The Delhi High Court has held that where a plaintiff, during insolvency proceedings against the defendant, submits its claim before the resolution professional and accepts the amount payable under an approved resolution plan in full and final settlement, such acceptance constitutes a settlement for the purposes of Section 16 of the Court Fees Act, even if there is no separate bilateral settlement agreement between the parties.
The Court also held that any kind of settlement by which the plaintiff agrees to bring quietus to the dispute falls within the scope of Section 16, and that the refund of court fees cannot be denied merely because the dispute was resolved through the CIRP framework rather than through a formal court-referred process under Section 89 CPC.
A Single Judge Bench of Justice Subramonium Prasad noted that the central issue was whether, in the absence of a conventional inter-party settlement, the facts nonetheless disclosed a settlement sufficient to justify refund of court fees under Section 16 of the Court Fees Act. The Bench observed that although there was, strictly speaking, no independent settlement agreement between the parties, the plaintiff had submitted its claim in the CIRP, accepted the amount payable to it under the approved resolution plan, and thereby settled for that amount in order to bring quietus to its claims.
The Bench treated the effect of such acceptance as attracting the ingredients of settlement. It observed that Section 16 of the Court Fees Act should not be narrowly confined only to settlements reached through modes formally referred under Section 89 CPC, and that the benefit of refund should extend to out-of-court settlements or any mechanism by which the dispute is brought to an end.
Briefly, the plaintiff had filed a commercial suit for recovery of Rs. 19.55 crores with pendente lite and future interest at 15% per annum, arising out of an agreement dated July 28, 2016 for supply of 5200 MT of sugar for a total consideration of Rs. 16.71 crores. The plaintiff stated that it had made advance payment to the defendant, that 1942.9 MT of sugar valued at Rs. 6.24 crores were supplied, but that no supply was made against the balance advance amount retained by the defendant within the stipulated period, leading to the filing of the suit.
Thereafter, during the pendency of the suit, insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 were initiated against the defendant; the plaintiff submitted its claim before the Insolvency Resolution Professional, the resolution plan was approved by the NCLT, and the plaintiff, classified as an operational creditor other than workmen and employees, accepted the amount granted under the resolution process without challenge. On that basis, the plaintiff sought withdrawal of the suit and refund of court fees under Order XXIII Rule 1 CPC.
Appearances:
Preeti Gupta, Urvashi Tyagi, Advs. along with Vikram Singh, AR of the Plaintiff
NA, for the Defendant Sainik Industries vs Indian Sugar Manufacturing Company