In a recent decision1, the Supreme Court of India (Supreme Court) while taking a purposive interpretation of Section 89 of the Code of Civil Procedure, 1908 (CPC), held that parties who settle disputes out of court shall fall under the ambit and scope of Section 89 of the CPC and will be eligible to receive refund of court fees paid at the time of filing of the proceedings, under Section 69-A of the Tamil Nadu Court Fees and Suit Valuation Act, 1955 (1955 Act).
- C. Subramaniam/Respondent No. 1 had purchased two vehicles from M/S. Sakthi Finance Limited/Respondent No. 2 under two separate hire purchase agreements dated June 10, 1996 (Agreements). As per the Agreements, Respondent No. 1 was to pay an amount of INR 10,08,000 in stipulated instalments to Respondent No. 2 for each of the two vehicles. C. Subramaniam/ Respondent No. 3 and Sadasivam/ Respondent No. 4 were the sureties to the Agreements.
Respondent No. 2 filed Original Civil Suits Nos. 66 of 2003 and 76 of 2003 (Original Suits) before the Additional District Munsif Court, Coimbatore (Munsif Court) and Additional District and Sessions Court, Coimbatore (District Court) respectively, against Respondent Nos. 1, 3 and 4 for non-payment of INR 6,64,00 and INR 5,97,200 towards the instalments stipulated under the Agreements. The Original Suits were partly decreed by judgment dated February 13, 2004 passed by Munsif Court and judgment dated January 31, 2005 passed by the District Court. Aggrieved by the judgments, the Respondent No. 1 filed Appeals2 before the High Court of Madras (High Court).
While the Appeals were pending before the High Court, the parties entered into a private out of court settlement. As a result, the Respondent No. 1 secured orders3 for withdrawal of the Appeals citing settlement of the issues between the parties out-of-court, along with directions for refund of the court fees deposited by Respondent No. 1 at the time of filing the Appeals.
Upon the Respondent No. 1 approaching the Registry of the High Court seeking refund of its court fees, the Registry refused the same citing it to be not authorised under the relevant rules, namely 1955 Act. Aggrieved by the decision of the Registry, the Respondent No. 1 filed Petitions4 under Section 151 of the CPC praying for refund of the court fees as had been directed by the High Court.
High Court's decision
The High Court after considering the matter in depth, passed a common judgment and order dated January 8, 2020 (Impugned Order) allowing the Petitions and directing the Registry to refund the court fees paid by Respondent No. 1. The High Court opined that Section 69-A of the 1955 Act and Section 89 of the CPC must be interpreted in a liberal manner so as to serve their object and purpose. It was observed that no differentiation can be made between parties who settle their disputes through a mediation centre or other centre of alternative judicial settlement enshrined under Section 89 of the CPC, and between parties who settle the disputes privately by themselves out of court. The High Court held that such differential treatment between two similarly situated persons, would amount to a violation of Article 14 of the Constitution of India, 1950. Dissatisfied by the Impugned Order of the High Court, the High Court of Judicature at Madras, represented by its Registrar General/ Petitioner filed an appeal before the Supreme Court.
Supreme Court's decision
The Supreme Court, while relying upon the judgments Directorate of Enforcement v. Deepak Mahajan5 and Shailesh Dhairyawan v. Mohan Balkrishna Lulla6, observed that a purposive interpretation of Section 89 of the CPC must be made in order to solve the deadlock between the parties. it was observed that the interpretation of a statute must be moulded in such a manner so as to achieve the true purpose of the enactment and to ensure that no difficulty or injustice is rendered due to such ambiguity over the interpretation of a statute. Thus, arriving at a conclusion to make a broader and purposive interpretation of Section 89 of the CPC read with Section 69-A of the 1955 Act.
The Supreme Court while relying upon the observations made in the Law Commission's 238th Report on Amendment of Section 89 of the CPC, held that the object and purpose of Section 89 of the CPC is to facilitate private settlements and enable lightening of the overcrowded docket of the Indian judiciary. It was further observed that Section 69-A of the 1955 Act is a step further to Section 89 of the CPC and opined that it only further encourages the settlement of disputes by providing for refund of court fees.
The Supreme Court taking reference from the decisions passed by various high courts across India7, held that the purpose of Section 69-A of the 1955 Act is to provide a reward to parties who have chosen to withdraw their litigations in favour of a more conciliatory dispute settlement mechanisms, thereby saving time and resources of the court. As per the Supreme Court, refund of the court fees also acts as an ancillary economic incentive pushing the parties to settle the disputes amicably through alternative means. It was further observed that, parties who settle disputes amongst themselves, without the need for a court to arrange for a third-party institution, are more deserving of the benefit arising out of Section 69-A of the 1955 Act.
The argument extended by the Petitioner that the benefit of Section 69-A of the 1955 Act will only be applicable to parties who settle matters under the ambit of Section 89 of the CPC, was observed by the Supreme Court to be an absurd and unjust outcome. The court was further perplexed with the Petitioner opposing the grant of such a benefit under Section 69-A of the 1955 Act to Respondent No. 1, as according to the Supreme Court, while the state government will be losing on a one-time court fee in the short term, the state is bound to save the expense when considering the opportunity cost of managing the otherwise endless cycle of litigation in the long term.
Lastly, the Supreme Court held that in situations where parties have after a long-drawn trial or after multiple frivolous litigations, approached the court seeking refund of court fees on account of the matter being settled out of court, the courts may on the basis of previous conduct of the parties and on principles of equity, refuse to grant relief under the relevant rules pertaining to court fees. However, since the present dispute does not fall under such a scenario, the Supreme Court upheld the Impugned Order and directed the Petitioner to refund the court fees to Respondent No. 1.
1 The HC of Judicature at Madras, Rep. by its Registrar General v. M.C. Subramaniam & Ors. [SLP (Civil) Nos. 3063-3064 of 2021 decided on February 17, 2021]
2 Appeal Suit Nos. 876 of 2012 and 566 of 2013
3 Orders dated September 16, 2019 and September 18, 2019
4 Civil Miscellaneous Petitions Nos. 26742 of 2019 and 26743 of 2019
5 1994 3 SCC 440
6 (2016) 3 SCC 619
7 Kamalamma & Ors. v. Honnali Taluk Agricultural Produce Co-operative Marketing Society Ltd. (2010) 1 AIR Kar. R 279; Pradeep Sonawat v. Satish Prakash 2015 (1) RCR Civil 955; Pritam Singh v. Ashok Kumar 2019 (1) Law Herald (P&H) 721; Raj Kumar v. Gainda Devi through LRs & Ors. 2019 SCC OnLine P&H 658; J.K. Forgings v. Essar Construction India Ltd. & Ors. (2009) 113 DRJ 612 and Inderjeet Kaur Raina v. Harvinder Kaur Anand 2018 SCC OnLine Del 6557.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.