Supreme Court Clarifies Refund of Court Fees in Private Settlements: High Court of Judicature at Madras vs. M.C. Subramaniam (2021)

Date of the Judgment: 17 February 2021

Citation: (2021) INSC 77

Judges: MOHAN M. SHANTANAGOUDAR, J. and VINEET SARAN, J.

Can parties who settle a dispute privately, without court intervention, get a refund of their court fees? The Supreme Court of India recently examined this question, focusing on whether the refund of court fees should be limited to cases where the court refers parties to alternative dispute resolution methods, or if it should also extend to private settlements. The Court’s decision clarifies the scope of Section 69-A of the Tamil Nadu Court Fees and Suit Valuation Act, 1955, and its interplay with Section 89 of the Code of Civil Procedure, 1908. The judgment was delivered by a bench comprising Justices Mohan M. Shantanagoudar and Vineet Saran.

Case Background

The case originated from a dispute between M.C. Subramaniam (Respondent No. 1) and a finance company (Respondent No. 2) regarding two vehicle hire-purchase agreements. In 1996, M.C. Subramaniam entered into two separate agreements with Respondent No. 2, with Respondents No. 3 and 4 acting as sureties. As per the agreements, Respondent No. 1 was to pay Rs. 10,08,000 for each vehicle in installments.

When Respondent No. 1 failed to make the payments, Respondent No. 2 filed two original suits in 2003 before the Additional District Munsif Court and the Additional District and Sessions Court, Coimbatore, seeking to recover the outstanding amounts of Rs. 6,64,000 and Rs. 5,97,200, respectively, along with interest. The Munsif Court and the District Court partly decreed the suits in favor of Respondent No. 2 in 2004 and 2005 respectively.

Aggrieved by the judgments, Respondent No. 1 filed appeal suits before the High Court of Judicature at Madras in 2012 and 2013. While these appeals were pending, the parties reached a private out-of-court settlement. Consequently, Respondent No. 1 sought permission from the High Court to withdraw the appeals and also requested a refund of the court fees he had paid.

Timeline:

Course of Proceedings

The High Court of Judicature at Madras initially granted permission to Respondent No. 1 to withdraw the appeal suits and also directed the Registry to refund the court fees. However, the Registry refused the refund, citing a lack of authorization under the relevant rules. Consequently, Respondent No. 1 filed Civil Miscellaneous Petitions under Section 151 of the Code of Civil Procedure, 1908, seeking a refund of the court fees. The High Court allowed these petitions, directing the Registry to refund the full court fee.

Legal Framework

The High Court considered Section 69-A of the Tamil Nadu Court Fees and Suit Valuation Act, 1955, which states:

“69-A. Refund on settlement of disputes under section 89 of Code of Civil Procedure.—Where the Court refers the parties to the suit to any of the modes of settlement of dispute referred to in section 89 of the Code of Civil Procedure, 1908 (Central Act V of 1908), the fee paid shall be refunded upon such reference. Such refund need not await for settlement of the dispute.”

The High Court also took into account Section 89 of the Code of Civil Procedure, 1908, which outlines the methods for settling disputes outside of court:

“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.”

The High Court interpreted that appeal suits are a continuation of original suits, thus falling under the ambit of ‘suits’ as mentioned in Section 69-A of the Tamil Nadu Court Fees and Suit Valuation Act, 1955. The High Court also noted that Section 89 of the Code of Civil Procedure, 1908, promotes alternative dispute resolution methods.

Arguments

Petitioner’s (High Court of Judicature at Madras) Submissions:

• The petitioner argued that Section 69-A of the Tamil Nadu Court Fees and Suit Valuation Act, 1955, only allows for a refund of court fees when the Court refers parties to alternative dispute resolution mechanisms under Section 89 of the Code of Civil Procedure, 1908.
• The petitioner contended that since the parties in this case settled their dispute privately, without any court reference, the refund of court fees was not authorized under the law.

Respondent’s (M.C. Subramaniam) Submissions:

• The respondent argued that the intent of Section 89 of the Code of Civil Procedure, 1908, and Section 69-A of the Tamil Nadu Court Fees and Suit Valuation Act, 1955, is to encourage settlement of disputes outside of court.
• The respondent contended that denying a refund to parties who settle privately would be discriminatory and against the spirit of these provisions.
• The respondent asserted that a broad interpretation of these provisions should include all forms of out-of-court settlements, not just those referred by the court.

Issues Framed by the Supreme Court

The Supreme Court framed the following issue:

1. Whether Section 89 of the Code of Civil Procedure, 1908, and Section 69-A of the Tamil Nadu Court Fees and Suit Valuation Act, 1955, should be interpreted to include private out-of-court settlements for the purpose of refunding court fees.

