaint.]
Section 16 A of Court
Fee Act 1870:
Refund of Court Fees on settlement before
hearing: Whenever by agreement of parties –
(i)
Any suit
is dismissed as settled out of court before any evidence has been recorded on
the merits of the claim; or
(ii)
Any suit
is compromised ending in a compromise decree before any evidence has been
recorded on the merits of the claim; or
(iii)
Any
appeal is disposed of before the commencement of hearing of such appeal; half
the amount of all fees paid in respect of the claim or claims in the suit or
appeal shall be ordered by the Court to be refunded to the parties by whom the
same have been respectively paid.
(The section 16 A was
provided for vide Court Fee (Delhi Amended) Act 2010 and assent of President
was accorded on 17.01.2011)
From the foregoing
provision of Section 16 A and as per the object of the Act, it appears that the
legislature intended to provide for refund in a situation, where, the parties
settle their disputes out of court and even without recourse to section 89 of
the Code. Though, section 16 A is conditional and is to apply only in a
settlement arrived at in pre-evidence stage and then too, it provides for 50%
of refund of court fee only.
Section 89
of Code of Civil procedure
Section
89:Settlement of disputes outside the Court —
(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.
(2)
Were a dispute has been referred –
(a)
for arbitration or conciliation, the provisions of the Arbitration and Conciliation Act,
1996 (26 of 1996) shall apply as if the
proceedings for arbitration or conciliation were referred for settlement under
the provisions of that Act;
(b) to Lok
Adalat, the Court shall refer the same to the Lok Adalat in accordance with the
provisions of sub-section (1) of Section 20 of the Legal Services
Authority Act, 1987 (39 of 1987) and all other provisions
of that Act shall apply in respect of the dispute so referred to the Lok
Adalat;
(c) for
judicial settlement, the Court shall refer the same
to a suitable institution or person and such institution or person shall be
deemed to be a Lok Adalat and all the provisions of the Legal Services
Authority Act, 1987 shall apply as if the dispute were referred to a Lok Adalat
under the provisions of that Act;
(d)
for mediation, the Court shall effect a compromise between the parties and
shall follow such procedure as may be prescribed.”
HISTORY
The Section 16 of the Court fee Act 1870 and
Section 89 of Code of Civil Procedure were inserted in the statute book by Code
of Civil Procedure ( Amendment) Act 1999 which was made effective on
01.07.2002. It was also highlighted that in order to implement 129th
Report of Law Commission of India and also to make conciliation scheme
effective, it should be made obligatory to the Court to refer the disputes
after framing of issues for settlement either by arbitration, conciliation,
mediation, judicial settlement or through Lok Adalat. In case parties are
failed to resolve the issues between them even after such alternate process as
narrated above, that the matter should be proceeded with in Court in which the
claim/suit is filed.
The hon’ble Supreme Court had the occasion to
interpret Section 89 of CPC in a judgment reported as Afcons Infrastructure Limited Vs
Cherian Varkey Construction Company Private Limited & Ors III
(2010) CLT 351:
“7. If Section
89 is to be read and required to be implemented in its literal sense, it
will be a Trial Judge's nightmare. It puts the cart before the horse and lays
down an impractical, if not impossible, procedure in sub-section (1). It has
mixed up the definitions in sub-section (2). In spite of these defects, the
object behind Section 89 is laudable and sound. Resort to alternative
disputes resolution (for short `ADR') processes is necessary to give speedy and
effective relief to the litigants and to reduce the pendency in and burden upon
the courts. As ADR processes were not being resorted to with the desired
frequency, Parliament thought it fit to introduce Section 89 and
Rules 1-A to 1-C in Order X in the Code, to ensure that ADR process was
resorted to before the commencement of trial in suits. In view of its laudable
object, the validity of Section 89, with all its imperfections, was upheld
in Salem Advocate Bar Association Vs Union of India reported in [2003
(1) SCC 49 - for short, Salem Bar - (I)] but referred to a Committee, as it was
hoped that Section 89 could be implemented by ironing the ceases. In
Salem Advocate Bar Association Vs Union of India [2005 (6) SCC 344 - for short, Salem
Bar-(II)], this Court applied the principle of purposive construction in an
attempt to make it workable”.
