Friday, 19 February 2021

Whether the court should refund court fees to parties, who have settled their case out of court?

 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

(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 thirdparty

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 stepbrotherly

treatment to other methods availed of by the parties.

Admittedly, there may be situations wherein the parties

have after the course of a longdrawn

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.

20. Thus, even though a strict construction of the terms of

Section 89, CPC and 69A

of the 1955 Act may not encompass

such private negotiations and settlements between the parties,

we emphasize that the participants in such settlements will be

entitled to the same benefits as those who have been referred to

explore alternate dispute settlement methods under Section 89,

CPC.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

SPECIAL LEAVE PETITION (CIVIL) NOS. 30633064

OF 2021

(DIARY NO. 38692021)

The High Court of Judicature at Madras Vs M.C. Subramaniam & ors. 


Author: MOHAN M. SHANTANAGOUDAR, J.

Dated: FEBRUARY 17, 2021

These special leave petitions arise out of common order and

judgement of the High Court of Madras (hereinafter, ‘High Court’)

dated 8.01.2020. By the impugned judgement, the High Court

allowed Civil Miscellaneous Petitions Nos. 26742 & 26743 of

2019 filed by the Respondent No.1 herein praying for refund of

the court fees deposited by him in Appeal Suits Nos. 876/2012

and 566/2013 filed by him before the High Court.

2. The facts leading to these petitions are as follows: Respondent

No.1 purchased two vehicles from Respondent No. 2 vide two

separate hire purchase agreements (hereinafter, ‘AgreementI’

and ‘AgreementII’;

collectively, ‘the Agreements’) dated

10.06.1996, under which Respondent No.1 was the principal

debtor/hirer, and Respondents Nos. 3 and 4 were the sureties to

the Agreements. As per the terms of the Agreements, Respondent

No.1 was to pay a sum of Rs.10,08,000/in

stipulated

instalments to Respondent No. 2 for each of the two vehicles.

3. It suffices to note for our purposes that Respondent No. 2

brought Original Suits Nos. 66/2003 and 76/2003 against

Respondents Nos. 1, 3 and 4 before the Additional District

Munsif Court, Coimbatore (hereinafter, ‘Munsif Court’) and the

Additional District and Sessions Court, Coimbatore (hereinafter,

‘District Court’) respectively. In the two suits, Respondent No.2

alleged nonpayment

of Rs.6,64,000/and

Rs.5,97,200/towards

the instalments stipulated in AgreementI

and

AgreementII

respectively, and sought recovery of the balance

amounts along with interest thereon. Both the Original Suits

Nos.66/2003 and 76/2003 were partly decreed by the Munsif

Court and District Court, by judgments dated 13.02.2004 and

31.01.2005 respectively.


4. Aggrieved, Respondent No.1 preferred Appeal Suits Nos.

876/2012 and 566/2013 before the High Court, against the

judgments in O.S. No. 66/2003 and O.S. No.76/2013,

respectively. While the appeals were still pending consideration

before the High Court, the parties entered into a private outofcourt

settlement, thus resolving the controversy between them. In

view of this, Respondent No. 1 filed a memo before the High

Court, seeking permission to withdraw Appeal Suits Nos.

876/2012 and 566/2013. Such permission, along with a

direction to refund the court fee deposited by Respondent No.1,

was granted by orders dated 16.09.2019 and 18.09.2019 in A.S.

Nos.566/2013 and A.S. Nos. 876/2012 respectively.

5. Despite the above stated orders of the High Court, the Registry

orally refused Respondent No.1’s request for refund of court fees,

on the ground that such refund is not authorised by the relevant

rules. Left without recourse, on 25.12.2019, Respondent No.1

filed Civil Miscellaneous Petitions Nos. 26742/2019 and

26743/2019 under Section 151, Code of Civil Procedure, 1908

(hereinafter, ‘CPC’), praying for refund of the court fees paid by

him in A.S. Nos. 876/2012 and 566/2013 respectively, in terms

of the orders dated 18.09.2019 and 16.09.2019 therein.


