Private Parties Settling Disputes Privately Entitled To Refund Of Court Fee

OVERVIEW

The Supreme Court has ruled that the parties who agree to settle their dispute privately, i.e. without judicial intervention, under section 89 of the Code of Civil Procedure (CPC) are entitled to refund of Court fees.

The court rejected an appeal filed by the Madras High Court seeking direction against its own verdict of refund of court fee to litigants.

BACKGROUND

The Madras High Court filed an appeal in the Apex Court against the judgement which held that section 89 of the CPC, along with section 69A of the Tamil Nadu Court Fees and Suit Valuation Act, 1955, would encompass all methods of dispute settlement outside court.

Section 69A of the 1955 Act refers to the refund regarding settlement of disputes under section 89 of CPC. It provides for the fee paid to be refunded to the parties, if the Court refers the parties to the suit to any of the modes of settlement of dispute referred to in section 89 CPC, without awaiting the settlement.

Section 89 of CPC provides for the terms of settlement among the parties, as per the court’s interpretation. Four modes of settlements are contemplated in the said provision – (i) arbitration; (ii) conciliation; (iii) judicial settlement involving settlement via Lok Adalat; or (iv) mediation.

The case at hand stemmed from a dispute between two parties regarding a hire-purchase agreement. After approaching the Munsif and District courts, the case reached the High Court, where the parties entered into a private settlement outside court, when the case was pending.

The petitioner, in the present case of High Court of Judicature at Madras v. M.C. Subramaniam & Ors., contended that sec. 69A of the 1955 Act simply contemplates refund of court fees in the cases where the Court itself refers the parties to alternative method of dispute settlement, as listed in sec. 89 of CPC, thus, not applying to the circumstances of the present case where the parties resorted to private settlement under sec. 89 of CPC without any reference by Court.

RECENT DEVELOPMENTS

The division bench of Justice Mohan Shantanagoudar and Justice Vineet Saran observed that if the administration’s argument is accepted, it would lead to a highly unjust outcome, resulting in two classes of parties to be treated differently with one party being deprived of the benefits of sec. 69A of the 1955 Act, despite having facilitated the purpose of the provision equally.

“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 the 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.”

CONCLUSION

The Court held that the narrow interpretation of sec. 89 of CPC and sec. 69A of the 1955 Act as argued upon by the petitioner would lead to injustice, and thus needs to be abolished in the favour of a purposive interpretation of the provisions. The Court, thus, upheld the judgement of the High Court and dismissed the appeal.