Plaintiff can get court fee refund after IBC plan ‘settlement’: Delhi High Court

The Delhi High Court has held that a plaintiff who withdraws a civil suit after accepting dues under an insolvency resolution plan is entitled to a full refund of court fees, treating the outcome as a “settlement” for the purpose of the Court Fees Act [Sainik Industries Pvt Ltd v. Indian Sugar Manufacturing Co. Ltd.]

Justice Subramonium Prasad passed the ruling while dealing with an application of Sainik Industries which had sued Indian Sugar Manufacturing Company Ltd in 2019 to recover about ₹19.55 crore with interest in connection with a 2016 agreement for supply of 5,200 MT of sugar.

Justice Prasad relied upon Supreme Court judgments which held that any mode of settling a dispute that brings a ‘quietus to the lis’ (ends the dispute) should qualify for refund and that courts should not distinguish between different mechanisms of settlement. 

The Court noted that though there was no direct bilateral settlement in the traditional sense, the plaintiff had settled by agreeing to the amount payable under the resolution plan and thereby ending its dispute.

”He states that Sainik Industries has accepted the amount under the CIRP process towards full and final settlement of claims under the Suit and that it would not initiate any other proceedings on the basis of the cause of action on which the present Suit is premised,” the Court noted. 

Sainik Industries had paid substantial court fees at the time of filing the commercial suit for recovery of the amount paid by it to Indian Sugar Manufacturing Company Ltd .

However, during the pendency of the suit, Sainik Industries also initiated corporate insolvency resolution proceedings under Insolvency and Bankruptcy Code (IBC) against Indian Sugar. 

A resolution plan was later submitted by a consortium led by Dutt India Pvt. Ltd. This was approved by the National Company Law Tribunal on February 6, 2024. 

Sainik Industries lodged its claim before the resolution professional as an operational creditor and accepted the amount offered under the approved plan, without challenging the NCLT order.

It then moved an application before the High Court seeking permission to withdraw the suit and praying for refund of court fees. It also urged the Court to treat the IBC-based resolution as a settlement between parties relying on the Court Fees Act, and Delhi government notification which permits refund of court fees for suits withdrawn after settlement. 

Justice Prasad allowed the withdrawal of the application and directed refund of the entire court fees from the High Court.

Advocates Preeti Gupta and Urvashi Tyagi appeared for Sainik Industries. 

[Read Judgment]