6. By the impugned common judgment and order dated

8.01.2020, the High Court has allowed the aforementioned Civil

Miscellaneous Petitions, and directed the Registry to refund the

full court fee to Respondent No. 1 herein.

7. In addressing the question of whether the refund of court fee

was permissible under the relevant rules, the High Court

considered Section 69A

of the Tamil Nadu Court Fees and Suit

Valuation Act, 1955 (hereinafter, ‘1955 Act’), which reads as

follows:

“69A.

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.” (emphasis supplied)

Considering, appeal suits to be continuation of original suits, and

therefore falling within the ambit of ‘suits’ as provided in Section

69A,

the Court went on to take notice of Section 89, CPC which

reads as follows:

“89. Settlement of disputes outside the Court.—(1)

Where it appears to the Court that there existelements

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.

(2) Were a dispute has been referred—

(a) for arbitration or conciliation, the provisions of the

Arbitration and Conciliation Act,1996 (26 of 1996)

shall apply as if the proceedings for arbitration or

conciliation were referred for settlement under the

provisions of that Act;

(b) to Lok Adalat, the Court shall refer the same to the

Lok Adalat in accordance with the provisionsof subsection

(1) of section 20 of the Legal Services Authority

Act, 1987 (39 of 1987) and all other provisions of that

Act shall apply in respect of the dispute so referred to

the Lok Adalat;

(c) for judicial settlement, the Court shall refer the

same to a suitable institution or person and such

institution or person shall be deemed to be a Lok

Adalat and all the provisions of the Legal Services

Authority Act, 1987 (39 of 1987) shall apply as if the

dispute were referred to a Lok Adalat under the

provisions of that Act;

(d) for mediation, the Court shall effect a compromise

between the parties and shall follow such procedure as

may be prescribed.”


8. After giving due consideration to the above provisions, the

High Court held that, given their beneficial intent, they must be

interpreted liberally, in a manner that would serve their object

and purpose. Construing them narrowly would lead to a situation

wherein parties who settle their dispute through a Mediation

Centre or other centres of alternative judicial settlement under

Section 89, CPC would be entitled to claim refund of their court

fee, whilst parties who settle the disputes privately by themselves

will be left without any means to seek a refund. Accordingly, the

High Court opined that such differential treatment between two

similarly situated persons, would constitute a violation of Article

14 of the Constitution. Therefore, in the High Court’s view, a

constitutional interpretation of Section 89 of the CPC, and

resultantly Section 69A

of the 1955 Act, would require that

these provisions cover all methods of outofcourt

dispute

settlement between parties that the Court subsequently finds to

have been legally arrived at.

9. Dissatisfied, the Petitioner herein has challenged the

impugned judgment of the High Court.


10. The gravamen of the Petitioner’s contentions is 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 hence it does not apply to circumstances such as

in the present case, 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.

This Court’s Analysis

11. Having heard the petitioner and thoroughly considered the

arguments advanced, we find ourselves unimpressed by the

Petitioner’s contentions, for reasons outlined below.

12. 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 Report on Amendment of

Section 89 of the Code of Civil Procedure 1908 and Allied


Provisions, Section 89 has now made it incumbent on civil courts

to strive towards diverting civil disputes towards alternative

dispute resolution processes, and encourage their settlement

outside of court (Para 2.3). 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 interpretation thereof.

13. Before expounding further on our interpretation of the

aforesaid provisions, regard must be had to the following

postulation of this Court’s interpretive role in Directorate of

Enforcement v. Deepak Mahajan, 1994 3 SCC 440 –

“24…Though the function of the Courts is only to

expound the law and not to legislate, nonetheless the

legislature cannot be asked to sit to resolve the

difficulties in the implementation of its intention and

the spirit of the law. In such circumstances, it is the


duty of the court to mould or creatively interpret the

legislation by liberally interpreting the statute.