Treatment of the Issue by the Court

Authorities

Cases Relied Upon by the Court:

• Directorate of Enforcement v. Deepak Mahajan, 1994 3 SCC 440, Supreme Court of India – The Court relied on this case to emphasize its role in creatively interpreting legislation to resolve difficulties in implementation and to achieve the spirit of the law.
• Shailesh Dhairyawan v. Mohan Balkrishna Lulla, (2016) 3 SCC 619, Supreme Court of India – The Court cited this case to highlight the doctrine of purposive interpretation, especially when literal interpretation leads to absurdity or defeats the purpose of the statute.
• Anurag Mittal v. Shaily Mishra Mittal, (2018) 9 SCC 691, Supreme Court of India – This case was cited to further support the principle of purposive interpretation.
• Kamalamma & ors. v. Honnali Taluk Agricultural Produce Co-operative Marketing Society Ltd., (2010) 1 AIR Kar. R 279, Karnataka High Court – The Court referred to this case to support the view that parties settling disputes privately should also be entitled to a refund of court fees.
• Pradeep Sonawat v. Satish Prakash, 2015 (1) RCR Civil 955, Punjab & Haryana High Court – This case was cited to show that other High Courts have also taken a similar view, favoring refunds for private settlements.
• Pritam Singh v. Ashok Kumar, 2019 (1) Law Herald (P&H) 721, Punjab & Haryana High Court – This case was also cited to show that other High Courts have also taken a similar view, favoring refunds for private settlements.
• Raj Kumar v. Gainda Devi through LRs & ors., 2019 SCC OnLine P&H 658, Punjab & Haryana High Court – This case was also cited to show that other High Courts have also taken a similar view, favoring refunds for private settlements.
• J.K. Forgings v. Essar Construction India Ltd. & Ors., (2009) 113 DRJ 612, Delhi High Court – The Court cited this case to emphasize that the legislative intent is to encourage settlement and that court fees should be refunded as an incentive.
• Inderjeet Kaur Raina v. Harvinder Kaur Anand, 2018 SCC OnLine Del 6557, Delhi High Court – This case was cited to show the Delhi High Court’s continued reliance on the principle of refund for private settlements.

Legal Provisions Considered by the Court:

• Section 69-A of the Tamil Nadu Court Fees and Suit Valuation Act, 1955 – This provision deals with the refund of court fees when disputes are settled under Section 89 of the Code of Civil Procedure, 1908.
• Section 89 of the Code of Civil Procedure, 1908 – This section outlines the methods of settling disputes outside the court, including arbitration, conciliation, judicial settlement, and mediation.
• Section 151 of the Code of Civil Procedure, 1908 – This section allows the court to make orders to secure the ends of justice.

Judgment

How each authority was viewed by the Court?

• The Supreme Court in Directorate of Enforcement v. Deepak Mahajan, 1994 3 SCC 440* was used to support the court’s role in interpreting legislation to achieve its intended purpose.
• The Supreme Court in Shailesh Dhairyawan v. Mohan Balkrishna Lulla, (2016) 3 SCC 619* was used to support the doctrine of purposive interpretation.
• The Supreme Court in Anurag Mittal v. Shaily Mishra Mittal, (2018) 9 SCC 691* was used to further support the principle of purposive interpretation.
• The Karnataka High Court in Kamalamma & ors. v. Honnali Taluk Agricultural Produce Co-operative Marketing Society Ltd., (2010) 1 AIR Kar. R 279* was used to support the view that parties settling disputes privately should also be entitled to a refund of court fees.
• The Punjab & Haryana High Court in Pradeep Sonawat v. Satish Prakash, 2015 (1) RCR Civil 955* was used to show that other High Courts have also taken a similar view, favoring refunds for private settlements.
• The Punjab & Haryana High Court in Pritam Singh v. Ashok Kumar, 2019 (1) Law Herald (P&H) 721* was used to show that other High Courts have also taken a similar view, favoring refunds for private settlements.
• The Punjab & Haryana High Court in Raj Kumar v. Gainda Devi through LRs & ors., 2019 SCC OnLine P&H 658* was used to show that other High Courts have also taken a similar view, favoring refunds for private settlements.
• The Delhi High Court in J.K. Forgings v. Essar Construction India Ltd. & Ors., (2009) 113 DRJ 612* was used to emphasize that the legislative intent is to encourage settlement and that court fees should be refunded as an incentive.
• The Delhi High Court in Inderjeet Kaur Raina v. Harvinder Kaur Anand, 2018 SCC OnLine Del 6557* was used to show the Delhi High Court’s continued reliance on the principle of refund for private settlements.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to encourage out-of-court settlements and reduce the burden on the judiciary. The Court emphasized the following points:

• The overarching goal of Section 89 of the Code of Civil Procedure, 1908, is to facilitate private settlements and reduce the caseload of the courts.
• Section 69-A of the Tamil Nadu Court Fees and Suit Valuation Act, 1955, is intended to encourage settlements by providing for a refund of court fees.
• A narrow interpretation of these provisions would create an unjust distinction between parties who settle through court-referred methods and those who settle privately.
• The Court highlighted that parties who settle privately save the State the logistical hassle of arranging for a third-party institution to settle the dispute.
• The Court emphasized that the purpose of Section 69-A is to reward parties who have chosen to withdraw their litigations in favor of more conciliatory dispute settlement mechanisms.

The Court’s reasoning was heavily based on legal interpretation and the need to achieve the purpose of the law, with less emphasis on the specific facts of the case.

Key Takeaways

• Parties who settle their disputes privately, without court intervention, are entitled to a refund of the court fees they paid.
• The refund of court fees is not limited to cases where the court refers parties to alternative dispute resolution methods under Section 89 of the Code of Civil Procedure, 1908.
• The Supreme Court has emphasized that the purpose of the law is to encourage all forms of out-of-court settlements to reduce the burden on the judiciary.
• This judgment promotes a more equitable approach to dispute resolution, incentivizing parties to settle their issues amicably.
• The decision is likely to reduce the number of pending cases in courts by encouraging private settlements.

Directions

The Supreme Court directed the petitioners to refund the court fees deposited by Respondent No. 1 for Appeal Suits Nos. 876 of 2012 and 566 of 2013 within a period of six weeks.

Development of Law

The ratio decidendi of this case is that Section 89 of the Code of Civil Procedure, 1908, and Section 69-A of the Tamil Nadu Court Fees and Suit Valuation Act, 1955, must be interpreted liberally to include all methods of out-of-court dispute settlement, including private settlements. This judgment expands the scope of these provisions beyond court-referred alternative dispute resolution mechanisms. This is a change from a strict interpretation of the law, where refunds were only applicable to court-referred settlements.

Conclusion

The Supreme Court’s judgment in High Court of Judicature at Madras vs. M.C. Subramaniam clarifies that parties who settle their disputes privately are entitled to a refund of court fees. The Court emphasized the need for a purposive interpretation of Section 89 of the Code of Civil Procedure, 1908, and Section 69-A of the Tamil Nadu Court Fees and Suit Valuation Act, 1955, to encourage all forms of out-of-court settlements. This decision promotes equity and reduces the burden on the judiciary by incentivizing amicable dispute resolution.

Category

Parent Category: Code of Civil Procedure, 1908

Child Categories:

• Section 89, Code of Civil Procedure, 1908
• Alternative Dispute Resolution
• Court Fees
• Settlement of Disputes

Parent Category: Tamil Nadu Court Fees and Suit Valuation Act, 1955

Child Categories:

• Section 69-A, Tamil Nadu Court Fees and Suit Valuation Act, 1955
• Refund of Court Fees

FAQ

Q: What does this judgment mean for people involved in court cases?

A: This judgment means that if you settle your case outside of court, even without the court’s intervention, you are entitled to get a refund of the court fees you paid.

Q: Does this apply to all types of cases?

A: Yes, this applies to civil cases where court fees are applicable and a settlement is reached outside of court.

Q: Why did the Supreme Court make this decision?

A: The Supreme Court made this decision to encourage people to settle their disputes outside of court, which reduces the burden on the judicial system and promotes faster resolution of conflicts.

Q: What if the court had already started the trial?

A: Even if the trial has started, if you reach a settlement outside of court, you are still eligible for a refund of the court fees. However, the court may consider the conduct of the parties before granting the refund.

Q: How do I apply for a refund of court fees?

A: You will need to file a request with the court where your case was pending, along with proof of the settlement. The court will then process your refund.

Q: What is the significance of Section 89 of the Code of Civil Procedure, 1908?

A: Section 89 of the Code of Civil Procedure, 1908, encourages alternative dispute resolution methods like arbitration, conciliation, mediation, and judicial settlement to resolve disputes outside of court.

Q: What is the significance of Section 69-A of the Tamil Nadu Court Fees and Suit Valuation Act, 1955?

A: Section 69-A of the Tamil Nadu Court Fees and Suit Valuation Act, 1955, provides for the refund of court fees when disputes are settled through methods mentioned in Section 89 of the Code of Civil Procedure, 1908.