India / April 7 2024
Introduction
In the Indian jurisprudence, the levy of court fee is inter alia sanctioned by the Court Fees Act, 1870 (“Court Fee Act”) for the purpose of instituting a suit or claim by a party to the matter or litigation. The payment of court fee is a condition precedent for seeking the aid of the court. The amount to be paid as court fee is prescribed by law and until the pre-determined amount is paid, the litigant cannot be heard, save with the leave of the court. However, if the parties to a suit come to a mutual understanding to resolve the dispute amicably, the law also prescribes for a procedure for providing a refund of the previously paid court fee by the litigant. The only remaining question that begs determination is when and how much of the court fee will be refunded to the litigant.
In this piece we aim to analyse the present statutory provisions that provide distinction for the quantum of refund of court fee on the basis of whether the dispute is settled through arbitration, mediation, judicial settlement, including Lok Adalat, and mediation (“ADR mechanism”) or the dispute is settled by private agreement between the parties. Further, we aim to also distinguish the conditions under which the court fee is refunded and whether or not the conditions so mandated by the governing statute are just and fair.
Statutory framework
Section 16 of Court Fee Act, 1870 provides for the refund of court fee in case “where the court refers the parties to the suit to any one of the mode of settlement of dispute referred to in Section 89 of the Code of Civil Procedure, 1908 (5 of 1908), the plaintiff shall be entitled to a certificate from the Court authorising him to receive back from the collector, the full amount of the fee paid in respect of such plaint.”
Further, Section 16A of the Court Fee Act, 1870 provides for refund of court fees on settlement before hearing “whenever by agreement of parties –
- Any suit is dismissed as settled out of court before any evidence has been recorded on the merits of the claim; or
- Any suit is compromised ending in a compromise decree before any evidence has been recorded on the merits of the claim; or
- Any appeal is disposed of before the commencement of hearing of such appeal; half the amount of all fees paid in respect of the claim or claims in the suit or appeal shall be ordered by the Court to be refunded to the parties by whom the same have been respectively paid.”
From a bare reading of the provisions, it emerges that Section 16 of the Court Fee Act entitles the plaintiff to a refund of the entire court fee deposited in case if the dispute is settled through an ADR mechanism under Section 89 of the CPC. Whereas Section 16A provides for a refund of half of the court fees if the dispute is settled by private agreement between the parties without the intervention of ADR mechanism.
Background
In 2018, the Delhi High Court in Nutan Batra v. M/S Buniyaad Associates (2018) 255 DLT 696 (DB) (“Nutan Batra”) delved upon the distinction between Section 16 and 16A of the Act and held that when a dispute is settled through an ADR mechanism, it may fall either under Section 16 or Section 16A depending on the facts of the case. However, if the matter is privately settled without the involvement of any ADR mechanism, it would fall under Section 16A of the Act, and the party would be entitled only to half the court fees paid.
Four years thereafter, the Delhi High Court in Ajay Mahajan v. Mridula Mukherjee(2023) SCC Online Del 2389 (“Ajay Mahajan”) took a view contrary to that taken in Nutan Batra and ordered a refund of the entire court fee, though the dispute was privately settled between the parties. It is interesting to note that Section 16A of the Court Fees Act was apparently not brought to the attention of the bench, which decided Ajay Mahajan.
The Division Bench of the Delhi High Court in V Guard Industries Ltd vs. Ms Mahavir Home Appliances and Anr. & Anr. (“V Guard”), is set to decide on an issue pertaining to the validity of Section 16A of the Court Fees Act. This provision was added by way of a notification dated February 11, 2011, applicable only to Delhi, and provides for the refund of half of the court fees when the matter is privately settled between the parties without the involvement of any ADR mechanism mentioned under Section 89 of the Code of Civil Procedure, 1908 (“CPC”). Meanwhile, as mentioned above Section 16 of the Court Fees Act is another provision in this regard, which provides for the refund of the entire court fees when the matter between the parties is settled via means of ADR mechanisms. Hence, there are two different statutory provisions applicable to Delhi in case of privately and institutionally settled cases providing 50% or 100% refund of the court fee respectively.
Now, when the Single Judge bench of the Delhi High Court (“Court”) in the case of V Guard came up with the issue relating to the extent to which the plaintiff would be entitled to a refund of the court fees deposited, where the dispute was settled privately between the parties without involvement of any ADR mechanisms, it referred the matter to the Division Bench in light of the contrary views taken by the Delhi High Court in previous cases.
