Parties who privately settle disputes without court intervention under Section 89 CPC also entitled to refund of Court fees: SC

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Special Leave Petition (Civil) Nos. 3063-3064 of 2021, Decided on 17.02.2021

JUDGES:Mohan M. Shantanagoudar & Vineet Saran, JJ.


Respondent 1 purchased two vehicles from Respondent No.2 via two hire purchase agreements, under which Respondent 1 was the principal debtor and Respondent No. 3 & 4 were the sureties to the agreement. Respondent No. 1 was to pay a sum of Rs.10, 08,000 in stipulated instalments to Respondent No. 2 for each of the two vehicles. Respondent No. 2 filed a suit for default and after going through the Munsif and District Courts, the case reached the High Court. While the case was pending in High Court, the parties entered into a private out of court settlement, thus resolving the controversy between them. The Respondent No. 1 who had filed the appeal before the High Court applied to withdraw the same, which was allowed but the Registry orally refused the request for refund of court fees.

The Respondent then moved the Madras High Court challenging the same. The High Court ruled against its own registry and allowed the plea. The High Court (administrative side) then came in appeal to the Supreme Court.

Issue: Whether Section 69-A of the Tamil Nadu Court Fees and Suit Valuation Act, 1955 contemplates refund of court fees in cases where parties, without any reference by the Court, privately agreed to settle their dispute outside the modes contemplated under Section 89 of the Code of Civil Procedure, 1908?

Held:The Supreme Court, dismissing the appeal, held that the parties who privately agree to settle their dispute outside the court contemplated under Section 89 of the CPC are also entitled to refund of Court Fees. The parties who engage in private settlement will be entitled to same benefits as those who have been referred by the court to explore alternate dispute settlement methods under Section 89 CPC.

The Court held that Section 89 should be interpreted liberally in a manner that would serve its object and purpose. The Court explained that, the narrow interpretation of Section 89 of CPC and Section 9-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 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 Court’s interference to seek a settlement. Such an interpretation, 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 69-A of the 1955 Act. A literal or technical interpretation, 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.

The Court held that there is non-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.

The Supreme Court examined the intent and scope behind Section 89 pf CPC. “The purpose of Section 89 is crystal clear- 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.”

[Section 69-A of the Tamil Nadu Court Fees and Suit Valuation Act, 1955, reads as follows: Refund on settlement of disputes under Section 89 of the Code of Civil Procedure– Where the Court refers the parties to the suit to any of the modes of settlement of dispute referred to in Section 89 of the Code of Civil Procedure, 1908, the fee paid shall be refunded upon such reference. Such refund need not await for settlement of the dispute.] 

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