Supreme Court Upholds State’s Power on Court Fees in ADR Cases: Sanjeevkumar vs. Union of India (2024)

Date of the Judgment: 19 December 2024

Citation: 2024 INSC 1004

Judges: C.T. Ravikumar, J., Sanjay Karol, J.

Can a state decide how much of a court fee to refund when a case is settled out of court, or does a central law always take precedence? The Supreme Court of India recently tackled this question in a case concerning court fees and alternative dispute resolution (ADR). The core issue was whether the state of Maharashtra could set its own rules regarding court fee refunds for cases resolved through mechanisms like mediation, or if the central law mandating full refunds should apply. This judgment clarifies the balance of power between the central and state governments in matters of court fees and dispute resolution. The judgment was authored by Justice Sanjay Karol, with Justice C.T. Ravikumar concurring.

Case Background

The appellant, Sanjeevkumar Harakchand Kankariya, had filed a civil suit in Aurangabad seeking specific performance of a contract for the sale of a property. The case was referred to mediation under Section 89 of the Code of Civil Procedure, 1908 (CPC), and was resolved amicably. However, when the appellant requested a refund of the court fees, he was granted only 50% refund. The appellant argued that he was entitled to a full refund under Section 16 of the Court Fees Act, 1870 (CFA, 1870), and Section 21 of the Legal Services Authorities Act, 1987 (LSA Act, 1987). He contended that the central laws should override the state law, the Bombay Court Fees Act, 1959 (BCFA, 1959), which was later renamed the Maharashtra Court Fees Act (MCFA, 1959), which allowed only partial refunds. The High Court of Judicature at Bombay (Aurangabad Bench) rejected his plea, leading to the appeal before the Supreme Court.

Timeline:

Course of Proceedings

The High Court of Judicature at Bombay (Aurangabad Bench) dismissed the appellant’s writ petition, holding that the CFA, 1870, was no longer applicable to the State of Maharashtra after the enactment of the BCFA, 1959. The High Court relied on a previous judgment, Pushpabai Shankerlal Sura v. The Official Liquidator, Sholapur Oil Mills Ltd. [1968 SCC OnLine Bom 62], to conclude that the BCFA, 1959, superseded the CFA, 1870. The High Court also differentiated between court decrees based on settlement and awards passed by Lok Adalats, stating that the latter were covered by the LSA Act, 1987, which mandated full refunds as per the CFA, 1870, while the former were not. The High Court recommended that the State Government issue a notification or amendment to provide a 100% refund of court fees for cases settled under Section 89 of the CPC, to align with the LSA Act, 1987, and the CFA, 1870.

Legal Framework

The case involves the interpretation of several key legal provisions:

• Article 246(2) of the Constitution of India: This article allows both Parliament and State Legislatures to make laws on matters listed in the Concurrent List (List III of the Seventh Schedule).
• Article 372 of the Constitution of India: This article states that existing laws continue to be in force until altered or repealed by a competent legislature.
• Entry 3 of List II (State List): This entry empowers the State to legislate on “fees taken in all courts except the Supreme Court.”
• Entry 11A of List III (Concurrent List): This entry deals with the “administration of justice; constitution and organisation of all courts, except the Supreme Court and the High Courts.”
• Section 16 of the Court Fees Act, 1870: This section, as inserted by Act 46 of 1999, states that “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.” This provision mandates a full refund of court fees when a case is referred to ADR under Section 89 of the CPC.
• Section 21 of the Legal Services Authorities Act, 1987: This section states that “where a compromise or settlement has been arrived at, by a Lok Adalat in a case referred to it under sub-section (1) of section 20, the court-fee paid in such case shall be refunded in the manner provided under the Court-fees Act, 1870 (7 of 1870).” This mandates a full refund of court fees for cases settled in Lok Adalats as per the CFA, 1870.
• Section 43 of the Maharashtra Court Fees Act, 1959: This section allows for the repayment of court fees in certain circumstances. Section 43(1) states that “When any suit in a Court or any proceeding instituted by presenting a petition to a Court under the Hindu Marriage Act, 1955 (XXV of 1955), is settled by agreement of parties before any evidence is recorded, or any appeal or cross objection is settled by agreement of parties before it is called on for effective hearing by the Court, half the amount of the fee paid by the plaintiff, petitioner, appellant, or respondent on the plaint, petition, appeal or cross objection, as the case may be, shall be repaid to him by the Court”. Section 43(2) allows the State Government to provide for repayment of fees in other circumstances.
• Section 16A of the Maharashtra Court Fees Act, 1959: Inserted by Maharashtra Act No. X of 2018, this section states that “Where the court refers the parties to the suit to any one of the modes of settlement of dispute referred to in section 89 of the Code of Civil Procedure, 1908 and suit is disposed of by the court by adaptation of any of the modes prescribed under the said section, 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.” This provision now mandates a full refund of court fees for cases settled through ADR under Section 89 of the CPC.

