Refund of Court Fees Is Permissible Upon Settlement Through Insolvency Resolution Process Under Section 16.

In brief

The question

1. Whether the Plaintiff is entitled to a refund of the court fees under Section 16 of the Court Fees Act when the settlement was reached through an IBC Resolution Plan rather than a court-referred ADR mechanism?

The court held

The Court answered the issue in the affirmative, holding that any form of settlement that ends the dispute falls within the ambit of Section 16 of the Court Fees Act

It also directed

The Court allowed the withdrawal of the suit under Order XXIII Rule 1(4) of the CPC and directed a full refund of the court fees to the Plaintiff

01Facts

The Plaintiff filed a suit for recovery of ₹19,55,30,723/- based on a sugar supply agreement dated 28.07.2016

pp. 1, para 2-3

The Plaintiff alleged that the Defendant failed to supply the balance quantity of sugar despite receiving substantial advance payments

pp. 2, para 5-6

During the pendency of the suit, insolvency proceedings under the Insolvency & Bankruptcy Code, 2016 (IBC) were initiated against the Defendant

p. 2, para 7

A Resolution Plan was subsequently approved by the NCLT on 06.02.2024, wherein the Plaintiff was categorized as an "Operational Creditor" and accepted the settlement amount granted under the said plan

p. 3, para 11

Consequently, the Plaintiff moved an application (I.A. 15936/2026) for withdrawal of the suit and a full refund of the court fees

p. 3, para 11

02Issues

i.1. Whether the Plaintiff is entitled to a refund of the court fees under Section 16 of the Court Fees Act when the settlement was reached through an IBC Resolution Plan rather than a court-referred ADR mechanism?

p. 4, para 15

03Law Applied

The Court applied Section 16 of the Court Fees Act, 1870, which mandates the refund of court fees when a dispute is settled via Section 89 of the CPC

p. 3, para 12

It relied on Nutan Batra v. M/s Buniyaad Associates, establishing that refunds are permissible upon withdrawal due to settlement

p. 3, para 13

The Court applied the Supreme Court’s ruling in High Court of Judicature at Madras v. M.C. Subramaniam, which held that Section 16 must be interpreted purposively to include private settlements reached without formal court intervention to avoid "absurd and unjust outcomes"

pp. 4-9, para 16-17

Provisions in the judgment · 2 · Linked ones open on LawLens

Code of Civil Procedure, 1908 Section 89

Court-Fees Act, 1870 Section 16

04Reasoning

The Court observed that while there was no "settlement" in the traditional sense within the suit, the Plaintiff’s acceptance of the amount determined under the IBC Resolution Plan functioned as a settlement to bring a "quietus to its claims"

p. 4, para 15

The Court reasoned that the objective of Section 16 and Section 89 CPC is to encourage the lightening of the judicial docket

p. 5, para 13

Following the M.C. Subramaniam precedent, the Court held that it would be discriminatory to grant refunds only to parties referred to mediation by the court while denying them to parties who settled independently

p. 7, para 17

Since the Plaintiff agreed to the Resolution Plan and committed not to initiate further proceedings on the same cause of action, the court found the ingredients of a "settlement" satisfied

p. 4, para 15 · p. 11, para 19

05Holding

The Court answered the issue in the affirmative, holding that any form of settlement that ends the dispute falls within the ambit of Section 16 of the Court Fees Act

p. 10, para 17

The Court allowed the withdrawal of the suit under Order XXIII Rule 1(4) of the CPC and directed a full refund of the court fees to the Plaintiff

pp. 11, para 18-21

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