Litigants will not be entitled to refund of court fees if disputes get settled out of court after commencement of trial, rules Madras High Court

The verdict was passed while dismissing two civil revision petitions filed by different litigants.

Litigants will not be entitled to return of court fees if their civil disputes lead to an out of the court settlement after the commencement of trial in civil suits, the Madras High Court has held after refusing to follow the judgment passed by the Supreme Court in the 2021 M.C. Subramaniam’s case.

Justice P.B. Balaji agreed with Advocate General (A-G) Vijay Narayan that the 2021 verdict in M.C. Subramaniam’s case had not factored in the top court’s 2010 judgement passed by a bench of co-equal strength in Afcons Infrastruture Limited versus Cherian Varkey Construction Company Private Limited.

“It is settled law that when there is an earlier ratio of a Coordinate Bench, it is binding on a later Bench of equal strength and if at all the later Bench is not agreeable to the ratio laid down in the earlier decision, it is only open to the later Bench to refer the matter to a larger Bench and not take a contrary view,” the judge said.

He went on to state: “In such view of the matter, I am emboldened to follow and rely upon the ratio laid down in Afcons case instead of following the ratio laid down in M.C.Subramaniam’s case.”

The judge said, the Tamil Nadu Court Fees and Suits Valuation Act, 1955 insists upon litigants to pay court fees for a reason. The court fee gets collected to meet all necessary and incidental expenses relating to provision of infrastructure for courts, conduct of trials, payment of salaries and allowances to the court staff and so on.

Section 69 of the 1955 Act, as it stood originally, provided for refund of 50% of court fees “whenever any suit is dismissed as settled out of court before any evidence has been recorded on the merits of the claim.” In 2007, Section 69A was introduced to the Act providing for refund of 100% of the court fees if the dispute gets settled after the court concerned refers the matter for arbitration, mediation, conciliation, Lok Adalat or such other alternative dispute resolution (ADR) mechanisms mentioned in Section 89 of the Code of Civil Procedure (CPC).

In 2017, the Act was amended again to provide for return of 100% court fees under Section 69 too. However, even then, the legislature consciously did not tinker with the words “whenever any suit is dismissed as settled out of court before any evidence has been recorded on the merits of the claim.”

Further, Justice Balaji highlighted that the Supreme Court in Afcons Infrastructure case had held that the civil courts could refer disputes to the ADR mechanisms mentioned in Section 89 of CPC only before commencement of trial because otherwise, the litigants could use it as a ruse to protract the trial.

Therefore, the continued existence of Section 69 along with the words “before any evidence has been recorded on the merits of the claim” and the Supreme Court’s 2010 ruling that courts could refer civil disputes for ADR only before commencement of trial would make it clear that litigants would not be entitled to refund of court fees after the trial commences, the judge held.

The verdict was passed while dismissing two civil revision petitions filed by different litigants. The first civil revision petition had been filed against the order passed by a district court in Tiruvallur district to refund only 50% of court fees and the second had been filed against Chengalpattu court’s order that the litigant would not be entitled to refund of the entire amount of ₹2.54 lakh paid towards court fees.

Justice Balaji held that both the petitioners would not be entitled to refund of any amount of court fees since the out of court settlement had been reached only after commencement of trial. However, since the State had not filed any revision petition against the order to refund 50% of court fees to the first petitioner, the judge refrained from interfering with the Tiruvallur court’s order.

The judge had requested the A-G to assist him in the case considering the important question of law involved in the case related to the State exchequer and recorded the court’s “deep appreciations” to him. He also appreciated senior counsel S. Parthasarathy and S. Subbiah, amicus curiae S. Suresh Sampath, advocates S. Ramesh, S.R. Sundar, A.V. Arun and all other Bar members who made their submissions following an open invitation extended to all of them.

During the course of hearing, the judge found that Section 69A when it was introduced for the first time in 2007 had correctly stated that whenever a court refers a dispute to ADR, the litigants would be entitled to issuance of a certificate from the court authorising them to obtain full refund of the court fees if the dispute gets settled.

However, the amendment made to it in 2017, read that the full court fees should be refunded immediately after a court refers a dispute to ADR. The judge said, such premature refund would go against the interests of the public exchequer if the dispute does not get settled through ADR. Therefore, he suggested the provision as it was introduced in 2007 should be brought back to the statute book.

“A copy of this order shall be marked to the Tamil Nadu Law Commission to look into this grey area and see whether the provision as it stood prior to the substitution by Act 6 of 2017 would have to be restored, as it safeguarded the State Exchequer, by entitling the party to only a certificate for refund, with the refund actually taking place only if the dispute is settled and not otherwise,” the judge concluded.