Arguments

Appellant’s Submissions:

• The appellant argued that Section 16 of the CFA, 1870, mandates a full refund of court fees when a dispute is settled, regardless of the stage of the case.
• The appellant contended that the administration of justice, under Entry 11A of List III of the Constitution, includes the settlement of disputes through ADR, making the CFA, 1870, and state laws on court fees concurrently operational.
• The appellant submitted that Section 21 of the LSA Act, 1987, specifically refers to the refund of court fees as per the CFA, 1870.
• The appellant argued that Section 89 of the CPC, introduced in 1999, aims to encourage dispute settlement through ADR. Accepting the State’s contention that the MCFA, 1959, supersedes the CFA, 1870, would frustrate this intention.
• The appellant emphasized that a harmonious construction of all relevant statutes is necessary to protect the purpose of Section 89 of the CPC.

Respondents’ Submissions:

• The respondents argued that the CFA, 1870, was an “existing law” under Article 366 of the Constitution and continued to operate until altered by a competent legislature under Article 372.
• The respondents submitted that the erstwhile State of Bombay, under Article 372 read with Article 246(2), superseded the CFA, 1870, with the BCFA, 1959, which was later renamed the MCFA, 1959. Section 49 of the MCFA, 1959, explicitly repealed the CFA, 1870, concerning Entries 3 and 66 of List II of the Constitution.
• The respondents contended that Section 43 of the MCFA, 1959, governs court fee refunds, and the impugned notification was issued under Section 43(2), which specifies varying refund percentages.
• The respondents argued that even if the notification was unconstitutional, the appellant would still be bound by Section 43(1) of the MCFA, 1959, which the appellant did not challenge.
• The respondents cited cases like Salem Advocate Bar Assn. (II) v. Union of India [(2005) 6 SCC 344] and High Court of Madras v. MC Subramaniam [(2021) 3 SCC 560] to support their argument that court fees are a state subject. They also cited judgments from various High Courts where 100% refunds were allowed under the LSA Act, 1987.
• The respondents noted that in 2018, an identical provision to Section 16 of the CFA, 1870, was inserted into the MCFA, 1959, by Maharashtra Act No. X of 2018.
• The respondents concluded that the High Court rightly rejected the challenge to the notification based on inconsistency with Section 16 of the CFA, 1870.

Submissions Table

Innovativeness of the Argument: The appellant’s argument was innovative in trying to link the administration of justice (Entry 11A, List III) with court fee refunds, arguing that ADR is a part of the administration of justice and therefore central laws should prevail. This was a novel attempt to broaden the scope of Entry 11A to include court fees in the context of ADR.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Whether, in view of the inconsistency between the CFA, 1870, and the MCFA, 1959, the appellant would be entitled to a complete refund of court fees per the former, since it is a Central legislation?
2. Whether the Maharashtra State Legislature could have enacted a provision and issued a notification giving refunds in ways contrary to and distinct from the manner and method provided in the Central Legislation?

