Parties agreeing to out-of-court settlement without judicial intervention under Section 89 CPC can’t be denied benefit of refund of court fees; they are “even more deserving”: Supreme Court

Supreme Court: The bench of MM Shantanagoudar* and Vineet Saran, JJ has held that Section 89 of CPC and Section 69-A of Tamil Nadu Court Fees and Suit Valuation Act, 1955 contemplate the refund of court fees in all methods of out-of-court dispute settlement between parties that the Court subsequently finds to have been legally arrived at and not just to those cases where the Court itself refers the parties to any of the alternative dispute settlement mechanisms listed in Section 89 of the CPC.

Issue before the Court

Madras High Court had, on8.01.2020, held that, given their beneficial intent, Section 89 of CPC and Section 69-A of Tamil Nadu Court Fees and Suit Valuation Act, 1955 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.”

The High Court was of the opinion that as such differential treatment between two similarly situated persons, would constitute a violation of Article 14 of the Constitution, a constitutional interpretation of Section 89 of the CPC, and resultantly Section 69-A of the 1955 Act, would require that these provisions cover all methods of out-of-court dispute settlement between parties that the Court subsequently finds to have been legally arrived at.

Challenging the said decision, the Madras High Court’s Registry had approached the Supreme Court with the contention 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. 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.

Analysis

Understanding the object of the provisions in question

The object and purpose of Section 89 crystal clear is 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 purpose of Section 69-A of the 1955 Act 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.

Why a narrow interpretation would lead to absurd and unjust outcome

The narrow interpretation of Section 89 of CPC and Section 69¬A 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 would lead 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.

“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.”

Further, 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 third¬party 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 69-A should only incentivize the methods of out-of-court settlement stated in Section 89, CPC and afford step brotherly treatment to other methods availed of by the parties.” 

Noticing that there may be situations wherein the parties have after the course of a long-drawn trial, or multiple frivolous litigations, approached the Court seeking refund of court fees in the guise of having settled their disputes, the Court said that 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.

How the Registry and State Government would benefit in long run 

Finding it puzzling that the High Court’s Registry should be so vehemently opposed to granting such benefit, the Court said that

“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.”

[High Court of Judicature at Madras  Rep. by its Registrar General v. MC Subramaniam, 2021 SCC OnLine SC 109, decided on 17.02.2021]


*Judgment by: Justice MM Shantanagoudar 

One comment

  • […] High Court of Judicature at Madras Rep. by its Registrar General v. MC Subramaniam, 2021 SCC OnLine SC 109: The bench of MM Shantanagoudar and Vineet Saran, JJ has held that Section 89 of CPC and Section 69-A of Tamil Nadu Court Fees and Suit Valuation Act, 1955 contemplate the refund of court fees in all methods of out-of-court dispute settlement between parties that the Court subsequently finds to have been legally arrived at and not just to those cases where the Court itself refers the parties to any of the alternative dispute settlement mechanisms listed in Section 89 of the CPC. Read more.. […]

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