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Parties settling disputes entitled for refund of court fees: Supreme Court of India

Parties who choose to withdraw their litigations in favor of more conciliatory dispute settlement mechanisms; saving them time and resources of the Court will be entitled to a full refund of the court fees deposited by them. Supreme Court of India took the decision in the case of The High Court of Judicature at Madras vs.M.C. Subramaniam & ors.[Special Leave Petition no. 3063-3064 of 2021] presided over by the bench of Hon’ble Justice Mohan M Shantanagoudar.

In the instant case, the dispute had arisen between the respondents with respect to hire purchase agreement of two vehicles. When the matter was pending in the High Court, parties decided to enter into a private out-of-court settlement without any intervention thus resulting in solving the controversies between themselves. In the High Court, a judgment dated January 8, 2020 ruled against its own registry and allowed the plea. Despite the orders from the High Court, Registry refused to pay back the court fee to the appellants. High Court had considered section 69­A of the Tamil Nadu Court Fees and Suit Valuation Act, 1955 which allows to pay back the court fees to the litigants. The said provision provides for refund of court fees on settlement of disputes under Section 89 of Code of Civil Procedure.

Section 89 of CPC provides that when the court feels that there exists scope for settlement, then it can formulate the terms of settlement and refer the parties to arbitration, conciliation or mediation. The gravamen of the Petitioner’s contentions was that Section 69 -A 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. However when the matter reached to the Supreme Court, the bench opined that “The provisions of Section 89 of the CPC must be understood in the backdrop of the longstanding proliferation of litigations in the civil courts, which has placed undue burden on the judicial system.” “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.”

While interpreting the provisions of Section 89 of CPC and Section 69 A, the court contended that the petitioner would lead to an outcome where parties who are referred to a mediation or arbitration by the Court will be entitled to a full refund of their court fee while those parties who 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. The court stated that “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.” Hence, Supreme Court upheld the judgment of the High Court and dismissed the appeal of the petitioner.

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