25. In Maxwell on Interpretation of Statutes, Tenth

Edn. at page 229, the following passage is found:

“Where the language of a statute, in its ordinary

meaning and grammatical construction, leads to a

manifest contradiction of the apparent purpose of the

enactment, or to some inconvenience or absurdity,

hardship or injustice, presumably not intended, a

construction may be put upon it which modifies the

meaning of the words, and even the structure of the

sentence. … Where the main object and intention of a

statute are clear, it must not be reduced to a nullity by

the draftsman's unskilfulness or ignorance of the law,

except in a case of necessity, or the absolute

intractability of the language used.” (emphasis

supplied)

Therefore, it is wellsettled

that the Courts may, in order to

avoid any difficulty or injustice resulting from inadvertent

ambiguity in the language of a statute, mould the interpretation

of the same so as to achieve the true purpose of the enactment.

This may include expanding the scope of the relevant provisions

to cover situations which are not strictly encapsulated in the

language used therein.


14. This principle of statutory interpretation has been affirmed

more recently in the decision in Shailesh Dhairyawan v.

Mohan Balkrishna Lulla, (2016) 3 SCC 619 –

“33.…Though the literal rule of interpretation, till

some time ago, was treated as the “golden rule”, it is

now the doctrine of purposive interpretation which is

predominant, particularly in those cases where literal

interpretation may not serve the purpose or may lead

to absurdity. If it brings about an end which is at

variance with the purpose of statute, that cannot be

countenanced.” (emphasis supplied)

This was followed in the subsequent decision of this Court in

Anurag Mittal v. Shaily Mishra Mittal, (2018) 9 SCC 691.

15. In light of these established principles of statutory

interpretation, we shall now proceed to advert to the specific

provisions that are the subject of the present controversy. 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.

16. It is pertinent to note that the view taken by the High Court

in the impugned judgement has been affirmed by the High Courts

in other states as well. Reference may be had to the decision of

the Karnataka High Court in Kamalamma & ors. v. Honnali

Taluk Agricultural Produce Cooperative

Marketing Society

Ltd., (2010) 1 AIR Kar. R 279, wherein it was held as follows:

“6. Whether the parties to a suit or appeal or any other

proceeding get their dispute settled amicably through

Arbitration, or meditation or conciliation in the Lok

Adalath, by invoking provisions of Section 89, C.P. C.

or they get the same settled between themselves

without the intervention of any

Arbitrator/Mediator/Conciliators in Lokadalath etc.,

and without invoking the provision of Section 89,

C.P.C., the fact remains that they get their dispute

settled without the intervention of the Court. If they get

their dispute settled by invoking Section 89, C.P.C., in

that event the State may have to incur some

expenditure but, if they get their dispute settled

between themselves without the intervention of the

Court or anyone else, such as arbitrator/mediator etc.,

the State would not be incurring any expenditure. This

being so, I am of the considered opinion that whether

the parties to a litigation get their dispute settled by

invoking Section 89, C.P.C. or they get the same

settled between themselves without invoking Section

89, C.P.C., the party paying CourtFees

in respect

thereof should be entitled to the refund of full CourtFees

as provided under Section 16 of the CourtFees

Act, 1870.”

(emphasis supplied)

Section 16 of the CourtFees

Act, 1870 is in parimateria

with Section 69A

of the 1955 Act, and hence the above stated

principles are equally applicable to the present case.

17. The holding in Kamalamma (supra) has been followed by

the Punjab & Haryana High Court in Pradeep Sonawat v.

Satish Prakash, 2015 (1) RCR Civil 955 and Pritam Singh v.

Ashok Kumar, 2019 (1) Law Herald (P&H) 721, which in turn


were further affirmed in Raj Kumar v. Gainda Devi through

LRs & ors., 2019 SCC OnLine P&H 658.