Treatment of the Issue by the Court:

Authorities

The Supreme Court considered the following authorities:

Cases:

• Pushpabai Shankerlal Sura v. The Official Liquidator, Sholapur Oil Mills Ltd. [1968 SCC OnLine Bom 62] – The High Court of Bombay relied on this case to conclude that the BCFA, 1959, superseded the CFA, 1870.
• Girnar Traders (3) v. State of Maharashtra [(2011) 3 SCC 1] – This case was cited to explain the doctrine of pith and substance, which is used to examine the true nature and character of legislation.
• Prafulla Kumar Mukherjee v. Bank of Commerce Ltd. [(1946-47) 74 IA 23 : AIR 1947 PC 60] – This case was the first application of the doctrine of pith and substance in India.
• Union of India v. Shah Goverdhan L. Kabra Teachers’ College [(2002) 8 SCC 228] – This case was cited to emphasize that the entire Act, its object, and scope must be examined to determine the true character of the enactment.
• Venkataramana Devaru v. State of Mysore [AIR 1958 SC 255] – This case was referred to in the context of the rule of harmonious construction, stating that effect should be given to both provisions when two provisions cannot be reconciled.
• Calcutta Gas Co. (Proprietary) Ltd. v. State of West Bengal [AIR 1962 SC 1044] – This case was also cited in the context of the rule of harmonious construction.
• J.K. Cotton Spinning & Weaving v. State of U.P. [AIR 1961 SC 1170] – This case was also cited in the context of the rule of harmonious construction.
• British Airways PLC v. Union of India [(2002) 2 SCC 96] – This case was cited to highlight that the court should try to sustain the validity of a statute and give meaning to provisions that advance the object of the enactment.
• Jamshed N. Guzdar v. State of Maharashtra [(2005) 2 SCC 591] – This case discussed the scope of Entry 11A of List III, stating that it includes the administration of civil and criminal justice and the powers of all courts except the Supreme Court.
• In Re The Special Courts Bill, 1978 [(1979) 1 SCC 380] – This case discussed the transposition of Entry 3 of List II to Entry 11A of List III.
• State of T.N. v. G.N. Venkataswamy [(1994) 5 SCC 314] – This case stated that under Entry 11A, the State Legislature can enlarge or reduce the powers of the courts.
• M. Karunanidhi v. Union of India [(1979) 3 SCC 431] – This case discussed the doctrine of repugnancy, stating that when a Central and State law conflict, the Central law prevails unless the State law has received Presidential assent.
• Ujagar Prints (II) v. Union of India [(1989) 3 SCC 488] – This case stated that if a legislation is challenged, the State can support it under any other entry within its legislative competence.
• High Court of Judicature at Madras v. M.C. Subramaniam [(2021) 3 SCC 560] – This case discussed the importance of understanding the purpose of Section 89 CPC in the context of reducing the burden on the judicial system.
• Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd. [(2010) 8 SCC 24] – This case discussed the mandatory nature of referring cases to ADR under Section 89 CPC, but also the exceptions to this rule.
• State of Punjab v. Jalour Singh [(2008) 2 SCC 660] – This case discussed that Lok Adalats have no adjudicatory functions and their role is purely conciliatory.
• Perry Kansagra v. Smriti Madan Kansagra [(2019) 20 SCC 753] – This case discussed the importance of confidentiality in mediation proceedings.

Legal Provisions:

• Article 246(2) of the Constitution of India: Allows both Parliament and State Legislatures to make laws on matters listed in the Concurrent List.
• Article 372 of the Constitution of India: States that existing laws continue to be in force until altered or repealed by a competent legislature.
• Entry 3 of List II (State List): Empowers the State to legislate on “fees taken in all courts except the Supreme Court.”
• Entry 11A of List III (Concurrent List): Deals with the “administration of justice; constitution and organization of all courts, except the Supreme Court and the High Courts.”
• Section 16 of the Court Fees Act, 1870: Mandates a full refund of court fees when a case is referred to ADR under Section 89 of the CPC.
• Section 21 of the Legal Services Authorities Act, 1987: Mandates a full refund of court fees for cases settled in Lok Adalats as per the CFA, 1870.
• Section 43 of the Maharashtra Court Fees Act, 1959: Allows for the repayment of court fees in certain circumstances, with different percentages for different situations.
• Section 16A of the Maharashtra Court Fees Act, 1959: Mandates a full refund of court fees for cases settled through ADR under Section 89 of the CPC.

Authority Consideration Table

Judgment

How each submission made by the Parties was treated by the Court?

