Settlement of dispute inside and out of the court- effect on refund of court fee.

Section 89 of the code of civil procedure settlement of dispute in a amicable manner. Hence the Legislature in its wisdom had enacted refund of the court fee where a matter has been a settled amicably between the parties without going to trial. Section 89 of the Code reads as follows,

89. Settlement of disputes outside the Court .-(1) Where it appears to the Court that there exist elements of a settlement which may be acceptable to the parties, the Court shall formulate the terms of settlement and give them to the parties for their observations and after receiving the observations of the parties, the Court may reformulate the terms of a possible settlement and refer the same for-

(a) arbitration;

(b) conciliation;

(c) judicial settlement including settlement through Lok Adalat; or

(d) mediation.

(2) Where a dispute has been referred-

(a) for arbitration or conciliation, the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply as if the proceedings for arbitration or conciliation were referred for settlement under the provisions of that Act;

(b) to Lok Adalat, the Court shall refer the same to the Lok Adalat in accordance with the provisions of sub-section (1) of section 20 of the Legal Services Authority Act, 1987 (39 of 1987) and all other provisions of that Act shall apply in respect of the dispute so referred to the Lok Adalat;

(c) for judicial settlement, the Court shall refer the same to a suitable institution or person and such institution or person shall be deemed to be a Lok Adalat and all the provisions of the Legal Services Authority Act, 1987 (39 of 1987) shall apply as if the dispute were referred to a Lok Adalat under the provisions of that Act;

(d) for mediation, the Court shall effect a compromise between the parties and shall follow such procedure as may be prescribed

Section 69 and 69A of the Tamilnadu Court fees and Suit Valuation Act, 1955 talks about the refund of court fee in case of settlement of dispute,

Section 69 - Refund on settlement before hearing Whenever any suit is dismissed as settled out of Court before any evidence has been recorded on the merits of the claim, half the amount of all fees paid in respect of the claim or claims in the suit shall be ordered by the Court to be refunded to the parties by whom the same have been respectively paid.

Explanation The expression 'merits of the claim' shall have the meaning assigned to it in section 12.

Section 69 says that where a suit is dismissed are settled out of court before any evidence is recorded on the merits of the claim the party shall be entitled to refund of half of the court fee paid by him..

Section 69A inserted by Tamilnadu act 44 of 2007 w.e. f 2-5-2008, wherein it states that when a court refers the parties to the suit to one of the modes of settlement referred under section 89 of the code of civil procedure,1980 then the plaintiff is entitled to a certificate from the court authorising him to receive full refund of the Court fee in respect of such plaint if the dispute referred by the court is settled.

Section 69A. Refund on settlement of disputes under section 89 of Code of Civil Procedure. - (1) Where the Court refers the parties to the suit to anyone of the modes of settlement of dispute referred to in section 89 of the Code of Civil Procedure, 1908 (Central Act V of 1908), the plaintiff shall be entitled to a certificate from the Court authorizing him to receive back the full amount of the fee paid in respect of such plaint if the dispute referred by the Court is settled.

When a decision of Madras High Court with respect to the refund of Court fee under section 69A came up for consideration, wherein the Madras High Court has held that even a dispute settled out of court without being referred for settlement under the modes defined under section 89 of the code of civil procedure, the parties are entitled for the refund of the entire Court fee.

Challenging the same, the registry of the Madras High Court went on an appeal and the supreme court has observed that the parties who have settled their dispute out of court are well deserving for refund of court fee as they have settle the dispute themselves saving the state of the Logistical hassle of arranging for a third-party institution to settle the dispute. The Supreme Court further observed the importance of private amicable negotiation between the parties cannot be understated but throws caution that where the parties have approached the court after a long drawn litigation on the guise of having settle their dispute, the court may having regard to the previous conduct of the parties and the principles of equity, refuse to grant the relief.

The Apex Court has curtly stated that No justifiable reason to afford step brotherly treatment to other methods availed of by the parties and directed refund of the Court.