Refund of court fee upon settlement.

One of the important legal questions which arise frequently in civil courts in India is regarding the refund of court fees pursuant to settlement between the parties. Settlement not only saves time and money of the parties but also relieves courts of burden of pendency of cases. Therefore, settlement is often promoted, specially by civil courts in India. However, there have been situations where the parties have had difficulty in seeking refund of the entire¬† court fees paid in a suit or other civil proceedings. Through this article, let’s try to understand the nuances of the refund of court fees upon settlement in civil proceedings as provided for by law in India.

The Civil Procedure Code, in section 89, provides for different mechanisms which may be explored by parties to a case depending on the recommendation of the court and their choice. It could be mediation, where a neutral third party tries to reconcile the disputes between the parties to enable them to arrive at a settlement. It could be arbitration, where the arbitrator acts like a judge and renders an award at the end of the proceedings. It could be before a Lok Adalat which is meant to act like a mediator and enable parties to arrive at settlement. Or, it could be judicial settlement, wherein the judge trying the case may himself explore settlement between parties or may refer the matter to some other judge for settlement. (Read Afcons judgment of Supreme Court)

An incentive is provided to parties to have their matters settled by recourse to one of the aforesaid mechanisms. Section 16 of Court Fees Act provides that if a matter is referred to one of the mechanisms for settlement by the court and the matter is settled in consequence thereof, a party is entitled to refund of the entire court fee paid by them in court. This provision is aimed at providing an impetus to parties to settle their disputes, specially in cases where large sums are paid as court fees.

What’s important to note is that section 16, Court Fees Act,¬† specifically refers to the settlement arrived at by parties pursuant to reference to one of the mechanisms under section 89, CPC. Therefore, on a plain reading of section 16, parties which settle disputes outside of reference under section 89, CPC, would not be entitled to refund of entire court fees. However, certain High Courts, such as Punjab and Haryana, Karnataka etc. (judgments easily available on internet) have held the parties to be entitled to refund of entire court fees, even when they settle outside the purview of section 89, CPC. The rationale of those judgments has been the underlying object of section 16, Court Fees Act and section 89, CPC, which is to promote settlement. However, currently there does not appear to be a definite view on the same by the Supreme Court.

A peculiar problem arises in Delhi where the Legislature has introduced amendment in Court Fees Act in the form of introduction of section 16 A. This section provides for refund of only half of court fees, that too, when certain conditions prescribed therein are fulfilled- such as, settlement having been arrived at before the evidence is led in the case and so on. This section has been introduced after the introduction of section 16, and therefore, is presumed to be operative in cases not covered by section 16. However, there is some overlap in the language of both provisions which required for definite construction of both of them by the Delhi High Court in Nutan Batra’s case.

In that case, the Division Bench of the Delhi High Court held that in cases covered by section 16- i.e. where the settlement is pursuant to reference to one of the mechanisms of section 89, cpc, there would be full refund of court fees. However, if the matter is settled wholly out of court without aid of section 89, CPC, section 16 A would be attracted and the party would be entitled to only half of court fee, that too, when conditions therein are fulfilled.

So, if the case is filed in Delhi, one needs to be careful with the kind of mechanism one opts for settlement. In other states, one may avail benefits of section 16, Court Fees Act, subject to reading of the judgments of High Courts prevalent in those states.

One may note that apart from the provision contained in section 16, Court Fees Act, there is no other provision in law which entitles a party to seek refund of court fees upon settlement of disputes, apart from certain provisions in certain states’ Acts ,which prevailed prior to introduction of section 16.

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