Court’s Reasoning and Decision

The Supreme Court, in its judgment, emphasized the constitutional division of legislative powers between the Union and the States. It held that:

• Court Fees as a State Subject: The power to legislate on court fees falls squarely within the State’s domain under Entry 3 of List II of the Constitution. This entry specifically grants the State the power to legislate on “fees taken in all courts except the Supreme Court.”
• State Law Prevails: Given that court fees are a State subject, the Maharashtra Court Fees Act, 1959 (MCFA, 1959), which was enacted under the powers granted by Entry 3 of List II, prevails over the Court Fees Act, 1870 (CFA, 1870), which is a Central law.
• Supersession of Central Law: The Court noted that the erstwhile State of Bombay, under Article 372 read with Article 246(2), validly superseded the CFA, 1870, with the BCFA, 1959, which was later renamed the MCFA, 1959. Section 49 of the MCFA, 1959, explicitly repealed the CFA, 1870, concerning Entries 3 and 66 of List II of the Constitution.
• Harmonious Construction: While the Court acknowledged the importance of harmoniously construing all relevant statutes, it emphasized that this principle cannot override the clear demarcation of legislative powers. The Court clarified that the administration of justice under Entry 11A of List III does not extend to court fees, which is a distinct subject under Entry 3 of List II.
• State’s Power to Legislate: The Court held that the State Legislature was competent to enact the MCFA, 1959, and issue notifications regarding court fee refunds, even if they differed from the CFA, 1870. The State’s power to legislate on court fees is not limited by the Central laws on the administration of justice.
• Amendment of MCFA, 1959: The Court noted the amendment to the MCFA, 1959, in 2018, which inserted Section 16A, providing for a full refund of court fees in cases settled through ADR under Section 89 of the CPC. However, this amendment did not alter the Court’s conclusion that the State law prevails on the subject of court fees.

Final Decision: The Supreme Court dismissed the appeal, upholding the High Court’s decision. The Court concluded that the State of Maharashtra had the legislative competence to enact the MCFA, 1959, and its provisions regarding court fee refunds were valid. The Court ruled that the appellant was not entitled to a full refund of court fees under the CFA, 1870, as the MCFA, 1959, was the applicable law in the State of Maharashtra. The Court also noted that the MCFA, 1959, now provides for a full refund of court fees in ADR cases, which aligns with the intent of Section 89 of the CPC.

Ratio Decidendi and Obiter Dicta

Ratio Decidendi and Obiter Dicta Table

Impact of the Judgment

The judgment has several significant impacts on the legal landscape:

• Clarification of State Power: The judgment definitively clarifies that States have the exclusive power to legislate on court fees under Entry 3 of List II of the Constitution. This means that State laws on court fees will prevail over Central laws on the same subject within the State’s jurisdiction.
• State Autonomy: The judgment reinforces the autonomy of States in matters of court fees, allowing them to set their own rules regarding refunds and other related aspects. This ensures that States can tailor their court fee structures to their specific needs and circumstances.
• Impact on ADR: While the judgment does not directly impact the encouragement of ADR, it clarifies that the State’s power to legislate on court fees is separate from the intent of Section 89 of the CPC. However, the judgment notes that the Maharashtra Court Fees Act, 1959, has been amended to provide full refunds in ADR cases, which aligns with the goal of promoting ADR.
• Consistency in State Laws: The judgment may prompt other States to review their court fee laws to ensure consistency with the constitutional framework and the principle of State autonomy. This could lead to a more uniform approach to court fees across different States.
• Harmonious Interpretation: The judgment highlights the importance of harmoniously interpreting different statutes but emphasizes that this principle cannot override the clear division of legislative powers. This reinforces the need for a balanced approach to legal interpretation.

Flowchart of the Case

Ratio Table of State Law vs Central Law

Sentiment Analysis

Conclusion

The Supreme Court’s judgment in Sanjeevkumar vs. Union of India (2024) definitively upholds the State’s legislative power over court fees, clarifying that State laws on court fees prevail over Central laws on the same subject. While the judgment acknowledges the importance of ADR, it emphasizes that the State’s power to legislate on court fees is a distinct matter. The judgment reinforces the constitutional division of powers and ensures that States can tailor their court fee structures to their specific needs. This case serves as a crucial precedent for understanding the balance of power between the Union and the States in matters of court fees and dispute resolution.