Full Court Fee Refund On Mediation Settlement Not Possible Unlike Lok Adalat Settlement Without State Law : Supreme Court

The Supreme Court on December 19 held that a dispute amicably settled by mediation under Section 89 of the Code of Civil Procedure (CPC) should not be confused with the settlement of a dispute through Lok Adalat in terms of the repayment of Court fees where the latter provides 100% refund in the administration of justice. This is so because in the settlement of disputes by alternative dispute mechanisms, the refund of Court fees, if any, is incidental. 

In this case, a dispute was settled through mediation and the appellant was refunded 50% of Court fees in accordance with the Maharashtra Court Fees Act, 1959. However, this was challenged on grounds that it went against the Central Court Fees Act, 1870 which stated that matters referred to Lok Adalat and settled shall be refunded with 100% Court fees. 

The appellant wrongly equated the mediation proceedings which were settled by way of a Court's decree with that of the award passed by Lok Adalat. He argued that the settlement of disputes through alternative dispute resolution is embedded in the effective administration of justice in Entry No.11A, List III. Therefore, since the same is a subject matter of the Concurrent List, in the face of dispute between the Maharashtra legislation which only provided for a refund of half the amount and the central legislation, the latter shall prevail. 

A bench of Justices Sanjay Karol and CT Ravikumar held that Court fees are specifically governed by Entry 3, List II (State List). Therefore, it is not a matter of incongruency between the Centre and the State legislations.

It held: "The inescapable conclusion per the above discussion, holding that Entry 11A List III cannot govern the refund of court fees when a matter is settled by methods of alternate dispute resolution, in the face of Entry 3 List II simply by the use of the words “administration of justice” in the former and, that reference to CFA, 1870 in respect of refund of court fees when the matter is settled by way of an Award of Lok Adalat does not mean that the same shall be extended to the settlement of dispute by mediation for the simple reason that Lok Adalat and mediation are two distinct methods and cannot be equated, we hold that this appeal lacks merit and is liable to be dismissed."

Further, the Court held that just because the matter of Court fees involves the settlement of disputes per alternative dispute mechanisms, the same would not come under the purview of Entry 11A, List III. It is because the alternative dispute mechanism only aids in the reduction of pendency and backlogs of cases. It held: "The refund of court fees, either partial or complete, as the case may be, is a benefit, incidental to the resolution of the dispute."

Facts of the case 

As per the brief facts, the appellant entered into an agreement to sell a certain property located in Aurangabad. When the said agreement could not be performed, he preferred a civil suit before the Court of Civil Judge, praying for a direction of specific performance of the contract. 

The dispute was then referred to mediation under Section 89 of the CPC and, amicable resolved. The terms of the settlement were presented to the Court and the civil suit was disposed of.

A request for a refund of 50% of Court fees was allowed. However, a writ petition was filed before the High Court arguing that since the matter was referred to Lok Adalat and a settlement was arrived at, the Court fees should have been refunded in accordance with Section 16 (refund of fee) of the Court Fees Act, 1870 read with Section 21 (award of Lok Adalat) of the Legal Services Authorities Act, 1987, that is the full amount.

The Bombay High Court observed that the 1870 Act is a pre-constitutional enactment which no longer applies to the State of Maharastra after the enactment of the Bombay Court Fees Act, 1959 (renamed as Maharashtra Court Fees Act). Therefore, Section 43 (repayment of fee in certain circumstances) of the Maharashtra Court Fees Act, 1959, which stipulates for half-refund of the Court fees, would apply. 

This is challenged before the Supreme Court.

What did the Supreme Court say?

The Supreme Court clarified that the scheme of Section 89, CPC, is not disturbed on the application of refund of Court fees as stipulated in the Maharashtra Court Fees Act. 

It held: "It cannot be doubted that the settlement of a dispute outside court is a cause for celebration in as much as it translates to early resolution of the dispute inter se the parties and it means also, that there is one less file to add on to already overflowing record rooms of the concerned civil courts. It also cannot be gainsaid that all efforts should be made to encourage the adoption of ADR mechanisms."

Examining the scheme of the Legal Services Authority Act, the Court stated that the primary mode of dispute settlement prescribed under it is Lok Adalat. Its purpose was to promote justice and it further casts a responsibility upon the State to provide free legal aid by way of suitable legislation or schemes so as to ensure that justice is not the province of only those who are unaffected by economic or other disabilities.

However, Lok Adalat cannot be equated with other alternative dispute mechanisms. The Court observed: "It is inconceivable as to how a reference to mediation under the CPC can be read to be the same or equal to proceeding before a Lok Adalat for any reference thereto, to be helpful to the case put forward by the appellant. Simply because a refund under CFA, 1870 is statutorily prescribed, to be given when a dispute is settled by way of a Lok Adalat, does by no stretch of the imagination mean by the exact situation be adopted to the settlement of a dispute by mediation. This argument has to be necessarily rejected. No error can be found, in this regard with the reasoning of the High Court."

Considering that the amount of Court fees involved was not excessive, the Court ordered full refunded provided that the same shall not be treated as binding precedent. 

The Court noted that in 2018, the Maharashtra Court Fees Act was amended to provide for full refund of court fee if a case was settled through ADR methods prescribed under Section 89 CPC.

"Any matter settled under the processes mentioned in Section 89 CPC after the coming into force of the above-extracted amendment, such parties shall receive refund of court fees in its entirety," the Court observed

Case Details: SANJEEVKUMAR HARAKCHAND KANKARIYA v. UNION OF INDIA & ORS., Special Leave Petition (Civil) No.1904 of 2015

Citation : 2024 LiveLaw (SC) 1022

Click Here To Read Order