The Madras High Court has held that litigants who settle their disputes outside court after evidence has been recorded during trial are not entitled to a refund of court fees under the Tamil Nadu Court Fees and Suits Valuation Act, 1955. [Susheela Kawar v. M Pettu Lakshmi]

Justice PB Balaji held that the benefit of a full refund of court fees following an out-of-court settlement cannot be extended indiscriminately to cases where the trial has already progressed to the stage of recording evidence.

"However, there is no doubt in my mind that a party is not entitled to any refund once evidence is recorded, if whatever little worth it may be," the Court observed.

The October 30 ruling came in two civil revision petitions challenging trial court orders refusing a full refund of court fees despite the parties having privately settled their disputes.

In one case, the trial court had permitted a refund of 50 per cent of the court fees after deducting 5 per cent towards administrative charges. In the other, the trial court had rejected the request for a refund entirely.

The petitioners relied on the Supreme Court's 2021 judgment in High Court of Judicature at Madras v. MC Subramaniam, which upheld the entitlement of parties to a full refund of court fees even when disputes were resolved through private settlements rather than the alternative dispute resolution mechanisms contemplated under Section 89 of the Code of Civil Procedure (CPC).

However, Justice Balaji distinguished that ruling, observing that the Supreme Court had not considered the stage at which the settlement was reached or the restrictions contained in Section 69 of the Tamil Nadu Court Fees Act.

The Court explained that Section 69 permits a refund when a suit is settled outside court before evidence is recorded on the merits of the claim. Although a 2017 amendment increased the refundable amount from 50 per cent to 100 per cent, the legislature had deliberately retained the restriction concerning the recording of evidence.

Justice Balaji explained that court fees were collected to meet the expenses associated with judicial infrastructure, salaries and the conduct of trials.

"Substantial judicial time and money has been consumed in the said process. This, in my considered view is why Section 69 still remains in the statute book, despite the introduction of Section 69-A and also subsequent amendment to the same by Act 6 of 2017," the Court said.

The judge also relied on the Supreme Court's earlier ruling in Afcons Infrastructure Ltd. v. Cherian Varkey Construction Pvt. Ltd., which emphasised that alternative dispute resolution should ordinarily be explored before trial begins.

The Court observed that the earlier Afcons ruling had not been considered by the Supreme Court while deciding MC Subramaniam.

It, therefore, concluded that Section 69-A (full refund of court fees where dispute settled out of court) could not be applied universally in a manner that rendered Section 69 redundant.

Applying these principles, the High Court upheld the denial of a refund in the case where witnesses from both sides and a court witness had already been examined.

Both revision petitions were accordingly dismissed.

Significantly, the High Court also called upon the Tamil Nadu State Law Commission to examine whether Section 69-A (as amended in 2017) should be revised to prevent litigants from obtaining refunds merely because their disputes have been referred to alternative dispute resolution.

Under the present provision, the entire court fee becomes refundable immediately upon reference to an alternative dispute resolution mechanism, regardless of whether the dispute is eventually settled.

"There is no clarity or statutory provision or rule with regard to a situation where a reference to alternate dispute resolution fails and the parties are forced to come back to the court for trial. There is total silence with regard to whether the court fee which has already been refunded by then, would have to be repaid by the party, before proceeding with the trial of the case," the Court pointed out.

A copy of the judgment was directed to be forwarded to the Tamil Nadu State Law Commission for consideration of this grey area.

"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 Court said.

Advocates M Meenarukmani and K Sukumaran appeared for the revision petitioners.

Advocate General N Vijay Narayan, assisted by Additional Government Pleader S Yogalakshmi, addressed the Court.

Advocate S Suresh Sampath assisted as amicus curiae.

Senior Advocates S Subbiah and S Parthasarathy, along with other members of the Bar, also assisted the Court.

[Read Judgment]