In the case of A-One Realtors Pvt. Ltd. v. Energy Efficiency Services Ltd. CS(COMM) 610/2019 & I.A. 15338/2019dated 23.05.2022, the Delhi High Court (hereinafter referred to as “the High Court”) held that the Plaintiff is not entitled to seek a refund of Court Fees when the matter is not referred to Arbitration in the context of settlement.
FACTS
Energy Efficiency Services Ltd. (hereinafter referred to as “the Defendant”) had filed an Interlocutory Application under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”) to refer the matter to Arbitration, which was allowed by the High Court and a Sole Arbitrator was appointed.
Through the present suit, A-One Realtors Pvt. Ltd. (hereinafter referred to as “the Plaintiff”), had approached the High Court for the refund of Court Fees under Section 16 of the Court Fees Act, 1870 read along with Section 89 of the Code of Civil Procedure, 1908 (hereinafter referred to as “CPC”).
ISSUE BEFORE THE HIGH COURT
Whether the Plaintiff is entitled to refund of Court Fees after the dispute is referred to Arbitration?
CONTENTIONS OF THE PARTIES
Plaintiff contended that they were eligible for the refund of Court Fees as per Section 89 of the CPC, owing to the fact that the matter was already referred to Arbitration and a Sole Arbitrator was also appointed.
In this regard, the Plaintiff relied upon the order of the High Court in RV Solutions Pvt. Ltd. v. Ajay Kumar Dixit 2019 SCC OnLine Del 6531, wherein the High Court had directed the refund of court fees under Section 89 of the CPC as the matter was referred to Arbitration.
Per contra Defendant vehemently opposed the request of Plaintiff and argued that Plaintiff was not eligible for the refund of Court Fees.
DECISION AND FINDINGS
The High Court took into due consideration Section 89 (1) of the CPC and observed that if the Court is satisfied that there is a possibility of settlement between the parties, it may refer the matter for Arbitration or Conciliation or Mediation or to the Lok Adalat under Section 89(1) of the CPC.
Thus, the High Court was of the view that Section 89 (1) of the CPC would be applicable for the refund of Court Fees only when the matter is referred to Arbitration in the context of a settlement.
The High Court held that as the matter was referred to Arbitration through an application under Section 8 of the Act and not in terms of Section 89 of the CPC for settlement, the Plaintiff was not entitled to refund of court fees under Section 16 of the Court Fees Act, 1870.
The High Court noted that it is the settled law that the Court Fees shall not be refunded to the litigant in case a plaint is rejected under Order VII Rule 11 of the CPC.
Relying on the same analogy, the High Court observed that the Plaintiff is not entitled to refund of Court Fees when the matter is referred to Arbitration through an application under Section 8 of the Act, based on the rationale that the Plaintiff itself had invoked a wrong remedy of filing the suit instead of invoking Arbitration proceedings.
The High Court noted that the Plaintiff’s reliance on the decision in RV Solutions Pvt. Ltd. v. Ajay Kumar Dixit 2019 SCC OnLine Del 6531 was misplaced, and observed that:
“There is only a direction given in the said case that court fees may be refunded as the matter has been referred to arbitration. The same would not constitute a dicta to hold that any of the cases where Section 8(1) of the application is allowed and the matter is referred for arbitration, the plaintiff would be entitled to refund of court fees.”
Thus, the High Court dismissed Plaintiff’s request for refund of Court Fees under Section 16 of the Court Fees Act, 1870 and held that Plaintiff is not entitled to refund of the same.
AMLEGALS REMARKS
Section 89 of the CPC enables the Court to refer the parties to any of the modes of dispute resolution, including Arbitration, when it appears to the Court that there exist elements of a settlement which may be acceptable to the parties. Likewise, Section 16 of the Court Fees Act, 1870 allows for the refund of Court Fees when the parties are referred to any of the modes of settlement of the dispute by the Court under Section 89 of the CPC.
Through this decision, the High Court clarified the issue of refund of Court Fees when the matter is referred to Arbitration under Section 8 of the Act. The High Court held that a party becomes entitled to claim the refund of Court Fees only when the reference to Arbitration is made in the context of a “settlement” under Section 89 of the CPC.
On the contrary, when the reference to Arbitration is made in pursuance of an application under Section 8 of the Act, the parties are not entitled to a refund of Court Fees. Similarly, in the instant case, Plaintiff had invoked the wrong remedy of filing a suit instead of invoking Arbitration proceedings, and the reference to Arbitration was made pursuant to Defendant’s application under Section 8 of the Act.
Thus, the High Court rejected the Plaintiff’s request for refund of Court Fees as the reference to Arbitration did not arise in the context of settlement, but rather through an application under Section 8 of the Act as the Plaintiff had invoked the wrong remedy of filing a suit instead of invoking Arbitration.
For any queries or feedback, please feel free to get in touch with rohit.lalwani@amlegals.com or riddhi.dutta@amlegals.com.
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