Supreme Court: Litigants Settling Disputes Privately Without Court Intervention U/s 89 CPC Also Entitled To Refund Of Court Fee

Supreme Court: Litigants Settling Disputes Privately Without Court Intervention U/s 89 CPC Also Entitled To Refund Of Court Fee

The Supreme Court of India (SC) bench comprising of Justices Mohan M Shantanagoudar and Vineet Saran stated in the case of High Court of Judicature at Madras (Petitioner) v. M.C. Subramaniam& Ors. (Respondents), that Section 89 of the Civil Procedure Code (CPC) should be interpreted liberally in a manner that would serve its object and purpose.

The bench observed, "The participants in private settlements will be entitled to the same benefits as those who have been referred to explore alternate dispute settlement methods under Section 89 CPC."

The SC explained that "The narrow interpretation of Section 89 of CPC would lead to an outcome wherein parties who are referred to a mediation center or other centers 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."

In this case, an appeal was filed by the Madras High Court (HC) wherein it challenged the HC's judgment that held that Section 89 of the CPC, and Section 69¬A of the Tamil Nadu Court Fees and Suit Valuation Act, 1955, (Act), would cover all methods of Out of the Court dispute settlement between the litigants that the Court subsequently finds to have been legally arrived at.

Section 69A of the Act deals with a refund on the settlement of disputes under section 89 CPC. The HC administration contended before the SC that Section 69¬A of the 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.

It was further submitted that it does not apply to circumstances 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.

The factual matrix of the case is that a dispute between the two parties regarding a hire purchase agreement. The Munsif Magistrate and District Courts analyzed the case. Subsequently, the case reached the HC where it was pending when the parties entered into a private out¬-of-court settlement without any intervention from Court, thus resolving the controversy between them.

The respondent had filed the appeal before the HC applied for withdrawal of the case and the same was allowed by the Court. But the Registry orally refused the respondent's request for refund of court fees.

The respondent moved to the HC for challenging the same. On 8 January 2020, the HC ruled against its own registry and allowed the plea. The judgment of the HC came in appeal to the Top Court.

The petitioners contended that Section 69¬A of the 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.

They urged that this provision will not apply to circumstances of 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.

Issue before the SC

Whether the refund of the court fee was permissible under the relevant rules, the Madras High Court had considered Section 69¬A of the Tamil Nadu Court Fees and Suit Valuation Act, 1955?

While analyzing the above issue the Court stated that the said provision provides for refund of court fees on the settlement of disputes under Section 89 of the 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 the settlement and refer the parties to arbitration, conciliation, or mediation.

The Apex Court examined the intent and scope behind Section 89 of CPC and opined that "The 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 69¬A of the 1955 Act, which further encourages settlements by providing for refund of court fee."

The SC further stated that "A narrow interpretation of Section 89 of CPC and Section 69¬A of the Act sought to be imposed by the petitioner would lead to an outcome wherein 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 SC stated, "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 69¬A of the 1955 Act."

The SC stated, that the purpose of Section 69¬A is to reward parties who have chosen to withdraw their litigations in favour of more conciliatory dispute, settlement mechanisms, thus saving time and resources of the Court, by enabling them to claim a refund of the court fees deposited by them.

The Top Court stated that the Karnataka High Court has rightly observed in the case of Kamalamma & ors. v. Honnali Taluk Agricultural Produce Co-operative Marketing Society Ltd., (2010) 1 AIR Kar that the parties who have agreed to settle their disputes without requiring judicial intervention under Section 89, CPC are even more deserving of this benefit.

The Court added that this is because by choosing to resolve their claims themselves, they have saved the State of the logistical hassle of arranging for a third party institution to settle the dispute.

The bench added that a literal or technical interpretation of the said provision 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.

While dismissing the Special Leave Petition and upholding the decision of the HC, it added "Though the Registry/State Government will be losing a one¬time 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 its interest to allow the claim."