Section 16 of the Court Fee Act
1870 was also inserted vide the very same amendment, probably with a view to
incentivize alternate dispute redressal mechanism.
The insertion of section 16 of
the Court fee Act 1870 was carried out by an amendment and is consequential to
the new section 89 of the CPC so as to enable the parties to claim refund of
court fee in case the matter in dispute is settled outside the Court. It is of
significance that Court fee Act 1870, as enacted did not have provisions of
refund of court fee in suits in case of its earlier resolution or in case final
adjudication was not required. Though, it is pertinent to mention that in Court
Fee Act 1867 analogous provisions were there.
The Division bench of Delhi High
Court has held in a matter reported as Nutan
Batra Vs M/s Buniyaad Associates 255 (2018) DLT696 (DB). The hon’ble
Division Bench has held in para no. 11 that:
“.
On a literal reading of Section 16, a
plaintiff would be entitled to the refund of the Court fees on a mere reference
to Alternate Dispute Resolution (ADR) under Section 89 of the Code of Civil
procedure regardless of whether the reference ended in a successful settlement
or not…..”
The 238th Law Commission Report
submitted in December 2011 and the Law Commission was critical of the drafting
error which gives rose to conflict with section 21 of Legal Services
Authorities Act (LSA) 1987 in as much as it is provided in LSA that in cases
placed for resolution through Lok Adalat shall be refunded in a manner as
provided under Court Fees Cat 1870, only if compromise or settlement has been
arrived at between the parties. However, Section 16 of Court fees Act 1870
shall as per the plain language indicates that court fee shall be refundable
merely on the reference to alternate dispute redressal mechanism, irrespective
of its outcome. It implies that failed process of settlement and continuation
of proceedings in court for adjudication shall also entitle a party refund of
court fee. It means that in most of the
cases court fee shall be refunded to the parties on mere reference of seeking
settlement. If this is to be understood, then every suit could be contested for
free. It was never the object and intention of the Court Fee Act.
It may be noted that actual wording of the section
and intention of legislature are in conflict. Clause 35 to the Amendment of
Court fee Act 1870 clearly reflected that the proposed amendment is
consequential to section 89 of CPC and court fee could be refunded upon
settlement of disputes outside the Section.
There is clear conflict in what is contained in
Section 16 of Court fees Act 1870 and Section 21 of LSA Act. It is certainly
not a conscious departure, but confusion has emanated from the improper
drafting. The Law Commission has recommended that provisions of The Court Fees
Act 1870 should be amended to make it in
sync with Section 21 of LSA 1987 so that court fee could be refundable only if
the ADR resulted into settlement as that is the avowed object.
Though, validity of Section 89 of CPC despite its
imperfection has been upheld in Salem Advocate Bar Association (1) Vs Union
of India (2003) 1 SCC 49, but while referring to a Committee it was hoped
that anomaly of Section 89 of CPC shall be dealt with and ironed out.
The Division bench of Delhi High Court has agreed
with the 238th Law Commission Report in Nutan Batra (Supra) and it is further held that purpose of return
of Court fee is only with a view to encourage a party to settle the disputes
between them rather than to await for the adjudication in courts. However, in
case the settlement process is failed, then, there could be no occasion or
purpose to refund court fee. This is contrary to the intent of the legislation
and therefore the anomaly is required to be done away with. In the interregnum,
however, section 16 of The Court fee Act 1872 is invoked only in case of
resolution of disputes between parties through the alternate dispute resolution
process only and not otherwise. Clearly, that is the object of the amendment.
