Refund of court fee pursuant to settlement: Law discussed
The settlement between the parties , whether by
way of out of court settlement or through the mechanism of mediation under the auspices
of the courts are encouraged with a view to bring contesting parties to a
settlement to extricate them, from procrastinated legal battle in the court
rooms. In order to encourage such
settlement, the Court Fee Act as well as the rules framed under Mediated Settlement has the provision
for refund of court fee. In case of money suits or several suits such as a suit
for specific performance, the court fee is payable ad valorem and settlement through mediation enables a party to
receive court fee back acts as an incentive. However, of late, there are conflicting
judgments of courts i.e whether court fee shall have to be returned in half or
entire court fee could be returned. Another aspect is whether the entire court fee
shall have to be returned only, when settlement is effected in mediation
proceedings and if parties privately settle it between themselves and then
record that same before court, whether only 50% of the court fee shall have to
be returned.
The Delhi High Court in a matter captioned as V GUARD
INDUSTRIES LTD Vs MAHAVIR HOME APPLIANCES AND ANR
CS(COMM) 98/2023 has recently dealt
with the aforesaid issue i.e to the
extent to which the plaintiff would be entitled to refund of court fees, where
the dispute is settled privately between the plaintiff and the defendants
without intervention of any Alternate Dispute Resolution (ADR) mechanism. A
single bench of Delhi High Court has sent the issue for clarification before a
Division Bench, as it is of recurring significance. The dispute between the
parties in the above matter are amicably resolved and the terms of settlement
have been placed on record in an application jointly filed by the parties under
Order XXIII Rule 3 of the Code of Civil Procedure, 1908 (CPC).
We know that Section 16 of the Court Fees Act
entitles the plaintiff to refund of the entire court fee deposited, where the
dispute is settled under of the Code of Civil Procedure, 1908 (CPC). Section 89
of the CPC to which Section 16 of the Court Fees Act makes reference, envisages
settlement through arbitration, mediation, judicial settlement including Lok
Adalat and mediation – in other words, settlement by Alternate Dispute
Resolution (ADR) mechanisms.
Section 16 of the Court Fee Act
is reproduced herein for ready reference:
16. Refund of
fee. – Where
the Court refers the parties to the suit to anyone 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 paid in
respect of such plaint.
Section
89 of the CPC reads as under:
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.
16A. Refund of fees on settlement before hearing:-
Whenever by agreement
of parties –
(i) any
suit is dismissed as settled out of court before evidence has been recorded on
the merits of the claim; or
(ii)
any suit is compromised ending in a compromise decree before 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.
DELHI NOTIFICATION
In this context it may be
relevant to point out that in the case of Delhi, vide Notification No. F.14
(22)/LA-2008/WAW/17, dated 11 February 2011 published in the Delhi Gazette,
Section 16A, which provides for refund only of half the court fee deposited in
case the dispute was settled privately among the parties without court/ADR
intervention.
There are two separate statutory
dispensations as regards Delhi. On the one hand Section 16 provides for refund
of complete court fees, where the dispute is settled via ADR/judicial
settlement. However, Section 16A provides for refund of half the court fees
where the dispute is settled by private agreement between the parties without
the intervention of ADR.
Nutan
Batra Vs Buniyaad Associates (2018) 255 DLT 696 (DB)
The Division Bench of Delhi High
Court in a matter reported as Nutan Batra (Supra) has acknowledged the aforesaid
position. The said judgment also makes reference to an earlier decision of the
Supreme Court reported as Afcons infrastructure and Ors. v. Cherian
Verkay Construction 2010 (8) SCC 24. In Afcons
(Supra) it is observed that Section 89 of the CPC pertains to the settlement of the
dispute through ADR. Thus, taking note of that, the Division Bench of Delhi
High Court has held in Nutan Batra (Supra) as under:
“14. Thus, the intention of the Delhi
Amendment was to provide for some relief in cases which are not covered by
Section 16, perhaps, because Section 89 of the CPC had not been invoked.
Section16A is conditional upon the suit being at a pre-evidence stage; then
too, it provides for refund of only 50% of the court fees paid.
17. In the context of this discussion, we are required to
determine the respective scope and applicability of Sections 16 and 16A of the
Act.