Analysis
Currently, there are two separate statutory provisions with respect to the refund of court fees where a dispute is settled privately between the parties. On the one hand, Section 16 envisages a refund of the complete court fee for the dispute settled via the ADR mechanism, and on the other hand, the plaintiff is entitled to a refund of only half of the court fees deposited where the dispute is settled privately between the parties without the involvement of the ADR mechanism under Section 16A.
During the last hearing held on December 23, 2023, the Delhi High Court analysed the current position in this regard. It drew a distinction between Section 16 and 16A of the Court Fee Act while dealing with the relevant judgments in this matter. Firstly, the Court revisited the Nutan Batra judgement where the Division bench had clearly held that if the dispute is privately settled between the parties without any involvement of the court and ADR mechanism, then the parties would be entitled to half of the court fees provided under Section 16A of the Court Fees Act.
Interestingly, the Court also noted another judgment in this regard, namely, Ajay Mahajan where the opposite stance was taken by the Division Bench. The Division Bench in that instance, relying on Section 16 of the Court Fees Act, ordered the full court fee to be refunded even though the parties had privately settled their disputes. The Division Bench in this case appears to have overlooked or was unaware of Section 16A of the Court Fees Act.
Another judgment, namely M.C. Subramaniam vs. M.C. Subramaniam (2021) 3 SCC 560 (“M.C. Subramaniam”) of the Supreme Court, was also discussed by the Court where the Supreme Court discussed Section 69A of the Tamil Nadu Court Fees and Suits Valuation Act, 1955 (“Tamil Nadu Court Fee Act”), which is pari materia with Section 16 of the Court Fees Act. The Apex Court found that Section 69 of the Tamil Nadu Court Fee Act can be interpreted liberally in the context of techniques used by parties to settle their disputes outside of court which the court later determines were properly implemented. The Apex Court had also observed that the object behind Section 89 0f the CPC is to divert civil disputes towards alternative dispute resolution processes and encourage their settlement outside the court to enable lightening of the overcrowded docket of the Indian judiciary. Therefore, the object and purpose of these provisions must guide court’s interpretation thereof. Thus, the distinction in the outcome wherein parties who are referred to ADR mechanism are entitled to refund of full court fee while the parties who similarly save the time and resources of the court by privately settling the dispute being deprived of the same benefit simply because there was no interference of the court would lead to absurd and unjust outcome.
The Single Judge Bench of the Delhi High Court in V Guard observed that if one were to read M.C. Subramaniam paragraphs alone and in the context of Section 16 of the Court Fees Act, without taking into account Section 16A of the Court Fee Act, as it has been made applicable to Delhi, it would seem justified to refund all court fees, regardless of whether the settlement is reached through mediation or in private between the parties.
However, since the introduction of Section 16A of the Court Fee Act mandates that it is specifically applicable to Delhi, clarity on this position gets weakened. Nonetheless, differential treatment meted out to two classes of parties that are equally facilitating the object and purpose of the aforesaid provisions by saving the court’s time and resources would only lead to injustice and render the object and purpose of the provisions nugatory and therefore, a purposive interpretation of the provisions are warranted for equity and fairness as opposed to a literal or technical interpretation of section 16A.
Keeping in mind the two distinct judgments on the issue, the Court referred the matter to the Division Bench, and the next hearing is scheduled to be held in April 2024. However, surprisingly, while the issue is still pending before the Division bench, the other benches of the Court took different viewpoints.
On one side, there are case laws such as Dassault Systemes & Ors vs Euler Motors Private Limited & Anr and Messers Amber Enterprises India … vs Messers Bs Global, where the Court, by applying Section 16A of the Court Fees Act, 1870, refunded half of the court fees, on the other hand, there are case laws such as Rohit Gupta & Ors vs Dinesh Kumar Gupta & Ors (Rohit Gupta) and Mohit Arya vs Shanti Satyaprakash Arya and Ors, where the Court refunded the entire amount and criticised Section 16A as making arbitrary distinctions between persons who seek a refund of court fees under Section 16 and those who seek a refund under Section 16A of the Court Fee Act.
Conclusion
It will be interesting to see the decision of the Delhi High Court in the case of V Guard Industries, where the division bench is set to decide on an issue where different viewpoints are taken by the different benches of the Hon’ble court.
While the recent decisions of the Delhi High Court have rightly questioned the existence of Section 16A, which allows for a refund up to half of the entire court fees, making an arbitrary distinction between the parties settling the disputes privately without the involvement of an ADR mechanism and the parties settling the disputes with the help of ADR mechanism. Such a distinction is not only against the principles of equity and fairness; it also inadvertently compels people to use ADR mechanisms.