In the
above said context, the relevant precedents are in J.K Forgings Vs Essar
Construction India Ltd & Ors in IA No. 9711/2009 in CS (OS)
156/2009 wherein Delhi High Court has held Section 16 of Court Fee Act 1870
shall be applicable in all circumstances in which parties arrived at settlement
irrespective of stage of proceedings. In the said judgment the refund of court
fee was permitted under section 16 of the Act even when out of court settlement
was arrived at and not by recourse to Section 89 of Code of Civil Procedure. It
was prior to the insertion of Section 16 A of the Code. Similarly, in Sayed Mohammed Rafey Vs Mumtaz Ahmed
& Ors in FAO (OS) 343/2010 & in CM
9014/2010. The J.K Forging (Supra) was overruled by the Division Bench
of Delhi High Court and it was held that if a statutary provision prohibits
refund then no refund could be permitted. Of course, both J.K Forging (Supra)
and Sayed Mohammed (Supra) was rendered before the insertion of Section 16 A by
the Delhi amendment.
The Nutan Batra (Supra) judgment rendered by
hon’ble Division bench has settled at rest the issue of refund of court fee in
very clear term. The para 19 of the judgment is worth reference:
“19.
A difficulty arises however, in the case of mediation/conciliation, initiated
upon a reference by Court ( as understood in the light of Afcons (supra). These
case can potentially fail both within Section 16 and Section 16 A of the Act.
On a plain reading, Section 16 would apply as the parties are referred to mediation
by an order of Court. However, Section 16 A would also apply, as long as the
mediation is at pre-evidence stage of the suit, and the settlement agreement
has been incorporated in a compromise decree. This court has framed Rules under Part X and Section 89 (2)(d) of the CPC,
entitled the Mediation & Conciliation Rules 2004. Rules 24 & 25 of the
said Rules require an agreement between the parties to be reduced into writing
and signed by them, which would be forwarded to the Court in which the suit or
proceeding is pending. On receipt of the settlement agreement , the Court upon
its satisfaction is required to pass a decree in terms thereof, that the
parties have settled their disputes.
In
para 20 it is further held:
“In
such a case, we are of the view that an interpretation of the statute inuring
to the litigant’s benefit should be preferred. If plaintiff is able to
demonstrate that the case falls within the requirement of Section 16, refund of
the full amount of the Court fee ought to be granted.. However, as held by the
Division Bench of this Court in Sayed Mohd Rafey (Supra), if the elements of
the provision are not satisfied, then refund in terms thereof cannot be
granted. It may then be examined as to whether the condition laid down in
section 16 A have been fulfilled, so as to grant refund of 50% of the Court Fee
paid.”
CONCLUSION
From the broad analysis of the
foregoing what is borne out is that The Court Fee Act 1870 originally did not
contain the provision of refund of Court Fee. The same has been brought to the
statute book for the first time in 1999, when Code of Civil Procedure was
amended and Section 89 of CPC was made part of the Code and Section 16 was made
part of The Court Fee Cat 1870, thereby making provision of refund of court fee.
Though, In Court Fee Act 1867, the provision was there, but the same was done
away with in Court Fee Act 1870. Since parliament has encouraged the process of
mediation and settlement outside the court and as an incentive thereto, the
provisions of refund of court fee in litigations such as suits is envisaged. Though,
mere reading of section 16 shall entail as if mere reference to alternate
dispute redressal (ADR) shall in itself, entitle a party to refund,
irrespective of the outcome. That cannot be the intent of the legislature. No
wonder, thus, that, the Law Commission of India in its 238th Report
had criticized it. The courts has recognized the anomaly and held that literal
meaning of Section 16 of Court Fee Act 1870 shall lead to incongruous and
unreasonable consequences. The provisions of Section 16 and Section 16 A of
Court Fee Act, 1870 were to be harmonized and with a view to encourage out of
court settlement not only through the mode of ADR i.e alternate mode of
redressal of disputes, but in case of out of court settlement arrived at by parties of disputes themselves.
The judgment/precedents as reported in Nutan Batra( Supra) has settled the
issue finally and for good measure with a view to encourage out of court
settlement and also with a view to encourage settlement through alternate mode
of redressal of disputes.
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Anil K Khaware
Founder & Senior
Associate
Societylawandjustice.com
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