18. The cases of reference to
arbitration or "judicial settlement" (as interpreted in paragraph 25
of Afcons, supra) do not pose any great difficulty, as they do not fall
within Section 16A of the Act at all, and are covered only under Section 89 of
the CPC read with Section 16 of the Act. Similarly, a compromise entered out of
Court, whether resulting in a compromise decree, or in the suit being dismissed
as settled out of Court, is covered only by Section 16A and not by Section 16.”
(Emphasis
supplied)
As per the aforesaid dicta of Nutan Batra (Supra) where
a dispute is settled through mediation, the case may fall either under Section
16 or Section 16 A, depending on the facts. However, where a case is not settled
through nay ADR mechanism, but privately settled between the parties, paras 14
and 18 of the Nutan Batra (Supra) makes it clear that the party would be entitled only to
half the court fees paid.
The Supreme Court also dealt with
similar issue in a matter reported as High Court of Judicature of Madra Vs M.C
Subramaniam (2021) 3 SCC 560
. It
is significant to point out that in essence Section 69 A of the Tamil Nadu
Court Fees and Suits Valuation Act, 1955 are para
materia similar to Section 16 of the Court Fees Act. It provides for refund
of the entire court fee paid, where the dispute is settled under Section 89 of
the CPC.
The decision in M.C. Subramaniam Section
69A of the Tamil Nadu
Court Fees and Suits Valuation Act, 1955 (“the Tamil Nadu Act”, hereinafter) is
pari materia with Section 16 of the Court Fees Act. It provides for
refund of the entire court fee paid, where the dispute is settled under Section
89 of the CPC. Section 69A of the Tamil Nadu Act,
vis-à-vis Section 89 of the CPC, came up for interpretation before the Supreme
Court in High Court of Judicature at Madras v. M.C. Subramaniam (Supra) The Supreme Court
has held as under: “13.The provisions of Section 89 of CPC must be
understood in the backdrop of the longstanding proliferation of litigation in
the civil courts, which has placed undue burden on the judicial system, forcing
speedy justice to become a casualty. As the Law commission has observed in its
238th Section Report on Amendment of 89 of
the Code of Civil Procedure 1908 and Allied provisions, Section 89 has now made
it incumbent on civil court s to strive: towards diverting civil disputes
towards alternative dispute resolution processes, and encourage their
settlement outside of court. These observations make the object and purpose of
Section 89 crystal clear - to facilitate private settlements, and enable
lightening of the overcrowded docket of the Indian judiciary. This purpose,
being sacrosanct and imperative for the effecting of timely justice in Indian
courts, also informs Section 69A of the 1955 Act, which further encourages
settlements by providing for refund of court fee. This overarching and
beneficent object and purpose of the two provisions must, therefore, inform
this Court's interpretationthereof. “23.We find ourselves in
agreement with the approach taken by the High Courts in the decisions stated
supra. The purpose of Section 69A is to reward parties who have chosen to
withdraw their litigations in favour of more conciliatory dispute settlement
mechanisms, thus saving the time and resources of the Court, by enabling them
to claim refund of the court fees deposited by them. Such refund of court fee,
though it may not be connected to the substance of the dispute between the
parties, is certainly an ancillary economic incentive for pushing them towards
exploring alternative methods of dispute settlement. As the Karnataka High
Court has rightly observed in Kamalamma
& ors. v. Honnali Taluk Agricultural Produce Cooperative Marketing Society
Ltd8 (supra), parties who
have agreed to settle their disputes without requiring judicial intervention
under Section 89, CPC are even more deserving of this benefit. This is because
by choosing to resolve their claims themselves, they have saved the State of
the logistical hassle of arranging: arranging for a third party institution to
settle the dispute. Though arbitration and mediation are certainly salutary
dispute resolution mechanisms, we also find that the importance of private
amicable negotiation between the parties cannot be understated. In our view,
there is no justifiable reason why Section 69A should only incentivize the
methods of out of court settlement stated in Section 89, CPC and afford step
brotherly treatment to other methods availed of by the parties.".