18. The Delhi High Court has also taken a similar view in J.K.

Forgings v. Essar Construction India Ltd. & Ors., (2009) 113

DRJ 612:

“11. The laudable object sought to be achieved by

inserting and amending these sections seems to be

speedy disposal. The policy behind the statute is to

reduce the No. of cases by settlement. Section 89 of

C.P.C. and Section 16 Court Fee Act are welcome step

in that direction, as the No. of cases has increased, it

is the duty of court to encourage settlement. In present

scenario of huge pendency of cases in the courts a

purposive and progressive interpretation is the

requirement of present hour. The intention of the

Legislature is primarily to be gathered from the object

and the words used in the material provisions. The

statute must be interpreted in their plain grammatical

meaning.

12. It is very clear that the Legislative intent of Section

16 of Court Fees Act was made broad enough to take

cognizance of all situations in which parties arrive at a

settlement irrespective of the stage of the proceedings.

It is also obvious that the purpose of making this

provision was in order to provide some sort of incentive

to the party who has approached the court to resolve

the dispute amicably and obtain a full refund of the

court fees. Having regard to this position, the present

application will have to be allowed.

14. This is not a case where parties to the suit after

long drawn trial have come to the court for settlement.


Had it been the case of long drawn trial non refund

of court fees could have been justified but in such like

cases courts endeavor should be to encourage the

parties and court fees attached with the plaint should

be refunded as an incentive to them.

xxx

17. Settlement of dispute only through any of the mode

prescribed under section 89 of C.P.C is not sine qua

non of section 89 C.P.C. rather it prescribes few

methods through which settlement can be reached,

sine qua non for applicability of section 89 is

settlement between the parties outside the court

without the intervention of the courts.

18. It is also not the requirement of the section that

court must always refer the parties to Dispute

Resolution Forum. If parties have arrived at out of

court settlement it should be welcomed subject to

principles of equity.

19. Court Fees Act is a taxing statute and has to be

construed strictly and benefit of any ambiguity if any

has to go in favour of the party and not to the state.”

(emphasis supplied)

The view taken in both Kamalamma (supra) and J.K.

Forgings (supra) has been subsequently relied upon by the Delhi

High Court in Inderjeet Kaur Raina v. Harvinder Kaur Anand,

2018 SCC OnLine Del 6557.


19. 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

(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 thirdparty

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 stepbrotherly

treatment to other methods availed of by the parties.

Admittedly, there may be situations wherein the parties

have after the course of a longdrawn

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.

20. Thus, even though a strict construction of the terms of

Section 89, CPC and 69A

of the 1955 Act may not encompass

such private negotiations and settlements between the parties,

we emphasize that the participants in such settlements will be

entitled to the same benefits as those who have been referred to

explore alternate dispute settlement methods under Section 89,

CPC. Indeed, we find it puzzling that the Petitioner should be 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 Respondent No. 1’s claim.

21. Thus, in our view, the High Court was correct in holding

that Section 89 of the CPC and Section 69A

of the 1955 Act be

interpreted liberally. In view of this broad purposive construction,

we affirm the High Court’s conclusion, and hold that Section 89

of CPC shall cover, and the benefit of Section 69A

of the 1955

Act shall also extend to, all methods of outofcourt

dispute

settlement between parties that the Court subsequently finds to

have been legally arrived at. This would, thus, cover the present

controversy, wherein a private settlement was arrived at, and a

memo to withdraw the appeal was filed before the High Court. In

such a case as well, the appellant, i.e., Respondent No. 1 herein

would be entitled to refund of court fee.

Conclusions and Directions


22. These petitions are accordingly dismissed, and the impugned

judgment of the High Court dated 8.01.2020 is upheld.

23. The petitioners are directed to refund the court fee deposited

by Respondent No. 1 for Appeal Suits Nos. 876 of 2012 and 566

of 2013, within a period of six weeks.

................................................J.

(MOHAN M. SHANTANAGOUDAR)

...............................................J.

(VINEET SARAN)

NEW DELHI

FEBRUARY 17, 2021


Print Page

No comments:

Post a comment