Breaking: Parties Who Privately Agree To Settle Disputes Without Court Intervention U/s 89 CPC Also Entitled To Refund Of Court Fee: Supreme Court

The Supreme Court held that the parties who privately agree to settle their dispute outside the modes contemplated under Section 89 of the Code of Civil Procedure are also entitled to refund of Court fees.

The participants in private settlements will be entitled to the same benefits as those who have been referred to explore alternate dispute settlement methods under Section 89 CPC, the bench comprising Justices Mohan M. Shantanagoudar and Vineet Saran observed.

In this case, the Madras High Court (administrative side) approached the Apex Court challenging the High Court judgment which held that Section 89 of the CPC, and Section 69­A of the Tamil Nadu Court Fees and Suit Valuation Act, 1955, would cover all methods of out­ of ­court dispute settlement between parties that the Court subsequently finds to have been legally arrived at. Section 69A of the 1955 Act deals with refund on settlement of disputes under section 89 CPC. It provides that, where the Court refers the parties to the suit to any of the modes of settlement of dispute referred to in section 89 CPC, the fee paid shall be refunded upon such reference and such refund need not await for settlement of the dispute. Under Section 89 CPC, four modes of settlement are contemplated: (a) arbitration; (b) conciliation; (c) judicial settlement including settlement through Lok Adalat: or (d) mediation. [In the present case, while the appeals were still pending consideration before the High Court, the parties entered into a private out­ of court settlement, thus resolving the controversy between them. The High Court Registry refused the request for refund of court fees, on the ground that such refund is not authorised by the relevant rules.]

The High Court (administration) contended before the Apex Court that Section 69­A of the 1955 Act only contemplates refund of court fees in those cases where the Court itself refers the parties to any of the alternative dispute settlement mechanisms listed in Section 89 of the CPC. That it does not apply to circumstances where the parties, without any reference by the Court, privately agreed to settle their dispute outside the modes contemplated under Section 89 of the CPC.

The bench observed that this contention, if accepted, would lead to an absurd and unjust outcome, where two classes of parties who are equally facilitating the object and purpose of the aforesaid provisions are treated differentially, with one class being deprived of the benefit of Section 69­A of the 1955 Act. It said:

"The narrow interpretation of Section 89 of CPC and Section 69­A of the 1955 Act sought to be imposed by the Petitioner would lead to an outcome wherein parties who are referred to a Mediation Centre or other centres by the Court will be entitled to a full refund of their court fee; whilst parties who similarly save the Court's time and resources by privately settling their dispute themselves will be deprived of the same benefit, simply because they did not require the Court's interference to seek a settlement. Such an interpretation, in our opinion, clearly leads to an absurd and unjust outcome, where two classes of parties who are equally facilitating the object and purpose of the aforesaid provisions are treated differentially, with one class being deprived of the benefit of Section 69­A of the 1955 Act. A literal or technical interpretation, in this background, would only lead to injustice and render the purpose of the provisions nugatory – and thus, needs to be departed from, in favour of a purposive interpretation of the provisions."

No justifiable reason to afford step brotherly treatment to other methods availed of by the parties

The court added that 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. Referring to judgments of Karnataka, Punjab & Haryana and Delhi High Courts in this regard, the bench observed:

"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 (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 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." 

Refund can be refused in cases of long drawn trial, or multiple frivolous litigations

The court, however, observed that, there may be situations wherein the parties have after the course of a long drawn trial, or multiple frivolous litigations, approached the Court seeking refund of court fees in the guise of having settled their disputes. "In such cases, the Court may, having regard to the previous conduct of the parties and the principles of equity, refuse to grant relief under the relevant rules pertaining to court fees. However, we do not find the present case as being of such nature", it said.

While dismissing the SLP, the court said that it finds it puzzling that the High Court is so vehemently opposed to granting such benefit. "Though the Registry/State Government will be losing a one­time court fee in the short term, they will be saved the expense and opportunity cost of managing an endless cycle of litigation in the long term. It is therefore in their own interest to allow the  claim.", the bench added.

Case: High Court of Judicature at Madras vs. M.C. Subramaniam [SLP (CIVIL) NOS. 3063­3064 OF 2021]

Coram: Justices Mohan M. Shantanagoudar and Vineet Saran

Citation: LL 2021 SC 97

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