The Delhi High Court has thus held in V Guard (Supra) that if
one were to read paragraphs of M.C
Subramaniam (Supra) in isolation and in the context of
Section 16 of the Court Fees Act – without considering Section 16-A as has been
made applicable to Delhi – it would seem to appear that, irrespective of
whether the settlement is arrived at through mediation or privately between the
parties, refund of full court fees would be justified. The clarity of this
position is, however, compromised, where the dispute relates to Delhi, because
of the insertion, in the Court Fees Section
16A, uniquely applicable to Delhi. If the judgment of the Supreme Court is to
be applied straightway to suits filed in Delhi, Section 16A of the Court Fees
Act may be rendered otiose as a result. Besides, such a view would also be
contrary to the judgment of the Division Bench of Delhi High s Court in Nutan
Batra, though, no doubt, the said decision was rendered prior to the
decision in M.C. Subramaniam. In Ajay Mahajan
v. Mridula Mukherjee 2023 SCC OnLine Del 2389 however has taken a contrary
view from the view of Division Bench in Nutan Batra. Thus, two
Division benches of Delhi High Court has taken a divergent views .In Ajay
Mahajan (Supra), though the dispute was privately settled
between the parties, the Division Bench directed refund of full court fee,
applying Section 16 of the Court Fees Act. It though appears that section
16A of the Court Fees Act, was not brought to the attention of the Division
Bench which decided Ajay Mahajan (Supra). The Delhi High court in
V Guard (Supra) has thus observed
that as
two
Division Benches of Delhi High Court has taken opposite views, the first, in Nutan
Batra and second in Ajay Mahajan. The Nutan Batra holds
that a plaintiff is entitled to refund of full court fees only where the
settlement is via ADR (under Section 16), and is entitled only to refund of
half the court fees, if the settlement is private between the parties. The Ajay Mahajan however holds that in a case
of private settlement without ADR intervention, that the plaintiff was entitled
to refund of the entire court fees paid, under Section 16.
It is also
significant to note that Nutan Batra (Supra) , was rendered before the Supreme Court in the judgment in M.C.
Subramaniam. The M.C.
Subramaniam interprets Section 69-A of the Tamil Nadu Act, which is in
pari materia with Section 16 of the Court Fees Act and envisages settlement
only through ADR, as entitling the party to complete refund of court fees,
irrespective of whether the dispute was settled privately between the parties
or through ADR.
What is significant in the
context is that the Supreme Court has, in M.C. Subramaniam,
accorded an expansive interpretation to Section 69-A as also including
settlement privately between the parties, it remains to be considered whether
that decision can apply in Delhi in the face of a separate statutory
dispensation for private settlement contained in Section 16A of the Court Fees
Act, applicable exclusively to Delhi.
The hon’ble Single bench of Delhi High Court has therefore
referred the issue before the Division Bench for enunciating clear position in
view of the following:
(i)
There
are two Division Benches of Delhi High Court which has taken take opposite
views, the first in Nutan Batra and second in Ajay Mahajan.
Nutan Batra holds that a plaintiff is entitled to refund of full
court fees only where the settlement is via ADR (under Section 16), and is
entitled only to refund of half the court fees, if the settlement is private
between the parties
(ii)
In Ajay Mahajan it is held that in
a case of private settlement without ADR intervention, that the plaintiff was
entitled to refund of the entire court fees paid, under Section 16. It though
appears that Ajay Mahajan did not notice Section 16-A.
(iii)
Nutan Batra was however rendered
before the Supreme Court judgment in M.C Subramaniam.
(iv)
Ajay Mahajan does
not, however, notice Section 16-A.
(v)
Though the Supreme Court has, in M.C. Subramaniam,
accorded an expansive interpretation to Section 69-A as also including
settlement privately between the parties, it remains to be considered whether
that decision can apply in Delhi in the face of a separate statutory
dispensation for private settlement contained in Section 16A of the Court Fees
Act, applicable exclusively to Delhi.
The ld Single judge of Delhi High Court in V
Guard (Supra) therefore, has referred the matter to be considered at
least by a Division bench, as the issue may have to be considered and decided
in the light of Sections 16 and Section 16A of the Court Fees Act and after taking
into consideration the judgment of the Supreme Court in M.C. Subramaniam and
of the Division Benches of Delhi High Court in Nutan Batra and Ajay
Mahajan.This is necessary so as to ascertain the finality as regards
the fact if the entire court fee shall have to be returned even in case of
private settlement between the parties and even if the ADR mechanism is not
involved by the parties to the lis. In the backdrop of notification as applicable
to Delhi, provisions of Section 16
and Section 16 A of Court Fees Act and
in the midst of conflicting judgments finality in this regard is required to emerge.
……..
Anil
K Khaware
Founder
& Senior Associate
Societylawandjustce.com
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